Hyperbitcoinization: How Currency Crises Are Driving Nations to Crypto

The textbook case of crisis-driven crypto adoption is Venezuela, with the first report on Venezuelans turning to Bitcoin arriving in October 2014.

While data on the actual number of people using Bitcoin at this point isn't available, the Reuters article states that Venezuela "Already [had] at least several hundred Bitcoin enthusiasts." Somewhat less vaguely, Coin Dance records that 625,573 Venezuelan bolívar was traded for Bitcoin on the LocalBitcoins peer-to-peer crypto-exchange in the week of Dec. 12, 2014, equivalent to about $99,403.

"The Bitcoin market in Venezuela is indeed big and growing at a fast rate. The absence of exchanges have seemingly gone unnoticed as most Bitcoin miners within the country trade informally with people they can trust - basically for reasons of privacy, as they seek to conceal their source of wealth from the public."

Assuming the same crude volume-to-users ration that was evident at the end of 2016, there were around 926,500 Bitcoin users in the week of Aug. 18, 2018, when 673 Bitcoin was traded against 27.28 trillion Venezuelan bolívars on LocalBitcoins.

It's not clear to what extent traded volumes will continue to grow now that the government has devalued the bolívar, yet the economic pressures faced by Venezuela have caused its population to adopt Bitcoin more speedily than other nations with comparable GDP. For instance, in New Zealand and Romania - two countries the International Monetary Fund puts next to Venezuela in terms of GDP - the LocalBitcoins BTC market has grown by 875 percent and 2400 percent respective since 2013.

In the face of such restrictions, Bitcoin witnessed price increases above the global average on the Zimbabwean Golix exchange at the end of 2017, with the price even doubling in November as locals sought to obtain currency that wasn't controlled or restricted by the government.

In the week ending on Nov. 4, 2017, 41 Bitcoin was traded for Turkish lira via the LocalBitcoins exchange, while in Mexico - which has a similar GDP, but an inflation rate of around 4.5 percent - 38 Bitcoin was traded for Mexican pesos.

In turn, neither Bitcoin nor any other cryptocurrency has seen a big jump in trading volumes recently, even though the longer-term weakness of the lira has played a role in giving Turkey one of the highest rates of crypto ownership in the developed world.

Still, even without any recent jump in crypto trading or ownership, Bitcoin still has a noticeable presence in Argentina.

Not only has an Argentine bank recently begun using Bitcoin for cross-border payments instead of the SWIFT network, but the country was also one of the earliest adopters of Bitcoin during the period between 2011 and 2015 - even though capital controls were in place.