Could Bitcoin Help Venezuelans As Crisis Deepens?

Authored by Michael Kern via Crypto Insider,

Protests continue to rage in Venezuela as inflation soars to unprecedented levels and the price of oil remains low. The country’s national currency is now worth less than fictional gold in Azeroth, the setting of the popular massively multiplayer online role-playing game World of Warcraft, pushing Venezuelans to bitcoin to hedge against the nation’s struggling economy.

So, What Happened?

Under President Hugo Chavez, Venezuela underwent a revolution, bringing social programs such as education and health care to the people, propped up by increasing oil prices. During his presidency, however, Chavez was accused of bending the economy for personal gain, human rights violations, and intimidation of the media. Price controls placed on basic goods, including food, initially meant to redistribute wealth and reduce costs, led to hyperinflation and shortages. Crime and violence also increased drastically under Chavez, leaving the country as one of the most violent in the world.

Venezuela’s misfortune increased, however. In 2013, Chavez passed away and his Vice President, Nicolás Maduro, took power. Worries of corruption mounted while plummeting oil prices created an economic climate which was less than desirable. Maduro’s inherited economic burden, in addition to the leader’s failure to diversify the country’s economy led to widespread protests in 2014.

In response to the deepening political crisis in Venezuela, then-President Barack Obama hit prominent level officials with sanctions, with White House spokesperson Josh Earnest saying that the administration is "deeply concerned by the Venezuelan government's efforts to escalate intimidation of its political opponents." The administration’s efforts to dissuade corruption, however, were in vain.

As oil prices continued their descent and Maduro’s mismanagement of the country’s economy intensified, Venezuelans chose a new way to protect themselves financially.

Venezuela Turns to Cryptocurrencies

Between 2014 and 2016, the number of users on just one Venezuelan Bitcoin exchange skyrocketed from just several hundred to over 85,000 users. Cheap, subsidized electricity and a failing currency pushed a number of young entrepreneurs to build their own mining operations. One trader, John Villar, Caracas-based software developer, most eloquently stated "Bitcoin is a way of rebelling against the system." While the currency remained a niche form of payment in the country, many users purchased food and goods online through online marketplaces such as, albeit indirectly through gift cards purchased with the cryptocurrency.

Noel Alvarez, former president of the Venezuelan Federation of Chambers of Commerce, stated that “A maximum of one per cent of the population has access to it, but it is very useful in our situation.”

Bitcoin’s popularity in Venezuela continued to grow. It became the country’s leading parallel currency. Some vendors even begun accepting Bitcoin exclusively. A popular online travel agency, Destinia, cited that, due to the bolivar’s instability and the trouble many Venezuelans experience when attempting to leave the country, “Giving priority to Bitcoin as a payment method could be of help."

While Destina admitted that Venezuela is not a primary focal point for their company, they chose to prioritize Bitcoin payments in the Venezuelan market to facilitate the travel needs of the people in light of the persisting economic downturn.

With infrastructure in place, trading and mining becoming more popular, and the crisis escalating, Maduro’s government began to take notice.

Maduro’s War on Bitcoin

The Venezuelan government began to crack down on the Bitcoin community, with police extorting citizens for “misusing electricity” or undermining the country’s economy. These grievances intensified over time, however, and the attack on miners became more apparent. In the largest raid, two miners were caught with 11,000 mining computers and were charged with cybercrime, electricity theft, exchange fraud, and even funding terrorism.

In Feb. 2017, following the incident, Surbitcoin, Venezuela’s most popular exchange went offline. The company encouraged users to withdraw their money immediately as Banesco, the company’s banking partner, was set to revoke the account associated with the exchange. Rodrigo Souza, the founder and CEO of Surbitcoin, noted that "When it was found that there were 11,000 mining computers consuming the energy to power a whole town at a time when there are severe electricity shortages, it triggered a reaction.” Souza went on to say that the company was not contacted by the government, but Banesco revoked their account as it did not want to be associated with such an operation. Surbitcoin resumed operations two weeks following.

The economic crisis continued to escalate as oil prices remained stagnant and Venezuela’s oil production shuttered

What’s Next?

