Bitcoin, as we speak, is the 8th largest currency in the world. Bitcoin is larger than the Canadian dollar, Russian rubble or Brazilian peso to name a few. Shockingly this is only within 10 years of its creation by Satoshi Nakamoto. It’s only a matter of time before Bitcoin catches up and surpasses world leading currencies like the USD, Euro and Pound. In this article i will lay out the advantages cryptocurrency has in times of market collapses and the future of crypto in a world that’s changing rapidly.
Crypto vs Recession? The Main Event.
Let’s assume that a financial crisis occurs, whereby institutions or assets are overvalued. If this crisis is left unchecked, it may cause an economy to go into recession. A financial crisis is commonly associated with a bank run, when investors withdraw cash from savings accounts as they fear that the value of their money and assets will depreciate. This recession has positively impacted the cryptocurrency industry.
- A digital asset that is designed to work as a medium of exchange.
- It is a form of payment that can be exchanged for goods and services.
- Its is decentralized, meaning that no government, institution or individual can regulate it like they do with fiat currencies.
The Cryptocurrency market is worth Billions of Dollars.
During normal times, and in the past, the US dollar, precious metals and the stock market acted as the preffered stores of wealth. But when world economies are plagued with the dreaded inflation, people turn to cryptocurrencies to protect the value of their savings. Cryptocurrencies like Bitcoin are not tied to any country or institution, therefore making it a popular alternative. I will show you how cryptocurrencies, in different countries, have hedged their citizens against recessions and hyperinflation.
Recession in Venezuela.
Cryptocurrencies have become very useful, despite facing a lot of criticism. Venezuela has suffered the harshest periods of hyperinflation dating back to world war two. The money value has rendered valueless. Recently in 2018 a devaluation had knocked five zeros off the currency. Essential goods such as medication and toiletries had reached sky-high prices and this caused crime to spiral upwards. As a result of their helplessness many Venezuelans have began using cryptocurrencies such as Bitcoin as an alternative to the Venezuelan bolivar.
How Cryptocurrencies helped the Venezuelans
Venezuelans have resorted to buying Bitcoin with Bolivar and storing it in digital wallets, as not to lose any value as the bolivar makes loses on a daily basis. Storing money in a digital wallet in a form of any digital currency, is now preffered by a majority of Venezuelans.
- In February 2019, it has been measured, the weekly volume of Bitcoin to the Venezuelan bolivar increased to a staggering 2,454 BTC(Bitcoin), which in US dollars is equivalent to a shocking $8.5 million per week and $1.29 million per day.
On September 10 according to data, Venezuela installed its first cryptocurrency ATM in the city of San Antonio Del Tachira, inside a convenience store. This machine supports different types of cryptocurrencies such as Dash, Venezuela and Colombian pesos, Bitcoin cash and of course Bitcoin.
According to statistics the number of crypto ATMS went from 501 in 2016 to over 5400 in 2019 worldwide.
Government Awareness of Cryptocurrencies
It is alleged that the Venezuelans central bank, has plans on keeping cryptocurrencies to help the state-controlled oil company Petroleos de Venezuela SA. It is not known yet as to where Petroleos obtained Ethereum(a cryptocurrency) and Bitcoin. It is a mystery as to how much they have. In numerous reports it has been elaborated that the Venezuelan government has been hording cryptocurrencies to bypass U.S International Trade Sanctions.
Investigators have also revealed that Maduro’s(Venezuelan politician) regime, has used the Maiquetia Airport to change the airline taxes charged to Bitcoin. It was also announced that Cryptocurrencies can be used to purchase amenities from Conviasa Airlines as well as tickets. The Administrative Service of Identification and Foreigners, has allegedly accepted digital currencies for passports. Crypto is also accepted for fines, licenses, vehicle plates and titles.
Hong Kong And Cryptocurrencies
Bitcoin is an unpredictable asset, keeping in mind that it is a new digital currency that offers many distinctive pledges and the most famous among them is censorship resistance.
This may explain why trading volume reached a “boom” in Hong Kong. Since June 9th 2019 there have been a series of protests, millions of protesters have marched to resist, among other things, the Chinese Jurisdiction against Bitcoin. No state without extraordinary investment in powering computers can control the transactions between Bitcoin. This is a huge benefit for concerns many protesters have with their payment systems. Cryptocurrencies have all the same features as digital cash, but without centralized control and surveillance.
Crypto ‘Boom’ in Hong Kong
In Hong Kong there are about 39 Bitcoin/Crypto ATMS, making it easier to spend Bitcoin and cryptocurrencies. Cryptocurrencies are a part of the”One country, two systems.” Hong Kong has not adhered to China s ban on crypto currencies.
It has been predicted that the cryptocurrency problems on mainland China may be a positive thing for Hong Kong, because a number of cryptocurrency projects are likely to relocate in Hong Kong. Hong Kong has already received a high number of inquires from project founders in mainland China. Businesses are turbocharging cryptocurrency. On 14th July, the ATM operative had distributed water paid for shockingly with international donations made in Bitcoin cash. The water bottles contained QR codes that allowed recipients to fund additional supplies for protesters by donating Bitcoin.
