In recent days, the economic situation in Venezuela has been critical. Indeed, the Venezuelan bolivar, the country’s currency, lost nearly 35.51% of its value against the US dollar. According to professionals, this situation is not only difficult to bear, but it is also dangerous since it could lead to a drastic rise in prices very soon. They think the exchange rate could drop to 12 bolivars per dollar by December 2022. Cryptos, the solution?
The causes of the loss of value of the American bolivar
Events related to the US dollar always have significant repercussions in the economic sector. In the past week, we have seen this again with the Venezuelan bolivar, the official currency of Venezuela. She has lost 35.51% of its value against the US dollar, which means that the exchange rate is now 8.70 bolivars per US dollar.
Two factors would be at the origin of the situation. According to the director of market research firm Ecoanalitica, Asdrubal Oliveros, the first factor that played was increased public spending. Such an increase meant that citizens and businesses had a lot of money and were therefore encouraged to “buy dollars in order to preserve their savings”. The second factor, just as important as the first, is Central Bank intervention from Venezuela. The institution put dollars on sale through the banks.
The need for a rapid reaction
According to Mr. Oliveros, if nothing is done, by the end of the year we will witness a sharp and remarkable increase prices. This situation would be tragic, because inflation, which until then seems under control, could thwart all forecasts and would no longer be controllable. In addition, he announced that the rise in the exchange rate will continue reaching considerable proportions.
Mr. Oliveros’ opinion on the increase in the exchange rate is shared by his peers. For example, Luis Arturo Barcenas, a Venezuelan economist, claimed that the exchange rate will climb between 10 and 12 bolivars per dollar by December, unless concrete actions are implemented.
Speaking of concrete actions, it should be noted that the Central Bank of Venezuela is making intense efforts to bring about a change in the situation. For example, it plans to auction $200 million to commercial banks across the country. It remains to be seen whether this operation will have any real effect.
Cryptos to the rescue of Venezuela
While waiting to study the effectiveness of this measure, cryptos, in this case stablecoins, could constitute a hedge of protection against inflation in Venezuela. These currencies can protect against depreciation money, which reduces the risk of inflation.
Moreover, it should be noted that regarding cryptos, several companies are planning to settle in the country. This is for example the case of the company BitBasewhose director in Venezuela, Enrique De Los Reyes, said: “We are going very strong with the [lancement de nos activités] in Venezuela this year. We keep up the hard work [pour obtenir] all the licenses we have needed to operate in Venezuela”. He concluded by stating: “We want to give a picture of the mass adoption of cryptocurrencies”.
The economic situation in Venezuela is becoming critical day by day. Recently, the country’s fiat currency, the Venezuelan bolivar, has lost a lot of value against the US dollar. The authorities as well as the country’s central bank are trying to implement several actions to avoid the worst.
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