On July 31st, in a highly controversial election, Venezuela voted for a new constituent assembly giving President Nicolás Maduro even greater control in the country on the brink of civil war. The new pro-Maduro constituency will now have the power to re-write the country’s constitution.

Critics of the election have suggested that the vote was manipulated. National Assembly President Julio Borges tweeted the vote was “the biggest electoral fraud in our history."

Following the election, Maduro set his sights on opposition parties. At midnight on August 1st, two opposition leaders, Leopoldo Lopez and Antonio Ledezma, were pulled from their homes by teams of heavily armed guards.

U.S. President Donald Trump announced in a statement "The United States holds Maduro - who publicly announced just hours earlier that he would move against his political opposition - personally responsible for the health and safety of Mr López, Mr Ledezma and any others seized."

"We are evaluating all of our policy options as to what can we do to create a change of conditions, where either Maduro decides he doesn't have a future and wants to leave of his own accord, or we can return the government processes back to their constitution,” Trump added.

The United States has since frozen the assets of Maduro and is considering deeper sanctions, possibly even targeting PDVSA, Venezuela’s state-held oil company. An action which could send the country over the edge.  As tensions rise, the country is entering a state of chaos.

With the collapse of the economy, Venezuelans are running out of options. Bitcoin could come as a saving grace to many people. It has kept food on the tables of families, helped Venezuelans escape the distraught nation, and acted as a voice of rebellion against the oppressive government. But how Maduro’s regime will proceed remains to be seen.


The Cooler King (not verified) Sun, 08/13/2017 - 15:40 Permalink

I nominate mosley & Raffie for the next 'DICTATORS' of Venezuela! Think about it. If they're right (which, perhaps, THEY ARE). What could POSSIBLY GO WRONG? (please answer sincerely, before resorting to the reflexive junk ~ this is actually an interesting theory) & whereby ~ if the 'junks', above, are from ad hoc mosley, Raffie, & bitcoin fluffers, then, WHY ALL THE HATE ALL OF A SUDDEN?

The Cooler King (not verified) tmosley Sun, 08/13/2017 - 15:49 Permalink

Who are the "WE" (you & Raffie)? Both of you have represented yourselves as the poster childs of future economic well being. (just buy bitcoin) Not only should geniuses, such as yourselves, & whereby others just don't understand,  be in charge of Planetary economics, but that skillset should qualify you to pull fucked up countries out of their misery as well. Akin to, Zuckerberg for 'in PRESIDENT' (as it may be). Anyway ~ You got MY VOTE... I think you should run Venezuela... Let that be a 'Petrie Dish' as to the viability of the 'crypto' revolution. (& FFS, they're sittin on top of oil ~ so, WHAT COULD POSSIBLY GO WRONG)?

In reply to by tmosley

The Cooler King (not verified) tmosley Sun, 08/13/2017 - 16:18 Permalink

@mosley"Not an argument." On the contrary... PRECISELY an argument... Here's why... The woes of Venezuela, or Greece, or others in that category that you'd might want to nominate are EXACTLY mired in economic slavery. Here are the facts that follow (that you yourself are on record as acknowledging) - Bitcoin wallets, today, number, around 15.8 million (a number you yourself put forth)- the 'ceiling' on bitcoin wallets is 2^16, which, you yourself acknowledge.- The population of Venezuela, or Greece, (or even the next 10 that you might want to nominate & AGGREGATE wouldn't even come close to ticking the present exponential on 2^160 even by 1)- So, IOW, you, as dictator, could furnish EACH Venezuelan citizen with 1 bitcoin wallet each and fund it with, THE MINIMAL necessary. (FFS ~ just sell some oil to come up with the necessary funds)- Then, sit back and watch as bitcoin rises to $50k (you could even appoint McAfee as your Defense Minister to make sure this happened). WHAT.COULD.POSSIBLY.GO.WRONG.? You have already admitted that you've sold your 'HOUSE FULL OF SILVER BULLION', which, is akin to VENEZUELA selling all it's gold bullion. IMO ~ That makes you eminently qualified to be DICTATOR of Venezuela.

