Failed fiat economies push bitcoin adoption

Hyperbitcoinization: For bitcoin idealists, the coming utopia for global finance begins With bitcoin eliminating fiat hegemony. This civilizational proposition has attracted cyberpunks since the early days of bitcoin. Now crypto has gone mainstream as everyday people are taking over failing economies and overriding government policies.

Daniel Kravitz, co-founder of the Satoshi Nakamoto Institute, described bitcoin’s rise to power as “hyperbitcoinization”. This will in part be due to poor policies, failed economies, and pressured government intervention. This will force people to move out of legal hegemony.

“Bitcoin-induced currency monetization, or hyperbitcoinization,” would be what “any illiquid currency” should “stand in the path of bitcoin’s total world domination,” Kravitz says. “If that happens, the currency will boom. Will lose value because bitcoin supplies it.”

From the recent government suppression of political protests, it is clear that whenever people are pushed, they migrate to the next technology to assert their agency. Hyperbitcoinization could finally become a reality as the world moves into an uncertain season of recession.

Hyperbitcoinization: the failure of fiat money

Lebanon, Turkey, Venezuela, Cuba, Zimbabwe and many other countries have faced issues of hyperinflation. Fiat currencies are in a downward race, prompting governments to implement questionable policies to prevent rot.

But the invocation of special powers by presidents, price controls, and surrogate currencies also compete with economic sanctions, poor governance, and other structural factors that render government financial control efforts in vain. It also denies citizens control over their money.

The humanitarian failure of fiat money became apparent in Venezuela sometime in 2019. Families were forced to buy rotten food and leave their children for adoption due to lack of basic commodities. At the last official count, Venezuela’s inflation in May stood at 151%.

Tragic cases like this stymie the urgency for an alternative currency that is not vulnerable to the whims of central banks. In Lebanon, failed government policies have robbed people’s savings and pensions. Its national currency has also lost value dramatically.

turn to bitcoin

According to a recent report by CNBC, people in Lebanon have turned to bitcoin to preserve the value of their money in the wake of the severe financial crisis caused by decades of “expensive wars and poor spending decisions”.

The report states that citizens are using bitcoin as a means of payment for both local and foreign transactions. The USDT stablecoin is also popular in the country. While crypto is not allowed as a means of payment by the Lebanese government, people simply do not care.

CNBC reported that businesses are promoting crypto as an acceptable payment method on Instagram and other social media platforms. It added that the banking system is broken, and the local Lebanese pound has lost 95% of its value since 2019. Banks are limiting withdrawals.

Global food and energy costs driven by the Ukraine war and the COVID-19 pandemic have exacerbated food shortages and inflation this year. Official figures show that the year-on-year inflation in September was 162%, the highest in the world.

“The use of USDT is widespread,” said one user, identified only as Gabrel. He added:

“There are a lot of coffee shops, restaurants and electronics stores that accept USDT… the government has much bigger problems right now than it is to worry about some stores accepting cryptocurrency.”

government repression

Economically failing and isolated governments have historically resorted to obsessive control of institutions and repression of citizens as they stage protests. In Zimbabwe, where inflation is running at a world high of 269% in October, officials have taken a tough stand on dissent.

Zimbabwe is often cited as a good case for bitcoin adoption due to its long-standing currency problems. In January 2019, the government banned the popular social network to quell protests and blacked out coverage of brutal government repression.

The clampdown reportedly resulted in the death of 12 people and the release of over 60 gunmen in hospital. The fighting was widespread. However, repression has caused new technological possibilities to open up in the past.

The people of Zimbabwe responded to the total internet shutdown by migrating to Telegram. Telegram is designed as a communication app to counter surveillance and suppression. Citizens also unlocked banned social networks, WhatsApp, Facebook and YouTube, through Virtual Private Networks (VPNs).

As citizens regain their democratic liberties through alternative communication channels, there is reason to believe they will follow suit in reclaiming their financial freedoms through censorship-resistant currencies such as bitcoin.

Zimbabwe one hundred trillion banknotes
The Infamous $100 Trillion Zimbabwe Note

Indeed, bitcoin has been booming on social media since the country’s central bank, the Reserve Bank of Zimbabwe, banned cryptocurrency trading and shut down two exchanges in May 2018.

But the trade did not die with the embargo. Instead, it re-established itself on WhatsApp through peer-to-peer trades. Over time, crypto enthusiasts have created strong WhatsApp groups where they share information and news on developments in the field.

Now, they are using similar groups to buy and sell cryptocurrency, using connections they already know or are new to. The trust built in this community is the key to building trust and preventing theft.

To combat inflation, the Zimbabwean government has unveiled a scheme that allows ordinary people to buy gold coins using the local currency. The plan aims to help people in a country that has seen the worst inflation in history, at 4 billion percent, preserve value.

regaining personal financial freedom

Some countries are clearing the ground for crypto through soft touch regulation. Others are doing the same by unknowingly failing to control inflation. This has led to a breaking point where citizens withdraw their freedom through alternative currencies, primarily bitcoin.

In Turkey, the government’s crackdown on crypto exchanges has failed to prevent citizens from turning to BTC. Inflation in the country reached a 24-year high of 86 per cent in October. Turkey also banned crypto payments in 2021.

According to data from LocalBitcoins, BTC peer-to-peer trades in Turkey increased by 51% and 40% during the first and second quarters of 2022. All this resulted in a fall in the value of the Turkish lira. People use bitcoin as an inflation hedge.

Chainalysis says that between 2021 and June 2022, Turkish citizens received $192 billion in cryptocurrency. The country has the fastest bitcoin adoption rate in the world.

Bitcoin continues to make inroads around the world. This has happened through progressive government policies and increasing user adoption. The failure of fiat currencies in developing economies will continue to force citizens to take back ownership of their money.

At the critical point of hyperbitcoinization, Daniel Kravitz’s radical vision of financial freedom and inclusivity will see citizens of poor countries transacting in a way that is borderless and permissionless.


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