- Despite the bearsih trend of the cryptocurrency market, traders in Argentina tired of inflation have increasingly felt taken advantage, and have sought safety in digital assets.
- The level of cryptocurrency adoption in the South American nation is higher than that of Mexico and Brazil.
- The controls on currency purchases have pushed Argentines to take refuge in Bitcoin and other cryptocurrencies.
Argentines are trying to preserve the value of their dwindling savings by investing into cryptocurrencies, despite the recent downtrend. Inflation in the South American nation is close to 60%, with little sign that it will drop this year.
In an April ‘Americas Market Intelligence’ report cited by Reuters, it can be seen that the level of adoption of digital currencies in Argentina is 12% higher than that of Brazil and Mexico, though it remains slightly less than in Venezuela, which is suffering from hyperinflation, leading to exponential growth in the use of crypto, according to Chainalysis.
"The local environment is pushing people to protect their capital in cryptocurrencies and so we see growth speeding up," highlighted Mauro Liberman, owner of the Crypstation cafe in downtown Buenos Aires, where the use of Bitcoin (BTC) is promoted.
He points out that the growth potential of BTC and other cryptocurrencies “is enormous” and that Argentines are buying into the leading asset as a form of savings.
The Argentine peso has suffered from consistent depreciation over the course of several years, and efforts by the government, to mitigate the loss of value through the Central Bank have been in vain. So far, in 2022 alone, the local currency has devaluated 14% against the dollar.
The controls on foreign exchange purchases, imposed by the government of Alberto Fernández in an attempt to prevent capital outflows, have stimulated the adoption of cryptocurrencies as a means of saving. The monthly limit for currency purchases in the country stands at $200 USD.
In April, annualized inflation reached 58%, and analysts estimate that it could reach as much as 70% in the coming months. The shocking levels of inflation have made digital assets attractive to local users, the recent crash of the crypto market notwithstanding.
Crypto savers feel that by buying digital currencies, they will lose less money than by retaining their savings in pesos. This is illustrated by the fact that the user bases of local exchanges Lemon Cash and Buenbit have ballooned in the past year, as the platforms revealed to Reuters.
On the Flipside
Why You Should Care
- While the issuer warns about the risks of investing into cryptocurrencies, the government is considering the option of financing the payment of part of its debt to the International Monetary Fund (IMF) through taxes on digital currencies.
- Bitcoin is slowly recovering as China’s Covid concerns gradually subside, and investor sentiment shifts towards risk.