Bitcoin is trading at a premium of about a thousand dollars on LocalBitcoins in Argentina after the currency of the country peso plunged more than 30% on Tuesday.

The currency crisis and stock market chaos followed country’s center-right leader, president Mauricio Macri performing poorly in primary elections.

Second-Biggest Market Rout and Currency Crisis

Early officials showed that Macri, who is viewed as market-friendly, lost by a far greater margin than expected, casting serious doubt over his reelection chances in October.

The surprise outcome ruled the nation’s financial markets, sending main Argentine stock market plunging more than 30% and S&PMerval Index falling 48% in dollar terms.

This has been the second biggest one-day rout after Sri Lanka’s 60% plunge in June 1989 due to civil war, reported Bloomberg.

Argentines Choosing Bitcoin as a Store of Value as Peso Plunges?

Argentina’s peso hit a record 65 per dollar, marking a 30.3% loss.

Country’s euro-denominated bond fell almost 9 cents lower and yield, which move inversely to price, rose about 3%. Already battered by US-China trade war and slowing global economy, emerging markets weakened further.

“Bad news has a way of being magnified in this environment and contagion risk is therefore higher,” said Ilya Gofshteyn, a strategist at Standard Chartered in New York.

This dire situation has pushed people to Bitcoin, which is trading at a premium in the country.

Bitcoin is surging in Argentina, trading at ~$12,300 on @buenbit, a premium versus ~$11,400 on Coinbase, where it's having a relatively quiet day. There's a bloodbath in argie markets today after Macri lost in a primary vote and people fear the return of populism. (1/2) pic.twitter.com/EJdqATZn8L

— Camila Russo (@CamiRusso) August 12, 2019

Cami Russo, who is writing a book on Ethereum and previously worked at Bloomberg Business, said,

“Argentines can buy dollars freely (and they are), but some are still choosing Bitcoin as a store of value.”

Or is it Just Low Liquidity?

However, the premium on Bitcoin could be because of the low liquidity in the market. Economist and trader Alex Kruger notes that the order book of Buenbit had only 19 BTC traded yesterday while instanz.com has under 50.

“The Bitcoin/ArgentinePeso market is highly illiquid,” said Kruger.

Currently, Bitcoin is trading at $11,547 on Buenbit versus $11,230 on Bitstamp.

It seems like Argentina, unlike China, does see a Bitcoin premium (localbitcoin, ~$1000 premium) any exchange there has decent liquidity?

The key diff is: In China there is sufficient local supply of Bitcoin (miners, exchanges etc) but Argentina is lacking local liquidity

— Dovey 以德服人 Wan 🗝 🦖 (@DoveyWan) August 12, 2019

Meanwhile, a Twitter user points out how the Bitcoin volume in USD actually surged last week as per LocalBitcoins Argentina.

This is LocalBitcoins Argentina in USD equivalent Volume. 220k USD last week. pic.twitter.com/5qGp8cKnjA

— Matt Ahlborg [UsefulTulips.org] (@MattAhlborg) August 13, 2019

Investors are moving to Bitcoin, for sure as evident from the surge in volume but it’s not as drastic as expected. Volume, though spiking is still low and premium on BTC is the effect of illiquidity in the market.

Bitcoin’s price is $33,276.83 BTC/USD exchange rate today. The real-time BTC market cap of $618.69 Billion currently ranks #1 with a chart dominance at 62.37%, daily trading volume of $12.41 Billion and live coin value change of BTC 2.19 in the last 24 hours.