In just one month, the bolivar, Venezuela`s fiat currency, has lost about 40% of its value relative to the US dollar.
According to sources, the government’s need to make seasonal payments and its lack of liquidity to intervene in the currency market are two factors that contribute to this, although some also point to cryptocurrency as a contributing factor.
After experiencing a recent period of relative stability, the value of the bolivar, the country’s currency, has been declining at an alarming rate.
In parallel markets, the value of the currency has fallen by approximately 40% in comparison to the US dollar, alarming individuals who are concerned about the rapid pace of the devaluation.
The director of the economics research company Ecoanallitica, Asdrubal Oliveros, adds that the Central Bank of Venezuela has not been able to act by adding liquidity to the authorized exchange market.
According to Oliveros, market makers who used cryptocurrency exchanges as a means of introducing these funds into the nation were currently supplying the majority of the parallel currency market, which is independent of governmental intervention.
But because of the market’s continuing decline and the lack of trust in centralized exchanges brought on by the failure of FTX, one of the largest cryptocurrency exchanges in the world, these market makers have reduced their exposure, making the market less liquid and adding to the dollar shortage.
The economist describes the current situation as a “perfect storm” for devaluation to continue growing and anticipates that the exchange rate will increase as these issues worsen over the coming days.