Venezuela Bitcoin Trading Volume Drops By 83%By Andy Hao
Through most of 2017 and 2018, Venezuela has been seen as a bright spot for crypto adoption, and more specifically Bitcoin adoption. The monetary policy decisions of the Venezuelan government led to rampant deterioration of the value of its national currency, the Venezuelan bolivar, leading many to look for alternative stores of value.
This coincided with the rapid rise in Bitcoin prices in 2017, and for a year or two Venezuelans have been significant adopters of Bitcoin, giving the broader Bitcoin community hope that the currency could provide relief for anyone around the world living in a country with unsound monetary policies.
But lately, Venezuela’s Bitcoin trading activity may be diminishing. Since February, when a weekly record 2,487 BTC were traded on LocalBitcoins in the country, the overall Bitcoin trading volume has been on a steep downtrend. In the week ending July 27, for example, only 433 BTC were exchanged on LocalBitcoins.
While Bitcoin price appreciation has made it slightly more costly to maintain trading volumes over time, the price of Bitcoin is only up 2.5x since February. Even when that is considered, today’s trading volumes in Venezuela are less than 50% of the volumes seen in February.
There are a few possible reasons for the volume drop. Perhaps some traders are deterred by the fact that LocalBitcoins has become stricter about know-your-customer (KYC) requirements. In recent weeks there have been fluctuations in the VES/USD exchange rate, so it may also be the case that some Venezuelans were hoping things would settle down. Venezuelans have also become more free to use US dollars to buy goods and services, which may also be detracting from Bitcon use.
Another plausible reason for this decline could be the rise in Bitcoin transaction fees in early April. Since the 2019 Bitcoin bull run began on April 2, transaction fees on the Bitcoin network have jumped — spending most of the last three months above $1 per transaction. It’s been widely reported that Venezuelans are dealing with widespread poverty and hunger, which may be making it difficult for some people to overcome a $1+ transaction fee for daily purchases.
Or, the decline in trading volume could be due to Venezuelans moving from LocalBitcoins to other methods of trading. Venezuelans have exchange options like Cryptobuyer, Xapo, Cryptoways as well as others, although it’s not clear how popular these options are in Venezuela compared to LocalBitcoins.