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Will Inflation in Emerging Countries Help Crypto Adoption?

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You can invest in crypto-currencies for a wide variety of uses. A current phenomenon observed in some countries is to use them to fight against inflation

As CoinMarketCap’s Twitter recently revealed, citizens of countries with emerging economies are turning to cryptocurrencies to protect themselves from the depreciation of their national currency.

The example of Venezuela

CoinMarketCap reports that after hitting a record inflation rate of 472%, many residents of Venezuela have turned to cryptocurrencies. The country has 2.9 million crypto users or 10.23% of its population.

As a real alternative to fiat currencies, the most famous cryptocurrencies have so far proven their role as a shield against inflation.

CoinMarketCap’s report reveals that other countries with struggling currencies have also adopted them. Examples include Nigeria, Pakistan, Colombia, and even Brazil. By comparison, about 8% of US citizens have turned to digital assets.

Limited internet access 

Sudan and Lebanon have just experienced record inflation above 200%. That of Syria is nearly 140%. The report indicates that the adoption of cryptocurrencies is however less pronounced in these countries.

Indeed, only 0.91% of Sudanese would have opted for digital assets. This figure is barely higher – 1% – in Syria or Lebanon. These data do not reflect a real reluctance of residents towards cryptos.

They are indeed linked to the difficulty of access to trading services, due to a very limited internet service. They can also be explained by the lack of on and off-ramps, which allow fiat currencies to be converted into digital assets. Internal conflicts could also play a role in this phenomenon.

What about stablecoins? 

Looking more closely at investment behaviors, we see that people in poorer countries prefer buying stablecoins like USDT. On the contrary, those in more favored countries will take more risk by investing in volatile cryptocurrencies like Bitcoin

The stablecoins based on the Terra blockchain, therefore, represent a good alternative for these countries with a threatened economy. By definition, the extremely stable character of these currencies could help their buyers hedge against rising inflation.

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