In reply to by tmosley

The Cooler King (not verified) tmosley Sun, 08/13/2017 - 16:28 Permalink

Is that all u have left in your bag? Trying to deflect hypothesis on the basis on 'wordplay'? Proposal? Argument? I don't give a FF on what term you use. The hypothesis/scenario is clear (as it paints a clear path towards utilizing, theoretically, the resources of Venezuela, the citizen base, and the 'vector' of bitcoin to do EXACTLY what the article thread implies). I nominated you as the logical LEADER of that movement. Because. If it's all true (which, based upon which you, Raffie, & others have forecasted, is an INEVITABILITY). In summary, it's a SOCIALISTIC UTOPIA if it succeeds! How can you possibly be against it?

In reply to by tmosley

The Cooler King (not verified) tmosley Sun, 08/13/2017 - 17:35 Permalink

No, I'm not claiming that in any way. I'm just ASKING whether, OR NOT, you'd be willing to stake your bitcoin PRICE MOVEMENT & UTILITY AS A CURRENCY beliefs, on the notion that oppressed people in socialist HELLHOLES, like Venezuela, might BENEFIT from said PRICE ACTION & OWNERSHIP BENEFITS. My thesis is that, someone like yourself, (& based on your steadfast belief that THIS IS THE FUTURE), would be 100% 'IN FAVOR' of that. I can't imagine you thinking another way. I'd be interested in hearing your thoughts THERETO, because, by nature, the whole thing would come down to DOG EAT DOG, or, if BITCOIN is actually the LIBERTARIAN "ANTI-BANK" nirvana that everyone has been waiting for. IOW ~ Do you care about 'humanity'? Or, do you just want free pizza & Gamefly? & notwithstanding, to just SHOVEL bitcoins to Jeff Bezos because AMAZON accepts them?

In reply to by tmosley

The Cooler King (not verified) SILVERGEDDON Sun, 08/13/2017 - 17:26 Permalink

@SILVERG I'm pretty sure that the 'logic' stream will end here... But never fear ~ JAMES BOND WILL RETURN AGAIN ~ In a saga where he survives (all within 90 minutes): -Falling out of an airplane without a parachute and still making it back to MI6 HQ, only about an hour late-Not getting killed by a 13G gravity machine gone haywire even though the logical 'killing stroke' would just be to shoot him-Not getting killed by Drax who had a shotgun on his back while he was aiming at pheasants- Not being killed, by a NINJA KILLER, who, regretfully chose a wooden stick to try and kill him-Not getting killed in a room of lethal ampules that are designed to kill 'millions', but then, the next day, people use the same room- Not getting killed by a a guy on the Sugarloaf Mountain gondola that is 100x stronger than he, but manages to get kicked into a gondola car notwithstanding his overwhelming strength advantage- Not dying from a freefall jump ove over 1oo meters- Not dying from getting chased all over Amazon tributaries in a boat with landmines & mortars galore because his boat had a hang glider on its roof- Not dying from the landing of that hang glider because he fortuitously landed, without broken bones, into an area where he was lucky enough to not be bitten by poisonous snakes, spiders, or other, & instead, find a SUPERMODEL, who led him to a destination- Not being killed by a PYTHON when he got there & was ejected into water- Not getting killed by then being placed into a chamber under the inferno of a SHUTTLE launch- Not getting killed when the SHUTTLE (miraculously reached its destination in space undetected by its proprietors)- Not getting killed when that space station came under attack by outer space MARINES who annihilated the space station (which was undetected by ANY radar).- Not getting killed as he was shooting down humanity killing pods, and managing to get one more FUCK in before a re-entry, that naturally resulted in a smooth landing at some airstrip. HAPPENS ALL THE TIME!

In reply to by SILVERGEDDON

The Cooler King (not verified) SILVERGEDDON Sun, 08/13/2017 - 18:27 Permalink

Don't bother asking him, he'll only tell you to fo f*** yourself. & it's still incredible to me that someone with the FERVENT belief in bitcoin, would FAIL to climb on board with the concept that this IS, IN FACT, the logical solution to the economic worries of countries like Greece, & Venezuela. What is there POSSIBLY not to like (viewed in those terms)? I mean, even DYLAN wrote "If you've got nothing, you've got nothing to lose"

In reply to by SILVERGEDDON

Raffie tmosley Sun, 08/13/2017 - 17:40 Permalink

Why answer these ignorant haters? They only know how to rage against what they don't want to know or accept as fact.You could prove 2+2=4 and they will still insist 2+2=Pancake till the end of time. It's who they are. They are hardwired that why.They will hang themselves soon enough in the comment section.We know the world is adopting cryptos and will never end and that is all that counts. We are right and they hate and loath that.While they RAGE our profits grow and that is a fact.The haters sure do sound A LOT like the Dems pushing that President Trump and the Russians took over the elections. AN still trying to keep pushing it.  

