Venezuela on Brink of Civil War as Annual Inflation Nears One Million Percent on Cafe Con Leche Index; Crypto Blocked, Localbitcoins (BTC) Shut Down

January 24, 2019 / by Zachary Mashiach

Localbitcoins Shutdown When Venezuelans Need Bitcoin The Most

Volume on Localbitcoins in Venezuela hit a maximum of 5.3 billion Venezuelan Sovereign Bolivars (VES) traded per week in late December after exponentially increasing throughout 2018. This was due to a hyperinflation crisis in Venezuela, which has seen the price of a cup of coffee in Caracas increase from 0.45 VES to 800 VES in the past year. The annual inflation rate is 785,000 percent based on the past three months of data, and it’s ready to soar into the millions of percent.

Bitcoin is being used as a safe haven currency in Venezuela, despite Bitcoin’s poor performance in 2018. Compared to the Venezuelan Sovereign Bolivar, Bitcoin is stable and a good store of value. Further, Bitcoin is cryptographically secure, making it much safer than holding cash.

However, Venezuela has shutdown Localbitcoins, perhaps out of fear that the outflow of capital into Bitcoin was accelerating hyperinflation. After reaching peak volume on Dec. 22, Localbitcoins volume began to decline and was as low as 61.6 million VES for the week ending on Jan. 12. For the week ending on Jan. 19, there was zero volume.

The shutdown of Localbitcoins perhaps makes it harder to obtain Bitcoin, but peer to peer Bitcoin dealing is likely continuing. That being said, the crackdown on Localbitcoins probably indicates that Venezuela is cracking down on Bitcoin dealers too, which would make peer to peer Bitcoin trading risky and far more expensive.

Supposedly, Venezuela’s first Bitcoin ATM will be launching soon, but considering the Localbitcoins shutdown, it seems unlikely this Bitcoin ATM will last long. The only Bitcoin ATM in Zimbabwe, a country which dealt with hyperinflation and a currency collapse, is perhaps the historical precedent for what could happen to this Venezuelan Bitcoin ATM. The Zimbabwean Bitcoin ATM was shut down after a brief period of use. Likewise, the only Bitcoin ATM in India was seized by police.

Venezuela On Brink Of Civil War

The shutdown of Localbitcoins in Venezuela coincides with a rapid surge in civil unrest. Today opposition leader Juan Guaido declared himself interim President of Venezuela. President Donald Trump of the United States quickly recognized Guaido as the official president of Venezuela and has threatened to sanction oil exports from Venezuela this week.

Simultaneously, Vice President of the United States Mike Pence said “Nicolas Maduro is a dictator with no legitimate claim to power. He has never won the presidency in a free and fair election, and has maintained his grip of power by imprisoning anyone who dares to oppose him… As you make your voices heard tomorrow, on behalf of the American people, we say to all the good people of Venezuela we are with you, we stand with you, and we will stay with you until democracy is restored and you reclaim your birthright of libertad.”

Large amounts of protestors are taking the streets in Venezuela, and violent clashes are taking place between protestors and the national guard. Earlier this week, a small group of soldiers attempted an uprising against the government, which may have initiated the current wave of protests. Further, some of the military agrees with the opposition and thinks Maduro is officially a dictator after the recent election farce. Some Venezuelan troops in Peru have publicly declared that they do not recognize Maduro as their commander-in-chief and will support efforts to restore constitutional order.

All signs are pointing to civil war in Venezuela. Crypto.IQ speculated on Dec. 6 that the “total collapse of the Bolivar will perhaps precipitate the collapse of the Venezuelan government since they will no longer be able to fund their activities via money printing, and perhaps eventually it will be clear that the Petro is a last ditch attempt by the Maduro regime to earn a warchest of cash and cryptocurrency for the struggle that is inevitably coming.”

It appears this is exactly what is happening.

Don’t Miss out on top crypto trade secrets

join crypto iq
Essentials Package
only $9/month

Retail $97/month