How Bitcoin Becomes a Lifeline During Hyperinflation

• Hart believes that when the national monetary system collapses, holders of foreign currency or Bitcoin fare the best
• In countries like Venezuela, where hyperinflation has significantly devalued the national currency, people have turned to alternatives such as Bitcoin and stablecoins to save value and send payments
• However, as shown this year, when the global economy gets shaky, Bitcoin hasn’t always acted like a reliable safe asset

Molson Hart, the CEO of Viahart, outlined a hypothetical survival hierarchy for individuals in societies where the national monetary system collapses, like what happened in Zimbabwe, Venezuela, or Weimar Germany in historical periods of hyperinflation.

He said that in such a scenario, holders of foreign currency or Bitcoin fare the best, because they can either leave the country or keep their buying power when the national currency becomes worthless. It ties into a long-standing crypto belief that digital money like Bitcoin (which isn’t controlled by any government) can act as a personal financial safeguard against bad economic policy or extreme inflation.

This isn’t even a hypothetical scenario anymore, considering that in countries where hyperinflation has significantly devalued the national currency, people have turned to alternatives such as Bitcoin and stablecoins to save value and send payments.

Venezuela is a prime example. With extreme inflation and strict limits on getting foreign cash, many Venezuelans turned to crypto to save money and send funds abroad. Stablecoins, mainly USDT, established themselves as a normal part of everyday buying, selling, and receiving money from families overseas after the regular banking system broke down. 

Trading crypto directly with others or swapping it for stablecoins became a basic financial tool for countless families and small businesses.

Also, in Zimbabwe and Argentina, high inflation and unstable local currency have led people to turn to Bitcoin and other cryptocurrencies as a way to protect their savings from losing value, even if they don’t use them to buy things on a daily basis.

Bitcoin as a hedge and safe haven

People who believe Bitcoin helps in a financial crisis point to its limited supply and decentralized nature, unlike government money, which can be printed endlessly. Bitcoin’s built-in scarcity has sometimes made it attractive as a digital version of gold, since its creation is fixed and predictable, giving it a high degree of economic rarity.

However, as shown this year, when the global economy gets shaky, Bitcoin hasn’t always acted as a reliable safe asset. In some cases when market fear was high, the classic safe haven, gold, has done better than Bitcoin.

Still, Hart’s hyperinflation and currency failure scenario isn’t just theoretical, considering it has led to real, measurable growth in crypto use in countries like Venezuela. Plus, history and data show that when monetary systems fail, people indeed seek alternatives like Bitcoin, foreign currencies, or hard assets.

Related: CryptoQuant Analyst Warns of Heightened Risk for Bitcoin as Sentiment Turns Red