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Venezuela's cryptocurrency is one of the worst investments ever
Source: Washington Post
Venezuela’s cryptocurrency is one of the worst investments ever
By Matt O'Brien March 5 at 7:00 AM
There are two types of countries, just as there are two types of companies: ones that are doing well, and ones that are pivoting to blockchain.
That, of course, is the technology that underpins so-called cryptocurrencies such as bitcoin. And, as their prices have skyrocketed the past year, it's also the buzzword that failing enterprises of all kinds have latched onto as a life raft in their own seas of bankruptcy. First, it was the Long Island Iced Tea Company that announced it was supposedly reinventing itself as some sort of blockchain one. That alone was enough to send its stock up as much as 500 percent even though there was no reason to think a company that couldn't make a profit selling soft drinks could do so with a technology it had no expertise in. (Nasdaq has since said it will delist it for allegedly trying to “mislead investors” with what turned out to be its nonexistent blockchain plans).
-snip-
And now it's Venezuela's turn to try to cash in on the crypto craze to save itself from its own long list of mistakes.
It's hard to think of a government that, absent a war, revolution or Stalinist-style purge, has done a worse job running its economy than Venezuela's. Maybe the United States' in 1929 or Zimbabwe's in 2003. What separates Venezuela, though, is that it's managed to combine the economic collapse of the first with the hyperinflation of the second despite the fact that it has the largest oil reserves in the world. Indeed, the International Monetary Fund estimates that, by the end of the year, Venezuela's economy will have shrunk 38 percent since the start of 2014, and its prices will be 2,176 times higher. That's what happens when you put incompetent cronies in charge of the state-owned oil company but keep spending money as if you're pumping as much oil as ever. You have to print what you need instead, until eventually all this new money pushes up prices so fast that it's difficult for any part of the economy to function. Going by black market prices, that's translated into Venezuela's currency, the bolivar, losing 99.99 percent of its value the past six years.
Which is why Venezuela's government has just launched the petro, its own cryptocurrency backed by oil. Well, at least that's what the regime is saying. In reality, the petro isn't a crypto, it isn't a currency, and it isn't backed by oil in any meaningful sense. It's just a way for Caracas to try to get around the sanctions against it while raising money from the only people more clueless than itself.
-snip-
By Matt O'Brien March 5 at 7:00 AM
There are two types of countries, just as there are two types of companies: ones that are doing well, and ones that are pivoting to blockchain.
That, of course, is the technology that underpins so-called cryptocurrencies such as bitcoin. And, as their prices have skyrocketed the past year, it's also the buzzword that failing enterprises of all kinds have latched onto as a life raft in their own seas of bankruptcy. First, it was the Long Island Iced Tea Company that announced it was supposedly reinventing itself as some sort of blockchain one. That alone was enough to send its stock up as much as 500 percent even though there was no reason to think a company that couldn't make a profit selling soft drinks could do so with a technology it had no expertise in. (Nasdaq has since said it will delist it for allegedly trying to “mislead investors” with what turned out to be its nonexistent blockchain plans).
-snip-
And now it's Venezuela's turn to try to cash in on the crypto craze to save itself from its own long list of mistakes.
It's hard to think of a government that, absent a war, revolution or Stalinist-style purge, has done a worse job running its economy than Venezuela's. Maybe the United States' in 1929 or Zimbabwe's in 2003. What separates Venezuela, though, is that it's managed to combine the economic collapse of the first with the hyperinflation of the second despite the fact that it has the largest oil reserves in the world. Indeed, the International Monetary Fund estimates that, by the end of the year, Venezuela's economy will have shrunk 38 percent since the start of 2014, and its prices will be 2,176 times higher. That's what happens when you put incompetent cronies in charge of the state-owned oil company but keep spending money as if you're pumping as much oil as ever. You have to print what you need instead, until eventually all this new money pushes up prices so fast that it's difficult for any part of the economy to function. Going by black market prices, that's translated into Venezuela's currency, the bolivar, losing 99.99 percent of its value the past six years.
Which is why Venezuela's government has just launched the petro, its own cryptocurrency backed by oil. Well, at least that's what the regime is saying. In reality, the petro isn't a crypto, it isn't a currency, and it isn't backed by oil in any meaningful sense. It's just a way for Caracas to try to get around the sanctions against it while raising money from the only people more clueless than itself.
-snip-
Read more: https://www.washingtonpost.com/news/wonk/wp/2018/03/05/venezuelas-cryptocurrency-is-one-of-the-worst-investments-ever/
