Bitcoin (BTC) Skyrocketing Against Argentine Peso as Top Cryptocurrency’s Inflation Model Prevails
Bitcoin continues to leave fiat currencies behind in the dust.
Record-high inflation, a weakening currency, and slowing growth are beating Argentina like many other countries. This is where a peer-to-peer network of Bitcoin presents an alternative that is in limited supply and is deflationary.
— Max Keiser, tweet poet. (@maxkeiser) April 25, 2019
Argentina’s fiat currency is just another example of how the current monetary system fails and fiat currencies doesn't have much of a life span.
Argentine Peso Falls Sharply To New Record Low
The embattled peso of Argentina was extremely weak on Thursday as it fell sharply to a new record low against the US dollar after uncertainty about high inflation and a recession looms over investors along with the nervousness regarding elections in October.
This year Argentine peso is the worst-performing emerging market currency that is down 16 percent. “When a high-profile country like Argentina comes under pressure, everybody loves to sell,” said Edwin Gutierrez, Aberdeen Standard Investment’s head of emerging market debt.
Political Concerns Rising
The peso fell over 5 percent yesterday on signs that President Mauricio Macri’s arch rival, populist ex-President Cristina Fernandez de Kirchner could beat him in an election run-off.
“Macri is getting worse and worse (in the polls), while Cristina is getting better and better,”
said Gabriel Rubinstein, a former economy ministry official. He further said she generates “many fears about her past,” referring to policies such as currency controls.
Meanwhile, the yield on short-term government debt though stabilized still remains near distressed levels. The index of Latin America's No. 3 economy’s risk has climbed to its highest level in five years, surpassing other similar emerging markets.
Defaulting On Debts
Earlier this month, Macri had announced a series of economic policies including price controls on various foods to offer some relief to voters but Alberto Ramos at Goldman Sachs says they are “symbolic” as
“They are not effective and will not work [to bring inflation down], but it may help the government win the hearts and minds of Argentines.”
During this time, the cost of insuring against an Argentine debt spiked again. In 2018, Argentina returned to IMF for a record $56.3 billion bailouts. According to Federico Kaune at UBS Asset Management, markets are pricing in a 65 percent chance of default.
“There really isn’t much the government can do right now, because it is not the policy mix that is the problem,”
said Mr. Ramos.