Usually, people use fiat currency (or standard money) to make payments in their everyday life. However, fiat currency can quickly lose its value during an economic crisis. When that happens, Bitcoin can serve as an alternative payment method. Here’s why.
Bitcoin as a main form of money
In times of stability, Bitcoin is usually recognized for its niche appeal, which attracts the attention of investors and enthusiasts. Although this has helped Bitcoin gain adoption, Bitcoin has revealed its true potential in countries that are experiencing an economic crisis. In many troubled nations, Bitcoin has become a viable alternative to traditional money.
Bitcoin can thrive when fiat fails because the two are not subject to the same pressures. Fiat currency has value because it is backed by a national government. This works well in economically sound times, but falls apart during an economic crisis. By contrast, Bitcoin’s value is generated by a worldwide network, which cannot be affected by events in a single country.
Although Bitcoin’s price regularly fluctuates, those changes pale in comparison to the hyperinflation that some countries are experiencing. Across the world, economic crises are causing endless inflation. When this happens to a country, the spending power of its fiat currency declines dramatically. Although nobody wants to be in this situation, Bitcoin has given some people a way to avoid the instability of fiat currency and seek out alternative forms of money.
Bitcoin become alternative payment method in real life
In Venezuela, hyperinflation is devastating the population, and many people are using Bitcoin as an alternative payment method. In fact, Bitcoin trading hit an all-time high in Venezuela this February. At that time, citizens were trading about $9 million worth of Bitcoin per week. Furthermore, this accounts for only some of Venezuela’s cryptocurrency use, as Bitcoin competitors like Dash are also gaining popularity for micropayments in the country.
Zimbabwe is in a similar situation. For years, Zimbabwe has suffered from severe hyperinflation, which has rendered its fiat currency virtually worthless. As a result, many people in the country have turned to Bitcoin. And although Zimbabwe attempted to ban Bitcoin last year, that ban only affected banks, exchanges, and financial services. Individual citizens are still using Bitcoin today thanks to its purchasing power.
The bottom line is that Bitcoin can provide a very effective alternative way of spending and storing money―especially if a country’s citizens collectively adopt the cryptocurrency. Several countries, including Zimbabwe and Venezuela, have already proven this is possible. Even in the face of overwhelming economic problems, Bitcoin has demonstrated that it can maintain an edge over fiat currency.
Disclaimer: information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in cryptocurrencies.