Bitcoin’s use diversifies into a ‘vehicle currency’ helping users acquire fiat
In the later part of Bitcoin’s decade-long existence many parts of Latin America most notably countries like Venezuela have found new use cases for the king coin. The deteriorating economic landscape coupled with poor fiat currencies in the region has forced many users to find new and novel ways to use cryptocurrencies like Bitcoin. Interestingly, in the region, Venezuela has not only turned into a hub with regard to Bitcoin usage but has also demonstrated that it holds considerable influence in terms of Bitcoin adoption and its utilitarian worth.
In the latest episode of the Tales from the Crypto podcast, Matt Ahlborg, Founder of UsefulTulips.org highlighted Venezuela’s growing influence in the region when it comes to Bitcoin usage and how this was on display during the country’s most recent power outage at the start of March 2020. With the heavy disruption to internet service in the country, it was obvious that Bitcoin trading activity would cease. However, according to Ahlborg, it was interesting to see that,
“The surprising part was that trading across virtually all Latin American currencies also dropped off significantly during the time of a blackout inside of Venezuela. And what that meant to me is just on a very basic level, that these other countries or these other currencies, were in somehow some way connected to the situation in Venezuela.”
Interestingly, for Local Bitcoins’ trading volume, 2020 has seen quite a surge amidst increased global uncertainty, markets in recession and blackouts in the country. Ahlborg added that the mass migration from Venezuela to different other parts like Colombia, Peru, etc. had a role in such an event occurring. Many of the Bitcoin users in the region are involved in some form of remittance transaction with Venezuela due to its high demand, he added,
“This is the reason why during the blackout in Venezuela, you saw also a massive drop off in other Latin American country transactions. It’s because this two-transaction event requires communication with the person inside of Venezuela, which was severed at that time.
Venezuela in the recent past has become the exemplification of poor economic planning and subpar fiat currencies and has become a testing ground for Bitcoin’s various value propositions. However, for most Venezuelans, Ahlborg noted that Bitcoin neither fully represents a store of value asset or a means of exchange. Many users simply use Bitcoin as a vehicle currency to gain access to the US dollar. He noted,
“In this situation, at least for the most part, Bitcoin is being used as a vehicle currency and what that means is that people, they acquire Bitcoin just so that they can acquire yet another fiat currency. So they go from one fiat currency to another fiat currency in like this value transfer process that crosses borders.”