Bitcoin’s (BTC) popularity explodes in inflation-hit countries

Hundreds of millions of people around the world are currently in the grip of spiralling inflation rates: Venezuela, Sudan, Zimbabwe, Lebanon, Suriname, Iran, Argentina, Angola, Nigeria and Turkey constitute the top ten most affected countries. Many of them are turning to Bitcoin as the obvious choice due to the bruising economic situation they face.

Inflation, more inflation, then hyperinflation

Three thousand percent. That is the current rate of inflation in Venezuela. In a country boasting some of the largest oil reserves in the world, the ‘black gold’ once flowed freely; it now costs as much as $1 (~£0.71) a litre on the black market. The Bolivarian Republic, which relies on oil exports to sustain national revenues, has also been brought to its knees by U.S. embargoes against the country. 

Companies are afraid to buy oil from Caracas for fear of a U.S. retaliation, while the sharp drop in the price per barrel in 2020 has further deepened the crisis. On top of this, Venezuela’s foreign exchange reserves are dwindling, making imports impossible. The result: shortages, and therefore, inflation.

The same scenario is currently playing out in Iran. However, given that Iranian industry is more diversified, and with China stepping in to support the Persians, inflation rests at ‘only’ 50% per annum. 

Syria and Lebanon are two more countries under close U.S. scrutiny due to their alliances with Iran at the heart of the infamous Shia crescent. In Beirut, prices are currently increasing 150% year on year. This follows the collapse of a Ponzi scheme orchestrated by the country’s bankers that managed to siphon off nearly all the $55 billion (~£39 billion) that the Syrians believed they had safely deposited in Lebanese banks due to the crisis in their own country.

Meanwhile, on the Syrian side of the border, war has decimated the national currency, with an inflation rate frequently exceeding 100% per annum dating back to the start of the proxy war in 2013.

Sudan is another country operating under the U.S. sanction regime. It is currently blighted by hyperinflation exceeding 350% per year. Elsewhere, Nigeria’s inflation is also on the rise, though in March this year it stood at a far more modest 18%. What is most fascinating about the ‘giant of Africa’ is the country’s enthusiastic adoption of Bitcoin. According to the BBC, “more cryptocurrency trading goes on in Nigeria than almost anywhere else in the world”.

The volume of Bitcoin transactions

The volume of cryptocurrency trading is exploding in Africa. It is one of the only regions of the world where it continues to reach new heights 

Uncle Sam’s economic warfare

Washington is constantly waging economic wars. They come in many different shapes and sizes, with the most common including fines, blackmail, and economic and monetary sanctions. But that is not all. The U.S. also carries out speculative attacks on exchange rates, freezes bank accounts and disconnects countries from the SWIFT network.

Take the exchange rate of Russia’s currency, for example. The ruble’s value has been slashed by a third due to American economic sanctions and speculative attacks. This can happen even despite Russia’s money supply being proportionally backed up by the largest gold reserves in the world and the country’s debt representing just 14% of GDP.

Turkey is also being hit hard. The lira’s value fell 50% during the summer of 2018 under fire from J.P. Morgan and City Bank. Istanbul felt the full force of America’s wrath after refusing to fall in line with NATO’s strategy in Syria. Today, the inflation rate hovers around 17%, and even the Turkish president, Recep Tayyip Erdogan, is now trying to recover the bitcoins found on cryptocurrency exchanges to bolster the country’s foreign exchange reserves…

Hopping across the border to Iran, we find a prime example when it comes to economic sanctions. The United States shut the country off from the SWIFT network in 2012 to isolate it from the rest of the world. SWIFT (Society for Worldwide Interbank Financial Telecommunication) is an international payment network dominated by the same Anglo-Saxon banks that dictate nearly all international financial transactions. It is used by more than 11,000 banks in 215 countries, handling approximately 20 million transfers a day.

The network has become a mechanism for global domination that facilitates regime change by suffocating a country’s economy. Incidentally, SWIFT, a Belgian company, was actually forced to disconnect Iran by European directive No. 267/2012 from the European Council. Of course, it was under the orders of Washington, but it sounds better when the EU says it.

As if by magic, Iran now pays for its imports using bitcoins…

Argentinians turn to Bitcoin

From recent experience, Argentina is one of the nations where citizens run riot over Bitcoin. At the start of 2020, the country’s largest Bitcoin exchange, Ripio, had around 400,000 users. One year later, it had over one million. As of now, the figure has risen to more than two million Argentinians holding bitcoin.

For Maximiliano Hinz, South American director of Binance, “the number of user accounts for investing in ‘cryptos’ has multiplied by ten in Argentina since 2020.”

Such high levels of popularity are not surprising for a nation that has continually suffered inflationary crises over the years. At the end of 2001, Argentina defaulted on the debt inherited from the military dictatorship that ruled between 1974 and 1983, an illegitimate debt that went from $8 billion (~£5.7 billion) in 1976 to $160 billion (~£114 billion) in 2001. During the same period, Argentina repaid more than $200 billion (~£143 billion), 25 times more than the original sum that it owed back in 1976…

Perhaps an inspiration for the Lebanese bankers mentioned earlier, the Argentine military junta embezzled around $21 billion (~£ 15 billion) just before the fall of the regime. Thus, with the path set, Argentina eventually restructured its debt in 2001, reducing it by around 60%. Unfortunately, this forced it to make enormous concessions to creditors and accept nightmarish interest rates on the remaining debt.

In summary, Argentinians know as much as anyone that everything can change in the blink of an eye, especially when you are not in the West’s inner circle. This explains Bitcoin’s popularity at a time when inflation in the country is back above 40% and where it is illegal to buy more than 200 U.S. dollars (~£143) per month. In this context, buying bitcoin looks a much better prospect than trying to save the American Monopoly money.

Western countries generally have the lowest levels of inflation, but they are still far from reaching those preached by opaque financial institutions, such as the IMF or the World Bank. Given the dramatic rise in commodity prices since the start of 2021, we are staring at a massive reduction of purchasing power in the next few years. The answer, as demonstrated by the countries discussed in this article, is surely Bitcoin.

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( Foreign Countries Manager )

Just your average global millennial embracing, and interested in, the future of money and finance. Excited by blockchain tech as well as fintech but have a special passion for DeFi and Yield Farming, what will this technological disruption bring next?

DISCLAIMER
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.
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