Behind Bitcoin's new high: Venezuela begins to abolish some banknotes nationwide after India

Rage Commentary : Last month, India abolished 500 and 1,000 ruble notes overnight. As a result, some people died while waiting in line to exchange currency, and the Bitcoin market soared. On Sunday, Venezuela also announced the abolition of 100-bolivar notes in the market, committed to combating capital smuggling on the border with Colombia. According to data, the demand for Bitcoin in Venezuela has increased significantly, and the value of Bitcoin is also increasing.

Translation: Flora

2016 has become the year of an all-out war on cash. Last month, India scrapped its long-standing 500 and 1,000 rupee notes overnight, causing massive problems across the country, deaths in queues to exchange currency, and a surge in the bitcoin market.

Now, embattled Venezuelan President Nicolas Maduro announced on Sunday that the 100-bolivar note will be scrapped.

Haven't we heard this before?

Prime Minister Narendra Damodardas Modi announced on November 8 that the government would abolish the country's most popular banknotes in order to clear out "black money" and undeclared and untaxed funds in the underground economy. On Sunday, President Maduro appeared to take a page out of Modi's book, alluding to the "mafia" smuggling funds.

Nicolas Maduro

President Nicolas Maduro said on national television:

"There has been fraud and smuggling of 100-bolivar notes on the border with Colombia. We have tried to work diplomatically with the Colombian government to deal with this problem. The mafia is too large. I have decided to withdraw all 100-bolivar notes in the next 72 hours. We must continue to fight the mafia."

Venezuela is at the center of this vicious hyperinflation, where the bolivar has to compete with the world's reserve currency and the dollar. In the last month alone, the value of Venezuelan banknotes on the black market has fallen by more than 50%. People have lined up for hours to buy food and use ATMs. Those without debit or credit cards need to carry heavy cash to pay. Many people are required to use bank transfers to pay, and cash or even credit cards are not accepted.

Bitcoin transaction volume hits record high

According to data from Coin Dance, the situation in Venezuela is similar to that in India, where people’s demand for Bitcoin has increased significantly, with the number of Bitcoins purchased from LocalBitcoins increasing by 1,000% in the past six months. The sharp depreciation of the Bolivar may reduce the efficiency of Bitcoin purchases, as the value of Bitcoin is still growing.

Venezuela is currently on a growing list of countries whose currencies are devaluing, including China (where the yuan has plunged 6% in the past year), Zimbabwe, Brazil, Argentina, Spain, Italy, the United Kingdom and Ukraine. Every devaluation of a national currency, every cash ban in a country’s banking system, seems to strengthen the global demand and appreciation of Bitcoin.