- LocalBitcoins volume in certain South American countries has increased 5 – 500 thousand times since the beginning of 2017
- Some fiat currencies in Latin America, such as Venezuelan bolivar, are far more volatile than the Bitcoin
- The situation shows that cryptocurrencies can be a viable alternative for legacy financial systems
The unstable economic situation in Latin America creates a good opportunity for cryptocurrencies, especially for Bitcoin, to be used as a means of payment. Due to these circumstances, LocalBitcoins, a service allowing to buy BTC using the local currency, saw its trading volumes rise at a staggering rate.
Economic Collapse in LATAM Countries
In the last few years, countries of Latin America have experienced a currency crisis. South American fiat currencies, which were supposed to be stable, lost significant amounts of their value. For example, Argentinian peso costs 2 times less than it did 1 year ago, while Colombian peso cost 25% more in 2014. The worst example is Venezuela, where the value of their national currency, the bolivar, decreases twofold every three weeks, making it far more volatile than Bitcoin. In fact, the value of bolivar falls so fast that it is not advisable to trade it against US dollar.
LocalBitcoins Trading Volume Steadily Increasing
Because cryptocurrency is the safest and convenient way to store money when local currency experiences hyperinflation, LocalBitcoins trading volumes have soared. In Argentina and Chile, two of the most economically stable countries in South America, trading volumes have increased six times since January 2017.
The increase in trading volume over the same period in less economically stable Colombia and Peru has been much more significant. This value is now 9 times bigger in the former country at 7.5 billion Colombian pesos, and 25 times in the latter at 3.3 million Peruvian sol.
However, the growth of volume in Venezuela dwarfs all the mentioned numbers. Due to bolivar hyperinflation, the trading volume of LocalBitcoins there now is more than 550 thousand times bigger than it was two years ago at staggering 5 billion bolivars.
The Important Message
The situation in Latin America shows that the price of fiat currencies can become unstable due to political and economic reasons. What’s more, it also shows that in such times cryptocurrencies can gain popularity as a store of value and be more stable than the fiat currencies. Despite mainstream media being mostly skeptical about price growth and real-world value of cryptocurrencies, especially Bitcoin, the situation in South America shows that it can be even more useful than legacy financial systems.