When bitcoin becomes a topic of discussion, people usually immediately fall on the value prop that it is an alternative to gold. But within the store of value proposition, often is forgotten why gold has become a money. Inflation resistance for emerging market citizens is still an undervalued narrative. Countries like Venezuela and Turkey are prime examples.
There is a rich history of governments banning the possession of gold. FDR did it in an attempt to strengthen the US dollar while he diluted the circulation. Today, Venezuela suffocates stronger currencies from entering its borders. The money printer goes brrrrrr as the country suffers from crippling hyperinflation. Question becomes, how do Venezuelan’s preserve value without access to gold or currency exchanges?
Mining crypto has become increasingly popular. Accessibility is a harped on benefit that crypto has versus physical gold. Gold’s lack of transportability has led to instruments like paper gold. That being said, self custody on gold must be physical which is where digital gold (bitcoin) picks up the slack.
Skeptics question why citizens would hold high volatile crypto assets to store value. The argument of volatility goes mute when comparing it against currencies like the Bolivar. What may seem like overblown news on volatility of the Bolivar, was confirmed from an anecdote I heard from a Venezuelan classmate.
A girl in my class was at the store and liked a pair of shoes. She brought the shoes to the counter, only to realize she left her wallet at home. When she asked the employee whether the shoes could be put on hold until she returns with her wallet. The employee responded, “I’m not sure if I can do that, the price of the shoes may change by then.”
Thousands of underground mining operations are active in Venezuela. The threat of crypto entering Venezuela was seen as an attack on it’s national fiat currency. As expected, the government has been cracking down on these operations. Considering mining diamonds and gold is illegal, miners fear that the government will come for their operations too.
Synonymously, there was a slight uptick in volume on bitcoin exchanges when the Turkish Lira crashed in 2018. In 2020, COVID economic pressures and excess printing of the LIRA has returned. Paxful, a Turkish crypto P2P exchange, saw a 274% increase in new registrations last twelve months. Turkey has been leading the cryptocurrency adoption in the Middle East.
The beauty of crypto is that not only is bitcoin gaining adoption, stablecoins pegged to the dollar should also act as a safe haven for citizens in countries subject to hyperinflation. Crypto adoption globally is in the bottom of the first inning. There is an obvious need for a more accessible store of value in hyper-inflationary environments, but US citizens are still naive to the legitimacy. As stimulus and quantitative easing is realized, I suspect the staunchest of skeptics will be turned.
Sources:
https://news.bitcoin.com/bitcoin-adoption-turkey-inflation-lira/
Dhruv's Bubble 