It’s no secret that bitcoin has performed better than many fiat currencies as a store of value over the past few years, but the main issue that has kept many people away from the digital money has been its volatility. Having said that, 2015 has been bitcoin’s most stable year in terms of the exchange rate with the US dollar. With the exception of a sharp crash in the price following the Bitstamp hack in January, there hasn’t been a lot of action in the bitcoin markets this year.
Although bitcoin is still unable to compete with some of the more stable fiat currencies around the world, it is already quite competitive when matched-up against the Venezuelan bolivar. In fact, it appears that bitcoin has performed better than the bolivar as a currency in 2015.
Bitcoin vs Venezuelan Bolivar Price Volatility
In terms of price volatility, the bolivar and bitcoin have been equally poor in 2015. Although bitcoin’s volatility has been slowly declining as the months go by, the price crash from January hurt the cryptocurrency’s overall score as a currency.
The Venezuelan bolivar has suffered two somewhat quick crashes in value over the course of the first half of 2015, which has negatively affected its rolling 30-day volatility over time. When changing the timeframe from a rolling 30-day window to all of 2015 up to this point, the bolivar does look a bit better (3.13% vs bitcoin’s 3.96%).
Bitcoin vs Venezuelan Bolivar as a Store of Value
In addition to having volatile exchange rates with the US dollar, bitcoin and the bolivar have also not stored value well at all in 2015. Through the 23rd of June, bitcoin has lost 22.28% of its value, while the bolivar has lost 62.94% of its value (both compared to the US dollar).
Although 2015 has been much kinder to the bitcoin price than 2014, it still hasn’t completely turned around the downward trend that started in late-2013. On the other hand, Venezuela is currently dealing with the world’s highest inflation rate.
Bitcoin and the bolivar are quite competitive when it comes to price volatility, but it’s clear that the bolivar’s inability to retain value over the long term has made it the less-attractive option as a currency in 2015.
What does this mean?
Many bitcoin advocates will say that the digital commodity only needs to become a better option than some of the worst fiat currencies in the world to succeed, but this may not be true. There are more options for holding any type of value on a blockchain coming online each year, and many people in a place like Venezuela would probably rather hold US dollar value rather than bitcoin.
Having said that, as the St. Louis Fed’s David Andolfatto recently mentioned, bitcoin may still be useful as a long-run store of value. It’s likely that anyone who believes in bitcoin as a long-term speculation would want to hoard their coins while spending inflationary fiat currency.
It’s still remarkable that a six-year-old technological invention is already outcompeting at least one fiat currency. Continuing to compare bitcoin to various fiat currencies is still likely a worthwhile endeavor, and it will be fascinating to see how the digital commodity continues to compete over the next few decades.
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