Bitcoin price approaches $800 as Venezuela announces emergency currency demonetization

Venezuela's economy has collapsed due to debt and hyperinflation. The government announced that it would abolish the country's largest denomination banknote, the 100 bolivar (Bf), within 72 hours. Before the central bank issues a higher denomination banknote, the whole country will fall into panic, just like India.

Venezuela's economy has been deteriorating since June, with persistent inflation causing its currency to drop below freezing, essentially making it worthless. In September, some common items like eggs or bread cost as much as $150, forcing people to take out piles of cash to go shopping.

Nathan Crooks, editor-in-chief of Bloomberg's Venezuela bureau, said that according to the official exchange rate, 1Bf is worth 0.1 US dollars, and the price of a lunch on the subway has reached 900 US dollars. According to the local black market exchange rate, a lunch is 3.9 US dollars.

Crooks exposed the economic situation in Venezuela in the article: even if calculated according to the black market exchange rate, a fast food meal worth $3.9 already accounts for 10% of the country's minimum wage. Due to the collapse of Venezuela's economy and financial system, most employees in the country can only get the minimum wage - less than $40 per month.

After abolishing the 100 Bf note, the government plans to issue a 20,000 Bf note. The government has not yet released detailed official documents or strategies for the issuance of high-denomination notes. Therefore, the market is likely to panic before the 20,000 Bf is put into circulation.

Hyperinflation & hard life

The Venezuelan government had been hesitant to issue large-denomination banknotes because they were concerned about two potential consequences of the policy: higher inflation and increased crime.

The 100 Bf is the highest denomination banknote in Venezuela. The government announced the issuance of a 20,000 Bf note back in October, but it seems that there has been no progress so far. Until the bank successfully issues a new note, businesses, merchants, families and workers can only rely on 50 Bf to ensure their daily needs. According to the black market exchange rate, 50 Bf is equal to 0.01 US dollars.

Turning to Bitcoin

Like India, Venezuela has seen a surge in demand for Bitcoin. According to Coin Dance, purchases in the country on LocalBitcoins.com have increased by 1000% over the past six months. As the Bolivar continues to depreciate, Venezuelans may have difficulty buying Bitcoin because its price has been rising.

In addition, Venezuela's economic turmoil has led a large number of entrepreneurs to turn to Bitcoin mining to obtain this safe and valuable currency.

Currently, electricity is the cheapest and most commonly available commodity in Venezuela. Therefore, mining is a profitable venture in the country compared to other industries.

However, Venezuela's financial and monetary transfer laws make Bitcoin mining illegal, so most Bitcoin miners conduct this activity in secret.

In order to ensure the safety of his property, Alberto, a 23-year-old university graduate from Venezuela, became a young Bitcoin miner. He said that the average monthly income of most jobs in the country is around US$20, which is even less than 50% of the minimum wage.

Venezuela is just one of the countries facing a devaluation of their fiat currencies. China, Zimbabwe, Brazil, Argentina, Spain, Italy, the United Kingdom, and Ukraine are all on the list. Whenever there is a devaluation of fiat currencies or a government demonetization, the demand and value of Bitcoin continues to rise around the world.