Bitcoin Price Goes Premium In Argentina As Native Peso (ARS) Collapses
The Argentinian currency continues its downward trend, going down over 30% in the last week. The value of the Peso has reduced by half since May 2018. It has forced the country’s central bank to increase interest rates by up to 60%, which makes any borrowing incredibly expensive, further affecting the economy.
This drastic measure of increasing interest rates was taken as a way of curbing the rising inflation rate and also stopping the ARS from falling further. 20 pesos were equivalent to one dollar back in May, but that price has since increased up to 42, before finally settling at around 38 pesos.
The Argentine government has been forced to halve ministries, increase taxation on exporters and even fire state workers. They have also requested the IMF to release their loan earlier, which is worth $50 billion. This highly indebted country has many traders concerned whether more borrowing is a good strategy, especially since Argentina defaulted in 2001 on its foreign debts.
The great depression that occurred at the turn of the century still hangs over the nation’s economy up to date with Argentina opting to print more currency to get rid of the enormous debt. The result is that the inflation rate has stayed above 20% for the past two decades.
A stronger dollar could also be one of the reasons why emerging economies are currently facing numerous currency issues. It seems that an event back in April may have possibly hinted at the start of this currency problem in developing nations, with Argentina being a notable spark.
Bitcoin Stays High In Latin America
Bitcoin is currently enjoying an excellent time in Argentina and also across most crypto exchanges across South America. For instance, Columbian currency (COP) can exchange bitcoin at a value of $6,500. The reason for this high price could be because many Venezuelans are using proxies to sell bitcoins to their Colombian neighbors. Given that the Brazilian currency is also performing poorly against the dollar, it could likely e that the South American countries are dealing with low confidence levels within their national currencies.
The big question that is on many people’s mind is whether this trend will continue spreading across all emerging economies, like South East Asia, as well as whether it will reach other developed economies, like American and Europe. With rising interests and astronomically high debt levels, the FED experts could make mistakes, as they are susceptible to do. That is precisely the case in the US as the country is adding up to one trillion dollars annually to its national debt, instead of reducing the debt and deficit levels.