Will Dollarization Kill Bitcoin Trading in Venezuela?

In brief

  • Venezuela’s national currency suffers from hyperinflation.
  • One of the ways that Venezuelans have sought to escape the devaluing bolivar is through Bitcoin.
  • But now that Venezuela’s government has made it much easier to access US dollars, Bitcoin’s appeal could be tested.

Venezuela’s complex economic conditions have led to it often being referred to as a “case study” in Bitcoin—a cryptocurrency practically tailor-made for an economy saddled with hyperinflation and a repressive government.

And even though Bitcoin use is hardly mainstream in Venezuela, that narrative has more or less held up: the country ranks third in the world in terms of Bitcoin adoption, according to a September 2020 report from crypto analytics firm Chainalysis.

But recent societal and political changes in the South American nation may soon put that narrative to the test.

Part of the reason why some tech savvy Venezuelans turned to Bitcoin to protect their wealth and escape the devaluing bolivar was because US dollars were difficult to obtain. Buying them was technically illegal, so citizens would resort to the black market to find them.

They no longer have to do that. What’s more, the notoriously “anti-imperialist” government of Nicolas Maduro appears to have now conceded defeat to dollarization—accepting now the fact that the dollar is the de facto currency of Venezuela.

Earlier this year, Maduro’s government began allowing Venezuelan banks to open accounts for their customers in dollars. Businesses can now even start paying their workers in foreign currencies—something that would have been unimaginable in Venezuela a decade ago.

So now that Venezuela has opened its doors to dollars, will that diminish the role Bitcoin plays in the country’s informal economy? Regional experts don’t believe there’s much reason to think so yet.

For most people, the dollar will continue to provide “shelter” from inflation for day to day transactions, but it “will never be a store of value in the same way that Bitcoin is today,” according to Alberto Zambrano, founder of the AJZ Institute, a regional project that offers training on crypto, blockchain and other technologies.

Saulo Muñoz, an economist who specializes in social development, shares a similar view: “Bitcoin is consolidated as an important aspect of a community that currently rejects fiat money,” he told Decrypt. Muñoz not only sees Bitcoin trading within Venezuela maintaining its momentum, it could even “escalate” as new use cases for the cryptocurrency emerge, he said.

Venezuela currently has a very active peer-to-peer Bitcoin trading market. Trading volume in the country remains the highest among all Latin American countries, according to data from metrics site Useful Tulips. Other than a spike in volume in late December and early January, trading on peer-to-peer Bitcoin exchange LocalBitcoins among Venezuelans remains on par with those recorded throughout the last two years.

Bitcoin trading volume in Venezuela. Image: Useful Tulips
Bitcoin trading volume in Venezuela. Image: Useful Tulips

That suggests that Bitcoin trading in the country has remained stable regardless of price fluctuations, and more recently, irrespective of the government’s shifting views on currency controls and limitations on the dollar.

What’s more, cryptocurrencies appear to be becoming an increasingly important consideration for Maduro’s government. In September 2019, Maduro confirmed that Venezuela’s central bank holds Bitcoin and Ethereum, the second-largest cryptocurrency by market cap, among its international reserves. The state-run platform for remittances also accepts cryptocurrencies and even expanded that initiative just last week.

According to Muñoz, insteading of hampering Bitcoin trading, dollarization in Venezuela may just lead to a “diversification of payment methods” on trading platforms.


The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.


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Top Analyst Reveals Biggest Altcoin Bag, Names Five Crypto Assets Poised To Erupt

A closely-followed analyst and trader is pulling back the curtain on his biggest crypto position outside of Bitcoin.

In a new tweet, the pseudonymous Kaleo tells his 81,900 followers that FTX Token (FTT), the native asset of crypto derivatives exchange FTX, is primed to erupt over 170% from its current price of $37 in the coming months.


“FTT to $100 this summer confirmed… FTT/USD is my biggest spot bag outside of BTC for a reason.”

Source: Kaleo/Twitter

Another coin on Kaleo’s radar is Bitmax Token (BTMX). According to the trader, the native token of digital asset trading platform Bitmax is on the cusp of pulling off a massive bullish move.

“Bought a bag of BTMX (BitMax Token). It looks primed for continuation along with the rest of the exchange coins.”

Source: Kaleo/Twitter

Swipe (SXP), the native asset of the Swipe decentralized finance (DeFi) ecosystem, is also on Kaleo’s list. The crypto strategist expects the token to rise over 100% from its current value of $2.97.

