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Blockchain Cryptocurrency Research Venezuela Inflation DASH Bitcoin

Hyperinflation Pushes Venezuelans Towards DASH and BTC

08/27 – 09/02

Hyperinflation Pushes Venezuelans Towards DASH and BTC
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WEEKLY RECAP

  • Total market cap. reached $237.21bn (a 10.7% increase), and 7-day trading volume surged 20.9% for top 100 crypto


WEEK AHEAD

  • 6 Sept: ADA to release roadmap update
  • 8 Sept: Vitalik B. will be speaking at the “Ethis” Ethereum Industry Summit in Hong Kong


THOUGHTS OF THE WEEK

Launched in 2014 under the name Xcoin and later Darkcoin, Dash is an early privacy token aimed at facilitating P2P merchant payments. Dash recently announced a partnership with cryptocurrency-enabled phone brand KRIP to penetrate into the Latin American payment market. Venezuela in particular is of interest to the coin, the price of which once surged to $216.88 in the past week (a 54% weekly increase).

Venezuela is currently suffering under hyperinflation, resulting in increased adoption of cryptocurrencies from Venezuelans seeking out alternatives to the Bolivar national currency. The Venezuelan Bolivar inflation rate in July was estimated at 82,700%, while IMF projects the 2018 inflation rate may reach 1,000,000%. Venezuelan president Nicholas Maduro recently introduced a new fiat currency called the “Sovereign Bolivar”, but the currency suffered a 96% devaluation after the pegging with the state-issued cryptocurrency Petro. Such conditions make what are typically considered volatile cryptocurrencies appear as relatively safe havens. It is not surprising to see Venezuelans switching their wealth into crypto-currencies, with the trading volume of BTC surging 4.5x since the start of 2018 in Venezuela. Despite this growing interest we believe the price impact on BTC will be very limited, as the Bolivar/BTC market accounts for less than 0.01% of BTC’s trading volume.

We further believe that being an early mover has given Dash a significant advantage over other altcoins, and aided the coin’s successful penetration into Venezuela. The nation is currently the second largest market for Dash with more than 200 new monthly merchant entrants and tens of thousands of wallet downloads per month. Starting from September 2017, the Dash core group committed $1mn towards increasing adoption in Venezuela, and began organizing monthly conferences and billboards in the capital of Caracas. This marketing effort has proven a success, with more than 20 Dash communities budding across the nation.

On the contrary, a lack of liquidity, lack of development opacity, and a lack of trust in the government would appear to be key reasons behind the low adoption of the state-issued Petro cryptocurrency. The discussion on launching state-issued cryptocurrencies has been heating up with Russia and Iran recently expressing interests in doing so. However, a 2018 BIS report warned against capital control challenges related to state cryptocurrencies, and we believe their value to be limited unless the technology as well as everyday use cases are also properly developed.

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