At the beginning of the Hong Kong protests in June, there was a sharp rise in the Bitcoin price because of increased trade in Bitcoin, and the fact that Hong Kong exchange rates are open to cryptocurrency. This is very common during times of economic oppression, as also seen in Argentina. It is said that if the demand for Bitcoin continues to grow rapidly, Bitcoins price may be over inflated on local exchanges. Crypto businesses are beginning to raise awareness that the digital currency can supply even better ways to the threat of devaluation.
Hyperinflation in Zimbabwe
Hyperinflation in Zimbabwe began in February 2007. However, in mid-November 2008, Zimbabwe’s inflation rate was estimated at a staggering 79,600,000,000%. This was the second highest incident of hyperinflation in the world, and this caused poverty and untold hardship to its citizens. Zimbabwe had an unemployment rate of close to 80%, prices would increase daily as spending power was eroded by the currencies catastrophic demise.
The cause of hyperinflation was due to printing money in response to a series of economic shocks, such as:
- Decline in export earnings
- Price control which aggravated shortages
- High national debt
- Economic sanctions
- Mismanagement at the Central Bank
The Zimbabwean Dollar
On February 2nd 2007 the Reserve Bank of Zimbabwe(RBZ), revealed that they would be releasing a third new currency, however since inflation exceeded 1000%, the bank notes were kept in storage. On September 6, 2007, the Zimbabwe dollar was again devalued by a shocking 92% making the exchange rate, ZW$30,000 to US$1. In 2008 the dollar currency was given a new code ‘ZWR’. The result was that in August 2008 10 Billion ZW$ was worth US$1. Shockingly In 2009,a $1 Trillion ZW Bank note was being exchanged for US$1…Shocking.
Devaluing of Money In Bank Accounts
To summarize what happened is the Reserve Bank of Zimbabwe had slashed the country’s currency by three zeros in 2006, with immediate effect. This was said to be a measure to fight inflation. They then slashed 10 zeros off the currency between 2008 and in 2009, the Central Bank slashes 12 zeros, when hyperinflation reached its peak.
My Personal Experience With Hyperinflation
I do not just write about recession, i have lived through it and have seen the effects of its destruction. I personally know a couple who sold their beautiful family home in order to buy a small holding to start up a market gardening project. The money was deposited into their bank account after the sale of their home. Five days later, the Zimbabwe Central Bank devalued the currency by horrendously removing one zero. So the $170,000 they sold their house for, and which was reflected in their bank accounts a few days earlier, was now reduced to $17000, a $153000 dollar loss overnight. Besides removing a zero to devalue the Zimbabwean currency, the currency lost massively to the United States Dollar. So effectively the money they sold their home for was worthless and they were ruined financially.
Is History Repeating Itself?
In 2016 the government introduced ‘Bond Notes’ a bearer cheque made to replace the shortage of the US Dollar bank notes in the country. Although the Bond Note had a 1:1 equal trade with the US Dollar, the Bond Note began to lose value as soon as it was introduced. In 2019 the central bank pegged a rate of ZWL$2.5 to US$1(the official name change from bond notes to ZWL), but things changed quickly and the rate began to run like an out of control train. This week the official inter bank rate for the Zimbabwe dollar to the USD is betweenZWL$15 to ZWL $16 to USD$1. This has greatly eroded consumer spending power and brought about untold suffering to the masses.HOPEFULLY, the Government sorts out the imbalance and steers the economy in the right direction to avert
the catastrophic 2008/2009 economic melt down i experienced.
Cryptocurrencies may not be regarded as main stream money yet, but over the past few years it has been noticed that cryptocurrencies have been very competent and beneficial with Bitcoin being the front runner. As we have witnessed globally, cryptocurrencies can be particularly beneficial to countries with excessive inflation and weak national currencies. Below are some advantages of cryptocurrencies
- Strong security- When a cryptocurrency transaction is verified, it cannot be reversed, this is a hedge against fraud.
- More confidential transactions- Each transaction you make is a unique exchange and cannot be negotiated.
- Individual ownership- In a normal banking system, you turn stewardship of your funds over to a third party, but with crypto you are the sole owner.
- Transactions- Transactions are one-to-one affairs which can takes place on a peer to peer network.
Cryptocurrencies are a ‘stable store of value’. Cryptocurrencies and blockchain are involved in the banking and financial sectors. Banks will eventually accept cryptocurrencies because of their dominant advantages they possess over traditional fiat currencies. Cryptocurrencies are going to revolutionize the way we bank, and combined with Blockchain technology, the future of how we transact and conduct business will be a total game changer.
With cryptocurrency vs recession, i believe that cryptocurrency will hedge us against the evils of recession whilst security and the fact that it cannot be manipulated will make their adoption a no brainer. Cryptocurrency ventures are on a rise, and their numbers accelerate every day. This will result in a widespread adoption of crypto. Cryptocurrency and the Blockchain are still considered to be in their infancy, and in my opinion will be the next explosive technological revolution we witness in all sectors, Cryptocurrency are the future.
If you have any questions, please leave them in the comment section below.