For developing nations, cryptocurrency is most valuable as a safe haven

For people living in developing countries, decentralized cryptocurrencies have never been a more important haven for the wealth of the people. Populist uprisings in both the Eurozone and the United States threaten global trade, without which many economies’ growth is stunted. On top of that, infrastructures in these countries are very poorly maintained but can be bypassed with smartphone technology.

Countries like Venezuela struggle with economic dependence on commodities holding a high value. As a result, a drop in the price of oil resulted in a massive devaluation of the Venezuelan bolivar, and spiraling rates of inflation. This circumstance, in combination with President Nicolas Maduro’s economic mismanagement has made the bolivar an unstable store of value.

The demand for bitcoin and other cryptocurrencies in Venezuela skyrocketed in accordance with the inflation crisis. Digital, easy to transfer currencies allowed Venezuelans to hold on to their assets, and purchase goods and services from other countries that had become scarce in Venezuela.

Turkey’s president Recep Erdogan has been rapidly consolidating power to the executive branch following the recent failure of a coup d’état. A referendum set for April will decide if Erdogan’s constitutional changes will be cemented.

This move toward autocracy creates uncertainty for businesses and consumers alike, driving sentiment toward cryptocurrency. Government attempts to control VPNs and internet use in Turkey have been poorly implemented, and are easily bypassed. The instability in the region will cause investors in the country to move their money out of cash, and to stores of value like bitcoin.

An autocratic move would be harmful to Turkey’s economy, as the Eurozone would not react kindly to this regression. While it remains to be seen what Erdogan’s next move will be, overwhelming executive power is often followed by poor regulatory choices. Protectionist policies and anti-immigration are also likely as Turkey’s national security is a growing concern.

Prices for bitcoin in Nigeria have undergone a recent explosion, due to increased interest in the region. Innovative startups like BitPesa are making it easier for Nigerians to use digital currency to pay for goods and services.

In areas where infrastructure like roads, telephone communication, or banking systems are neglected, applications like BitPesa are important to enable people to send money to others in times of need. If applications like this eventually reach widespread use, a thriving crypto market will emerge in Nigeria, along with a boon to economic stability.
With automated payment systems, corruption is given a smaller window of opportunity, as payments are made directly without a middleman. In general, countries that struggle with corruption would benefit greatly from decentralization.

People in each of the above countries are using cryptocurrency to bypass the roadblocks of inefficiently managed governments. Insecure bank systems, strained currencies and infrastructure, and uncertain regulatory environments are being sidestepped with the virtual safe haven of crypto. Digital currency carries its fair share of risk, but in these cases, it is much less volatile than assets becoming worthless, or being seized by governments or bandits.

Another reason that cryptocurrency is more important than ever, is the rise of protectionism. The hastiness of recent policies enacted by Donald Trump, such as the withdrawal from the TPP, has driven uncertainty as to where global trade will be left in the wake of his presidency. China has been central to the demand of bitcoin, partly because of the ease in which it can be transferred out of the country. A trade conflict between the U.S. and China would drive the demand for bitcoin, and other cryptocurrencies through the roof as they’re freely exchanged without tariffs.

Protectionism not only would drive demand in China, but also in much of South America. Countries dependent on commodities will have their currencies driven downward by a border tax, or even simply by a stronger U.S. dollar, resulting from 3 scheduled rate hikes this year. All of these factors play into the emergence of cryptocurrency as a legitimate store of value for all countries.