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BTC Trading for $12.5K In Zimbabwe

Bitcoin is trading at a huge premium on local Zimbabwean exchanges, as the embattled country struggles through another bout of hyperinflation. At press time, BTC was selling on the local exchange, golix.com, at $12,500. The substantial premium – nearly double the price in the US – is likely connected to the difficulty in obtaining access to other international exchanges.

The country has been in the news in recent years for its massive levels of inflation, often creating situations where locals are forced to carry entire backpacks of Zimbabwean dollars to the market for some simple groceries. In an economy where such inflation rapidly devalues whatever funds consumers have an externally fixed currency like Bitcoin creates a stable and usable marketplace where none existed before.

Creating new markets

Market forces in nations with weak or very weak fiat currencies are driving prices for Bitcoin, as tens of thousands of new users capitalize on the ability to exchange goods and funds in a simple and clean way.

Obviously, the market at this stage represents an arbitrage nightmare, depending on which side of the transaction a consumer is on. However, the clear use case should give hope to Bitcoin bulls, looking to see the price increase to higher levels.

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Clueless Central Bankers Regard Bitcoin With Envy, Hatred

In my first article for the Cointelegraph I tried to explain the value of Bitcoin to citizens of countries that practice capital controls, which are usually countries with less economic development.

A day later, I read an article where the president of the Central Bank of Brazil exposes his lack of understanding and appreciation about digital currency, which could be such a boon to citizens of my native country, Brazil.

I believe that the best way to explain it is through practical examples, so I will summarize my experience with the legal tender currency of my country.

I was born in 1981, during the decade of hyperinflation in Brazil, I remember that it was normal to see the supermarkets crowded during the first week of the month. This is because on payday, everybody groceries for the entire month since prices were changed every day, sometimes more than once a day.

Our money lost value every minute, while the government’s printing machine worked at a frenetic pace.

During more than 10 years of hyperinflation, several leaders sitting in the chair of the Finance Minister or the President of the Central Bank tried to reduce or minimize inflation. They didn’t do it the hard way, and the way that might have worked, by cutting government spending. Instead, these men had pipe dreams, coming up with economic plans they thought were most miraculous.

One of these pie-in-the-sky plans definitively marked the Brazilian people. During the government of President Fernando Collor, the Minister of Finance, Zelia Cardoso de Mello, confiscated all the money that Brazilians kept in banks. The idea was simple: without money there would be no demand for products, so inflation would be controlled.

Obviously this didn’t work to save the economy, but it did devastate many Brazilians. Some, like my grandfather, relied on their life savings to pay for their medical care. These people were badly hurt.

What does history teach us?

First of all, a deflationary currency such as Bitcoin, whose economic model is based on that of thinkers like Frederich Hayek, is valuable to all citizens of countries that fear of inflation.

Second, inhabitants of countries that have already experienced economic chaos know how valuable it is to have assets that cannot be confiscated overnight. Today we have examples such as Venezuela, and a few years ago, Argentina.

There is a popular saying in Brazil that a dog that has been bitten by a snake is afraid of a sausage. In America, you might say “once bitten, twice shy.” Those who have lived through hyperinflation can really understand the value of a deflationary currency.

That’s why we love Bitcoin, and why most of the central bankers hate it. Deep down they are envious, even fearful, of Bitcoin’s economic model. Bitcoin has achieved what is impossible for them, the creation of the first truly deflationary currency that’s free from the mismanagement of governments.

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Bitcoin Mining Thrives in Venezuela Thanks to Hyperinflation and Free Electricity

Venezuela is home to one of the world’s worst cases of hyperinflation since the Weimar Republic. For example, a McDonald’s Big Mac there now costs half a month’s salary. The country’s annual inflation rate has surged to 1,600 percent, The Atlantic reports.

This might not be an ideal situation to live in. As the high percentage of inflation continues to soar annually, citizens do not enjoy time queuing for lines with empty shelves, nor piling stacks of bills in front of the store’s cashier.

Turning to cryptocurrency mining for survival

Venezuelans have found a better alternative to escape hyperinflation. They’ve taken Bitcoin as an alternative, and  mining Bitcoin has become big in the country.

To further utilize the cryptocurrency, data-crunching power is implemented to earn more Bitcoin. People utilize digital equipment such as specialized computers, with Bitcoin miners helping the cryptocurrency market to hit its record high in 2016.

Virtually free electricity powers cryptocurrency miners

With few utilities that its citizens can still afford, electricity happens to be among them. In fact, electricity power in the country is hugely subsidized and virtually free. This is all thanks to President Nicolas Maduro of the socialist regime.

Such a setup created an opportunity for struggling citizens, as Bitcoin miners can run many transactions and earn at least $500 a month. This can feed a family and provide them their basic needs – goods, medications, and such.

However, miners can highly influence inflation, too. These so-called miners are becoming the government’s “capitalist parasites”, since Bitcoin is still not legally regulated in the country, leading to some miners getting arrested for stealing free electricity.

Such a crackdown on Bitcoin mining, however, didn’t stop miners, with some turning to Ethereum and Dash mining instead, showing no signs of slowing down.