Venezuelan Bolivar Resumes Intense Bearish Descent

After experiencing a recent period of relative stability, the value of the Venezuelan bolivar (VES) has been declining at an alarming rate. In parallel markets, the value of the currency has fallen by approximately 40% against the US dollar (USD), alarming citizens who are concerned about the rapid pace of the devaluation.

In accordance with the well-known pricing index Monitordolar, on October 25, the price of one dollar was 9.05 bolivars. On November 26, the exchange rate rose to 12.63 bolivars for every dollar.

There are numerous explanations for this drop. Analysts claim that this decline was anticipated because of the increased spending that occurs during the Christmas season as a result of the increased liquidity created in the market by the bonuses and payments that the government and other businesses give to employees.

This is the section of the thesis that economist Jose Guerra, a Venezuelan, has developed regarding this matter.

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. This is due to the insufficient flow of dollars coming in for several reasons, such as sanctions that make it impossible to move the money, which is mostly paid for the sale of oil in cash.

Meanwhile, the Venezuelan peso likewise lost 35% of its value against the US dollar in a single week in August.

Cryptocurrency Exerting Additional Pressure on Venezuelan Bolivar

Oliveros thinks that this issue is made worse by a crypto factor in addition to the regular factors. According to Oliveros, market makers who used cryptocurrency exchanges as a means of introducing these assets into the nation were currently supplying the majority of the parallel currency market, which is independent of governmental action.

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.