The people of Argentina are financially conscious by necessity. The country has been in a vicious cycle of hyperinflation and stabilization for decades. The recent turn of inflation that started in 2016 has driven people to embrace cryptocurrency.
Inflation is a way of life in Argentina. There are Argentinians who specifically hold dollars in the banks instead of the country’s native currency because of fear that the government might devalue them overnight. But because people expect inflation to happen, the prices are always on the rise.
The latest rounds of financial woes the country faces have rapidly declined people’s spending power. It has brought 37.3% of the population below the poverty line, and many people have seen their savings vaporized.
The populace has that’s why has turned to bitcoin to find solace to bring some stability into their lives by hedging against 60% inflation.
Bitcoin, Stablecoins, and The Promise of Freedom and Stability
Jeronimo Ferrer runs a walking tour in Argentina known as “Our Local crazy economy & Bitcoin tour of Buenos Aires”. One might consider him one of the many experts in Argentina who understand how the financial tides move inside the country. To him, Bitcoin has provided a way for people to attain financial freedom.
- Argentina Peso is Highly Volatile: Argentinian Peso has always been a volatile currency. Since 1990, it has gone through several reforms and all were meant to put a leash on inflation. The most radical among them was the currency board, introduced in 1990 by Domingo Cavallo, the economics minister during that time. Alongside that came the convertible peso. These measures pegged the currency with the USD at 1:1. However, by 2019, the ratio went to 60:1 – devaluing the peso and sapping the population’s spending capabilities. This volatility has caused people to look for ways to bring financial stability into their lives.
- Bitcoin Mining is Cheaper in Argentina: Bitcoin operations consume a lot of energy. However, the cost of electricity is relatively cheap in Argentina – making it fairly frugal for people to mine bitcoin.
- Bitcoin can Act as a Buffer against High Inflation: Since only a finite amount of bitcoin can be created at a time, the cryptocurrency can act as a buffer during high inflation. Argentinians continued to look for an asset that was limited – and bitcoin was the one they found.
- Stablecoins can store value in the USD: It is not just bitcoin that has captured the interest of Argentines; stablecoins too have given them the means to store value in USD. One of the main reasons behind this is the country’s strict policies on foreign exchange services.
Due to these factors, Bitcoin penetration in Argentina has reached 12%, many times more than the nearby countries such as Mexico, Peru and others.
Three startups have emerged in the country that offer debit cards to transact using crypto. Among these budding companies is Lemon, originating from a Patagonian town where 40% of shops accept Bitcoin.
Your capital is at risk.
We Should be Cautious About this: Vitalik Buterin
Vitalik Buterin, the creator of Ethereum, visited Argentina in December. He noticed the rising Stablecoin and other cryptocurrency adoption in the country. While appreciating the government’s acceptance of the crypto, he has warned that the country’s economy would depend too much on the USD. He further said that the problem can increase for the country if the USD starts showing serious issues.
Argentinian president has echoed the same concerns and has said that the citizens must be careful. But he also encouraged bitcoin adoption, saying that it is stable than the Argentina peso.
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Source: https://insidebitcoins.com/news/argentina-embraces-bitcoin