In reply to by tmosley

SILVERGEDDON Raffie Sun, 08/13/2017 - 17:53 Permalink

Enjoy your 15 minutes of fame as tmosley's cheerleader and catcher, Raffie. Joing the PTOB new world order control currency crowd of cool kids. Don't cry when truth turns out to be what we warned you about in advance.Cryptos are about control - no more, no less. As in, you have none, and your masters have all.  

In reply to by Raffie

Raffie Yellow_Snow Sun, 08/13/2017 - 19:11 Permalink

It's really not that they missed the boat, but choose to keep missing the boat time after time.I pity them the most because they are so filled with rage and anger they don't think straight. Animal spirits I tell you inhabit them. Irrational and just as illogical as can be all in the name of thinking they are right.If cryptos are truly a scam, why not wait till they go to zero then rush in with the I TOLD YOU SO HAHAHAHA, but no, they know they are wrong and doing all they can to discredit cryptos.  

In reply to by Yellow_Snow

Advoc8tr Raffie Sun, 08/13/2017 - 20:38 Permalink

... and now the discussions of the "flippening" begin.  Not BTC v ETH but rather BTC (Crypto) v Government Fiat.… this baby pops into the mainstrem consciousness the value will pump 10% higher every day for years as the process unfolds. Just buy some so you can look smart in hindsight FFS ... you can keep "hating" it and not tell anyone but you will be a humble pie eating convert before too long if you have 2 brain cells to rub together.

In reply to by Raffie

Advoc8tr Yellow_Snow Sun, 08/13/2017 - 20:53 Permalink

Accepting that Gold's "physicality" is its weakness and that which has enabled the manipulators to contain it permanently with printed fiat / naked shorting / endless rehypothecation etc is a hard pill to swallow.   Intelligent people change their mind when new information presents itself not dogmatically hold on to existing beliefs.Bitcoin IS the new GOLD ... Intelligent, open-minded gold bugs were the early odopters and even the creator was anti-fiat and a promoter of "unencumbered" gold money.

In reply to by Yellow_Snow

BritBob Sun, 08/13/2017 - 15:39 Permalink

Perhaps Maduro will use his 'Malvinas distraction' against the British imperialists?Maduro is a keen supporter of Argentina's mythical Malvinas claim even speaking at regional conference on behalf of Argentina (CELAC).How can Argentina claim the Falklands when she has never legally owned them?Falklands- Never Belonged to Argentina: Still, why let a good old socialist distraction get in the way of the truth.

Crypto Kevin (not verified) Sun, 08/13/2017 - 15:41 Permalink

So the Tylers' have gone from pumping silver to pumping crypto now. It might be time to sell. We all remember what happened to silver 7 years ago when ZH was pumping it everyday.

ebworthen Sun, 08/13/2017 - 15:42 Permalink

Sure, you're average everyday Venezuelan is going to be buying flour and toilet paper with Bitcoin.And maybe freedom-fighting warrior unicorns from Planet Rainbow 9 will conquer Maduro and the Socialists.

malek tmosley Sun, 08/13/2017 - 16:13 Permalink

OK, I'll try:

1. Starting at zero (or after a complete collapse), the first form of trade will be -as always- bartering goods-for-goods.

2. The next evolution is trading goods-for-most-commonly-accepted-valuable-goods.
(3. Much further down the road those are replaced, first locally, with scrip promising redeemability to those valuable goods. At a late stage that becomes universally accepted fiat.)

Could bitcoin replace gold in step 2? Unlikely as every trader would need a working internet connection.
Could bitcoin replace fiat in step 3?
Yes. But that will not help Venezuela in the near future.

In reply to by tmosley