Bitcoin virtual currency has been given a boost this year because currency turmoil in India and Venezuela.
Bitcoin Virtual Currency boosted by currency controls in India and Venezuela
The recent surge in the value of the Bitcoin virtual currency has been attributed to monetary policy in India and Venezuela. During the past six months the value of a Bitcoin has doubled and it is predicted to rise to the 1000 dollar mark early in the new year.
Both India and Venezuela have introduced currency controls which have had a dramatic effect on the Bitcoin virtual currency. Financial chaos has ensued in both these two countries.
Prime Minister Narendra Modi took a decision to curb private illegal cash holdings in order to limit illegally earned cash and put a stop to tax evasion. He made the announcement on 8th November offering only four hours notice that high value 500 and 1000 Rupees notes would not longer be legal tender. The 1000 Rupee note is worth around 15 dollars.
The plan was to bring billions of dollars of unaccounted cash into the economy, 80% of Indian currency in circulation is high value notes. It was a cunning plan. Indians were told that they could deposit or change their old high value notes in banks until 30th December. New 500 and 2000 Rupee notes would be issued in exchange for old currency notes. When making an exchange, ID is required so they know who the cash holder is.
Then on 17th November it was declared that any currency value over 2000 Rupees needs to be credited to a bank account which, many Indians do not have. In India it is estimated that 90% of transactions are made in cash. More than half of Indians do not have a bank account, many do not have legitimate ID.
Indian Finance Minister Arun Jaitley recently announced that Indian banks had received three trillion rupees ($44.4bn) in cash in the first four days after the ban.
For different reasons Venezuela has introduced currency controls in an attempt to reduce rampant inflation. Venezuela has been in the grip of a deep recession for three years and inflation is expected to rise by 1,660% during the coming year.
The effect has been that the people of Venezuela have been desperate to offload their cash into US dollars. Many have crossed the border into Columbia to exchange money. When panic sets in local currency like the Bolivar can be undermined sharply and that is what has happened.
Bitcoin Virtual Currency Solution
Both of these countries have set objectives but public confidence in local currency has been undermined. People have been desperate to find alternatives.
One alternative is changing money into a virtual currency and Bitcoin has been heavily boosted because of that. The rise in value of the Bitcoin has even beaten gold price rises.
Buying large amounts of Bitcoins for investment has certainly been a major reason for their increase in value.
See live Bitcoin prices for the major currencies on our currency converter.
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Disclaimer: This article only represents the author’s opinion and should not be taken as investment advice.