How Bad Does a Currency Have to Be for Bitcoin to be a Safe Haven?

We recently wrote about cryptocurrency traders flocking to bitcoin and experts being confused about the cryptocurrency. The bottom line is while bitcoin is the most reliable of the online currencies it is highly volatile and potentially dangerous. Nevertheless in two nations especially traders are still buying bitcoins. These nations are Venezuela and China and traders are doing this for two different reasons. Venezuela’s currency is in free fall and we wrote recently about what caused Venezuela’s currency to fall so far. Now Bloomberg writes about Venezuelans seeking safe haven in bitcoins.

Crypto coins’ gyrations require nerves of steel, but to an increasing number of Venezuelans, they’re the safest currency they can own.

Demand for digital coins is soaring in Venezuela amid an escalating political crisis that has protesters demanding that President Nicolas Maduro step down. Inflation has spiraled to the triple digits, debasing the bolivar and depleting savings, while citizens struggle to find everything from food to medicine on store shelves.

“If you’re going to be in something volatile, you might as well be in something that’s volatile and rising than volatile and falling,” says Ryan Taylor, chief executive officer of crypto currency Dash Core, the third-largest digital coin by number of transactions.

Chaos Descends on a Country

Venezuelans are in a terrible situation as their dysfunctional government sits by and lets the nation sink into chaos. People have seen their life savings destroyed as their currency has devalued more than thousand fold. With daily life in the country reduced to standing in line all day for basic necessities those who want to hold on to any monetary wealth have already converted to dollars, euros, pounds or yen and even moved out of the country . For those staying at home an option is to buy bitcoins which are volatile but likely to do better than the Bolivar. That explains Venezuelans buying bitcoins but how about the Chinese?

The Next Great Thing

A lot of people made a lot of money in the last decades as China rose from an isolated and backward nation to a productive economy selling things to the entire world. But the economic model that drove China’s growth since the late 1970s is getting old. The amount of debt that China has built up is a threat to its continued growth and those with money have been moving it out of China. Last year we wondered out loud if China will run out of money as its cash reserves fell.

China is in the Forex news again as money flows out of the country. This time it has to do with a change in how many Yuan can be converted into foreign currencies next year. Locals are rushing to take advantage of the current $50,000 limit. Bloomberg discusses liquidity fears in the land of managed capitalism.

China has made it harder to convert Yuan to foreign currencies and move assets offshore and growth is slowing due to high debts. But one place to put assets is bitcoins where they can then be turned into dollars, yen, pounds or euros anywhere in the world!