For the past two weeks, Argentines have been dumping record amounts of pesos for bitcoin on the peer-to-peer bitcoin exchange platform, LocalBitcoin. The volume actually increased 1028% in Argentine pesos, 407% in BTC, and 139% in USD since the beginning of 2018, noted Arcane Research.
Bitcoin adoption in Argentina hit an all-time high this April which coincided with the implementation of new capital controls which started accelerated last fall.
The Argentine government is about to default on its debt for the ninth time and its fiat currency peso is suffering from inflation.
The 3rd largest economy in Latin America has had economic, monetary, and political circumstances that many say are favorable to bitcoin adoption but is still at the 4th spot in volume on LocalBitcoins in overall Latin America.
Corralito: One of the best use cases for Bitcoin
The country has suffered from economic stagnation for decades and had several periods of hyperinflation. More specifically, in 2001 with the event Corralito, the government froze its people’s dollar accounts and then confiscated those dollars causing a 75% overnight value in people's deposits.
Because this has already happened twice, they have a history of mistrust in the banking system, as such Argentines turn to stash cash at their homes.
Let me show you what this really means..
Being from Argentina..
It’s my duty to show the crypto community and the world what this is really like .. not just reading it from the internet!
— Tech With Catalina (@techwithcatalin) April 27, 2020
However, due to the fact that there is an extensive informal infrastructure to obtain dollars, bitcoin is needed a lot less, noted Matt Ahlborg, a Research Fellow at dlab.
As for the reason behind this surge in volume on LocalBitcoins, in his latest analysis, Ahlborg found speculation is one reason and the other is Venezuela. The process the Venezuelan migrants all across Latin America uses to send home to their families involves purchasing BTC with Argentine Pesos in Argentina and then selling the BTC for bolivars.
Now, the reintroduction of capital controls is another reason and this problem endemic to Argentina is likely to be the primary growth force for the current surge in volumes.
As a matter of fact, besides ARS volume, “there is a significant amount of US dollar volume emanating from Argentine LocalBitcoins accounts as well,” as much as $20,000 USD every day in January.
Argentines weren’t the only ones that put a record amount of their fiat currency for Bitcoin during the market turmoil.
From Chile, Colombia, Morocco to Mexico, and Venezuela as per Coin Dance data, all made new record volumes during April while the fiat currencies suffered due to the central banks increasing the supply with their constant money printing.