Bitcoin To Become The Moonicorn For Argentinians As Inflation For Pesos Surpasses 50%
Argentina’s Inflation Rates Could Help Increase Bitcoin Adoption
Argentina’s inflation rates continue to grow and the government seems not to be able to control it, even after several months of monetary tightening. This could be a good moment for individuals and their population to start embracing Bitcoin (BTC).
Argentina’s Inflation Reaches Its Highest Level Since 1992
Argentina could have been a great country and an economic power but during the last 70 years, the country has been mismanaged in economic terms. The country experienced hyperinflationary crises and defaults, which have affected people’s trust in the government and its institutions.
Since Mauricio Macri became president of the country, inflation seemed to remain stable. In 2017, inflation rates fell and the trend was very promising. However, in 2018, things changed its currency, the Argentine peso (ARS) devaluated against the USD, and the economy fell 2.5%. After ten years, Argentina has the same GDP per capita. Meanwhile, other similar countries in the region and around the world were able to increase more than 40% their GDP per capita.
According to a recent report released by Bloomberg, inflation rates in Argentina continue growing, even when the USD remained somehow stable since October 2018.
“The inflation rate rose to almost 55 percent in March [YoY], with consumer prices rising 4.7 percent in the month, exceeding all of the forecasts in a Bloomberg survey of analysts.”
Indeed, in this survey, several economic analysts provided their inflation projections for March. The consensus was close to 4%, but far from the 4.7% registered by the INDEC, the statistics agency of the country.
Are Argentinians Embracing Bitcoin?
Although Bitcoin could be a store of value for Argentinians, there does not seem to be an increased interest for the digital asset. There are some sites that are providing misleading information about how Argentina is embracing the digital asset by showing a graphic from LocalBitcoins in which the traded volume in ARS has been growing over time.
The first thing to mention about it is that the ARS has been losing its value over time. People need more ARS to purchase the same goods and services they were buying a month or a year ago.
For example, when Bitcoin was reaching its all-time high in December 2017, LocalBitcoins registered a trading volume of 17 BTC in Argentina. This is equal to $306,000 if we consider that the price of Bitcoin was close to $20,000.
A year after this price increase in the price of Bitcoin, Argentinians were purchasing 57 BTC. Considering a price of $3,500 that means that they moved less than $200,000. Even if we adjust by USD inflation, the numbers would remain very similar. This shows that trading volume in the country fell 34% in USD terms.
Interestingly, it is possible to see that when the Bitcoin price started to grow in February, the trading volume also started to fall in terms of BTC. This shows that Argentinians are following a trading scheme similar to the one registered by developed countries. People are not searching for Bitcoin as a store of value, instead, most of them are using it to speculate with its price.
During the same period of time, Argentinians traded AR$ 5,728,000 in December 2017 and AR$ 7,694,000 in December 2018. This represents an increase in trading volume of 34%. During the same period of time, the USD moved form AR$ 17.3 to AR$ 38.3, increasing 121%.
Although Bitcoin trading volume has fallen in USD terms. There are some positive things to mention about Bitcoin adoption in this South American country.
A few months ago, we reported at Bitcoin Exchange Guide that the companies Bitex and Alto Viaje, implemented a system that allows users to pay for public transport in 47cities using Bitcoin.
At the same time, the same company, Bitex, performed an international export of Argentine pesticides and fumigation products to Paraguay. The buyer in the neighboring country of Argentina paid $7,100 for these products and Bitex performed the transaction using Bitcoin. The funds were immediately converted to ARS. Bitex allows individuals to make transactions of under $15,000 very efficient, simple, cheap and fast.
At Bitcoin Exchange Guide we were able to contact Athena Bitcoin, a recognized Bitcoin and crypto ATM company with presence in Colombia, Argentina, and the United States. They told us that they are planning to launch new Bitcoin ATMs in Argentina in the future.
At the time of writing, Argentina has only 10 Bitcoin ATMs installed. Back in September 2018, there were no Bitcoin ATMs in the country. Since then, the metropolitan region of Buenos Aires became the second largest area in South America with the largest Bitcoin ATM machines installed. Meanwhile, Colombia leads the ranking with 37 ATMs located in different cities.
As mentioned before, although Argentinians are not using Bitcoin to fight against inflation as Venezuelans are currently doing, there is a more mature offer of Bitcoin and other digital assets. In the future, if there is a deeper crisis such as the one that is currently experiencing Venezuela, the infrastructure would be already built around the most popular virtual currency in the market, allowing citizens to move towards this digital asset.
During a conversation with the local newspaper La Nación, Draper mentioned that Bitcoin could be an ideal tool to combat Argentina’s economic woes. Draper had a meeting with Mr. Macri before a Fintech and Blockchain summit that was organized by his Argentine fund called Draper Cygnus.
About the ARS and Bitcoin, he commented:
“If the peso is valued more than Bitcoin, I double the investment I am making in the country; and if Bitcoin acquires more value than the pes… that would be a perfect solution because there is no confidence in the country.”
In terms of inflation, the economic team of the government decided to stop increasing tariffs for services such as electricity, transport, and more. This is aimed at stopping inflation in the short term ahead of the elections in August, October and eventually November. Although this is not a deep solution for the inflationary problems, the central bank is currently with a very tight monetary program that should have effects in the coming months, even when April’s inflation seems to be high as well.