Argentines are buying Bitcoin to protect themselves from 276 percent inflation instead of rushing to exchange pesos for dollars, upending a timeless strategy that’s made the crisis-prone country one of the top places for greenbacks in the world.
Bitcoin purchases in Argentina — one of the nations with the highest level of cryptocurrency adoption globally — approached their highest weekly value in 20 months at local cryptocurrency exchange Lemon, the most popular among retail customers in the South American country.
Argentines are looking for ways to survive a recession and one of the world’s highest inflation rates as President Javier Milei implements his shock therapy policies intended to reset the economy. Exchanging pesos for dollars, the main safe haven for decades, has lost some of its appeal in the past two months as the commonly-used parallel exchange rate has strengthened 10 percent against the dollar, while Bitcoin has rallied almost 60 percent against the greenback over the same period.
Lemon recorded almost 35,000 customer transactions to buy Bitcoin in the week ending March 10, double the weekly average last year. The behaviour was similar to that of customers of other major exchanges in Argentina, such as Ripio and Belo.
A major driver behind the stronger peso in recent weeks is Milei’s tight grip of the amount of money in circulation, not letting it grow while the Central Bank rebuilds its stockpile of cash dollars.
Volume in Bitcoin and Ether have increased tenfold so far in 2024 compared to the same period last year at digital wallet Belo, CEO Manuel Beaudroit said in a phone interview. He noted that purchases stablecoins — crypto assets often tied to currencies like the US dollar — have fallen to 60 percent from 70 percent over that period as Bitcoin’s rally lured in more buyers.
“The user decides to buy Bitcoin when they see the news that the currency is going up, while stablecoin is more pragmatic and many times used for transactional purposes, as a vehicle to make payments abroad,” Beaudroit says.
Argentina is one of the top two countries in the world, along with Russia, for shipments of US dollar banknotes, according to a 2012 Federal Reserve paper. The New York Federal Reserve press office declined to provide more recent data. Savers in the South American nation hold some US$200 billion in US currency, a figure only surpassed by the United States and Russia, according to an analysis by Argentine economist Nicolás Gadano based on Central Bank data.
Amid the Bitcoin rally, Argentines are now shedding some of their dollar savings and initiating investment options that allow them for the first time in years to save themselves from inflation.
Subsequently, there was a fivefold jump in reports of cryptocurrency scams in February, according to Bitcoin Argentina, the country’s main non-governmental organisation in the sector.
“Argentines’ desperation to make it to the end of the month and not lose their savings leads them to make hasty decisions without measuring the risks, transforming them into easy prey for scammers,” said Gabriela Battiato, the head of legal at Bitcoin Argentina.
by Ignacio Olivera Doll, Bloomberg
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