Some of them are suffering from inflation today. Others are on the verge of hyperinflation tomorrow. As a result, their citizens are starting to consider crypto as a store of value and means of exchange. The countries’ recent troubles have highlighted the opportunity for crypto to become a libertarian’s dream. The opportunity to replace the struggling fiat and become the dominant form of money. This was the shared vision of many crypto pioneers.
Even though such a scenario is possible, it’s a long time away. Cryptocurrencies do not have a good reputation as a store of value. This means that even though Turkey, Zimbabwe and Venezuela’s citizens are leaning towards crypto, the governments will not follow so easily. The increasing BTC volumes, which are traded in these countries, are not significant enough to impact global volumes. These countries tend to have a more isolated nature, meaning mass adoption will be reached with many difficulties.
Inflation today offers the limited possibility for profit
In order for mass adoption to become a realistic possibility, the majority of the population has to have access to crypto or gold. It also needs to be noted, that the world’s reserve currencies such as the USD, EUR and JPY need to be extremely volatile for global investors to start a heavy shift towards crypto and gold. In 2018 crypto ownership is increasing steadily, but it’s nowhere near the point where mass adoption can be considered.
Iran has recently fallen under heavy economic sanctions from the United States. The country’s currency – the rial (IRR), is suffering from high levels of inflation today. The country’s current inflation rate is around 18%, which is nowhere near Venezuela’s 82%. In April this year, the inflation rate was around 8% only for it to reach 18% in June and July. This was followed by the Iranian government’s announcement for a state-controlled cryptocurrency. By the time of the announcement the population of Iran had already traded over $2.5 billion in crypto. This was done despite the April ban, which forbid banks to deal with cryptocurrencies.
In Turkey we could see a similar picture. When the United States doubled the steel tariffs, a huge number of people swung towards crypto. There were also implications of this last year, when the TRY fell nearly 12%. Turkey’s national banks were quick to pile high amounts of risky private debt. This quickly saw foreign investors leaving the country.
Turkey’s inflation was a slim opportunity for a few
That was enough incentive for Turkey’s people to massively start looking towards crypto. In general, a high level of inflation can be slightly beneficial towards mass adoption. In order for drastic measures, unfortunately a hyperinflation is required. This was happened in July, when inflation rose to 15.3%. The result was incredibly favorable for Turkish crypto exchanges. The volume increase was almost 132% in local exchanges. BTC trading volume in TRY rose from 327 300 to 759 026 between July 7th and August 11th.
These two examples showcased an inflation rate around 15% isn’t sufficient enough for widespread crypto adoption. Even if we highlight the incredible growth of the BTC/TRY market, the numbers were still very low. July saw a lot of Turkish citizens quickly moving to US dollars and gold, as both quickly rose against the TRY. This jump wasn’t seen in Bitcoin or any other cryptocurrency.
So to summarize: The potential of cryptocurrencies to become alternative methods of payment and stores of value during economic catastrophes is endless. This however, requires the world reserve currencies in the face of the USD and EUR to be unstable. If people from an unstable nation have access to stable fiat, crypto will not reach widespread adoption.
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Tags:BTCcrypto exchangehyperinflationinflationinflation todayIransanctionsTRYTurkeyUnited StatesVenezuelawidespread adoption