“SXP is by far the biggest laggard when it comes to Sam [Bankman-Fried] coins. Whether it’s just due to the TA or whether there’s some type of major news soon, I expect this to blow past the old ATH (All-time high) when it breaks out of this range. I have a bag.”

Source: Kaleo/Twitter

The trader is also keeping a close eye on Flow (FLOW), a crypto asset created for use cases in the gaming and non-fungible tokens (NFT). Kaleo believes that Flow is now ready to resume its bullish ascent after breaking out of consolidation.


“FLOW is ready. Send it.”

Source: Kaleo/Twitter

The fifth token on Kaleo’s watchlist is blockchain gaming platform Enjin Coin (ENJ), which he says is gearing up to ignite a big move against Bitcoin.

“I expect a few more days of chop before the next leg up out of this range.”

Source: Kaleo/Twitter

As for BNT, the native asset of decentralized exchange Bancor Network, Kaleo says he’s buying the dip as he expects the coin to correct in the short term.

“Taking some profit here. I’ll add back on the retest.”

Source: Kaleo/Twitter

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Why JP Morgan’s New Crypto ‘Basket’ Doesn’t Include Tesla Stock

In an SEC filing this week, investment bank JP Morgan Chase revealed it is establishing what it calls a “cryptocurrency exposure basket.” Investors can buy structured notes whose value is tied to 11 stocks from companies involved in Bitcoin or other cryptocurrencies. 

As the basket is based partly on each company’s exposure to Bitcoin as well as liquidity, it includes selections such as cloud software developer MicroStrategy, payments company Square, mining firm Riot Blockchain, and chipmaker Nvidia. (Stocks in those four firms comprise 68% of the basket.)

But it’s missing an obvious target: Tesla.

Tesla bought $1.5 billion worth of Bitcoin earlier this year and holds an estimated 0.3% of its treasury in the digital asset. Among publicly traded companies, only MicroStrategy has a larger stockpile of Bitcoin, according to Bitcoin Treasuries, with 91,064 BTC—enough for Bitcoin volatility to impact MicroStrategy’s day-to-day stock price.

By comparison, Square has 8,027 BTC, comprising 0.4% of its holdings, and Riot has 1,175 BTC (1.7%). Nvidia, while it doesn’t have Bitcoin on the books, makes graphics processing units that are used in crypto mining.

What gives?

In short, JP Morgan thinks Tesla’s stock price is too high. 

JP Morgan analysts warned on December 9, 2020:

“We recommend investors not weight Tesla shares in their portfolio in equal proportion to the S&P because Tesla shares are in our view and by virtually every conventional metric not only overvalued, but dramatically so.” 

Tesla’s stock price closed that day at $604.48. Since it currently stands at $668 after coming down from an all-time high of $900, not much has happened to change the investment bank’s view.

Instead, JP Morgan filled out the remaining 32% of the basket with stock in PayPal (10%), which has integrated Bitcoin and other crypto purchases onto its app; semiconductor companies Advanced Micro Devices (5%) and Taiwan Semiconductor Manufacturing (5%); crypto derivatives marketplaces Intercontinental Exchange (4%) and CME Group (4%); furniture retailer Overstock.com (2%), which runs a blockchain wing; and Silvergate Capital (2%), a bank for cryptocurrency firms.

Investors can buy into the basket with a minimum of $1,000. For its troubles, JP Morgan deducts 1.5% of the investment and returns.


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Korea’s Shinhan Bank Completes Digital Won CBDC Pilot

Shinhan Bank of South Korea has announced the completion of its central bank digital currency (CBDC) pilot. The project was carried out in conjunction with LG CNS and the team claims the pilot is in a bid to get the bank ready for the eventual launch of the nation’s digital won by the Bank of Korea, according to a BusinessKorea report on March 9, 2021.

Shinhan Bank Execute CBDC Pilot

As the world keeps looking for better ways of doing things, central bank digital currencies have become the hottest topics on the lips of 80 percent of apex banks around the world, since digital currencies have proven to be more efficient for both local and cross border payments. 

In the latest development, Shinhan Bank (formerly Hanseong Bank), a Seoul-based lender first established in 1897, has joined forces with LG CNS, the information technology subsidiary of LG Corporation, to carry out a digital won CBDC pilot.

The team says the aim of the CBDC pilot project, which is independent of the Bank of Korea, is to get Shinhan Bank prepared for the eventual rollout of a national digital won by the central bank. 

