As Venezuela’s beleaguered economy falls deeper into trouble, interest in Bitcoin rises, says Anibal Garrido, who teaches crypto-trading at the University of Carabobo, Venezuela, and offers courses on his website

But does the data support the notion that crypto acts as a “safe haven” in times of strife: the idea that Bitcoin is beneficial for troubled economies because it’s uncorrelated with major events that could tank an economy, like war or economic sanctions, and doesn’t depend on third parties, such as banks, to operate? 

When it comes to Venezuela, Garrido says yes. “Venezuela has one of the most distorted economies on the globe, showing inflation variations up to three digits in a month,” Garrido told Decrypt in an interview, citing data produced by the country’s central bank.

The International Monetary Fund estimates that consumer prices in Venezuela will inflate by 500,000 percent, and Garrido said that the amount of money the Central Bank of Venezuela pumps into the economy “hugely varies,” making it difficult to predict the value of the country’s currency, the bolivar. 

Therefore, “Both the private sector and the average citizen have chosen to protect themselves in other international currencies to take shelter over their purchasing power,” he told Decrypt

“Because it’s so easy to acquire cryptocurrencies, especially Bitcoin, Venezuelans have increased the trading volumes in the mother cryptocurrency more than any country in the region,” he said. 

But does the evidence support Garrido’s argument?  

Some of it does. 

Interest in crypto in the country could be related, in part, to Venezuela’s own state-backed cryptocurrency, the Petro, which it disbursed last month to 3 million citizens dependent on the state, such as the retired and public-sector workers. Over 1,000 merchants in Venezuela, such as local retail giant Traki and fast-food restaurant Burger King have started accepting crypto. 

And trading on LocalCryptos, a peer-to-peer cryptocurrency marketplace, also reports big business in Venezuela. In 2019, Venezuelans accounted for 26% of cryptocurrency transactions, and 86% in all of Latin America. 

Active Venezuelan users on Dash wallets increased by over 400% from May-November. That’s enough for Ernesto Contreras, business development manager for Latin America at Dash Core group, to conclude that “the country is the leading market for crypto adoption in the world today.”

“This is a level of adoption and usage not seen anywhere else,” he told Decrypt, which “solve[s] some of the need for solutions caused by the financial problems the country is facing.”

But trading data from LocalBitcoins.com, a popular peer-to-peer Bitcoin trading site, is inconclusive. In early 2019, Bitcoin transaction spiked in volume in Venezuela on LocalBitcoins.com, a popular peer-to-peer Bitcoin trading site, and has been rising steadily for years, according to data on CoinDance

In the second half of 2019, however, Bitcoin trading for the Venezuelan bolivar tanked to less than half of all trading volume in the first half of the year (a drop from 35,659 bitcoins to 14,944 bitcoins)—a trend that contradicts the “safe haven” argument, since Venezuela’s economy only worsened during that period.

It's worth noting, however, that trading volumes on LocalBitcoins decreased across the board last year, not just in Venezuela, following the introduction of know-your-customer (KYC) requirements on the exchange. Meanwhile, other peer-to-peer exchanges such as Paxful and Hodl Hodl have picked up the slack.

Indeed, according to the Venezuelan economist, any drop in local Bitcoin trading within the country may have had much more to do with the broader crypto market. Garrido said that the decline in transactions on LocalBitcoins isn’t a sign that Venezuela’s losing interest in crypto. “It's a cyclical market problem related to the eternal bullish and bearish struggle,” he said. In the second half of 2019, Bitcoin’s price dropped, meaning it didn’t seem like a safe asset anymore. “It wasn’t only Venezuela...it was the whole BTC market.” 

Still, it’s difficult to maintain that Bitcoin behaves like a true safe-haven asset if local trading tanks along with the market—and crypto suddenly doesn’t seem like a safer alternative to even the inflation-riddled bolivar.

And it’s even more difficult to conclude from this that Bitcoin is a safe-haven asset for the wider world.

For starters, Bitcoin is still a volatile currency compared to other, more stable alternatives; in 2019 alone, it hit highs of $13,860 and lows of $3,441. By comparison, the value of the dollar against the euro in 2019, two fairly stable currencies, deviated by only a few cents.

And Bitcoin’s price isn’t immune from swings due to global events as diverse as US-Iran tension and the Chinese New Year.

So for those looking to conclude that troubled economies are bullish for Bitcoin, it might be best to look beyond Venezuela.