The Pilot

In the real world, apex banks do not distribute fiat currencies directly to the end-users. Instead, smaller banks under the purview of the central bank obtain the fiat currency and in turn, distribute it to their customers in form of withdrawals. 

Shinhan Bank assumes the issuance of the digital won by the Bank of Korea will function in the same way and its CBDC pilot created a virtual apex bank which issued and distributed the mock digital currency on the blockchain and sent it to Shinhan bank, which then circulates it to its clients.

The blockchain-based digital won was designed to allow individuals and merchants to easily convert their account balances to the digital won and carry out a vast array of transactions, including local payments, money transfers, foreign exchange and more.

Last September, reports emerged that the Bank of Korea was in search of a CBDC consulting partner to work out the architecture of its digital won project and it appears everything is going on exactly as planned, as the bank’s CBDC pilot is now in its final stages.

Meanwhile, all hands remain on deck in China for a successful nationwide rollout of the digital renminbi. 

In February 2021, BTCManager informed that the Postal Savings Bank of China (PSBC), has launched a new hardware wallet for digital yuan payments.

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Inflation Fears Pumps Bitcoin Prices Above $56k

The U.S. Consumer Price Index (CPI) for February 2021 rose 0.4 percent in February 2021 on a seasonally adjusted basis after adding 0.3 percent in January, data from the U.S. Bureau of Labor Statistics on Mar 10 shows. At the backdrop of this, the Bitcoin price added to gains of Mar 9, marching to fresh 2-week highs above $56k.

Bitcoin Price Rally above $56k

As of writing, the Bitcoin price is up 15 percent week-to-date, adding three percent in the past 24 hours, according to trackers.

Notably, in the past week, the Bitcoin price has been on a recovery path. It is reversing from $43k pits of the last week of February, printing higher buoyed by institutional demand.

Analysts pin the revival of crypto, and specifically Bitcoin prices, on inflation concerns.

Bitcoin’s inflation-hedging properties and stellar price performance in the last few months are now sparking a scramble.

Public companies and institutional investors are flocking to Bitcoin to protect their assets from value gnawing inflation and for capital gains.

The Fears of the $1.9 Trillion Stimulus Package

Part of President Joe Biden’s campaign promises was to offer more financial aid to the economy.

At the core of this was the release of even more checks to affected households in the country.

Towards that end, the approval of the $1.9 trillion stimulus package was critical. Therefore, last week’s Senate Approvals of the mega stimulus package was a win for the president.

However, the combination of an accommodative monetary policy, characterized by record-low interest rates, and a Federal Reserve open to an economy flush with cash translates to a possibility of higher inflation in the near future.

Rising Headline Inflation to Push BTC Prices Even Higher

Already, Jeffrey Gundlach, the founder of DoubleLine Capital, predicts the U.S. economy to heat up.

The result, in his prediction, could see headline inflation rise above the two percent FED target to over three percent. If it tops four percent, Jeffrey says, it could spook the bond market.

Albeit rising treasury yields, FED officials are concerned, expecting inflation to grow in the medium term but to contract in subsequent months.

Rising inflation, on the other hand, could spark demand for Bitcoin, pushing prices even higher. As BTCManager reports, Jesse Powell, the CEO of Kraken, predicts the Bitcoin price to reach $1 million.

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Price analysis 3/10: BTC, ETH, BNB, ADA, DOT, XRP, UNI, LTC, LINK, BCH

Long-term investors use dips in a strong uptrend to buy while short-term investors are fixated on calling a top. In the past few days, data from Glassnode has shown significantly sized Bitcoin (BTC) outflows from Coinbase exchange, which is a sign of accumulation according to analysts.

It is encouraging to note that the demand is not limited to one exchange and data from Material Indicators shows buy orders of $100,000 and higher are reaching an all-time high.

This shows that the influx of institutional investors and large corporations entering the crypto sector continues to accelerate. Proof of this comes as American Residential Warranty became the latest company to buy Bitcoin in order to maximize the returns on its investment portfolio.

Daily cryptocurrency market performance. Source: Coin360

Another positive sign is the relative movement of the U.S. dollar and Bitcoin. Usually, these assets are inversely correlated, meaning when the U.S. dollar rises, Bitcoin comes under pressure and vice versa.

However, in the past few days, the rise in the U.S. dollar currency index (DXY) has not been able to stall Bitcoin’s bullish momentum. When a negative event fails to put brakes on the rally, it is a sign of strong demand.

Let’s study the charts of the top-10 cryptocurrencies to determine the possible target objectives and the critical levels on the upside.