The acute hyperinflation that is ranging in Argentina has made its citizens to adopt the Bitcoin usage. The inflation which is at the highest level since 1992 persists after several efforts of the central bank of Argentina to salvage the economy.
Inflation and Bitcoin Adoption
In the last month, the central bank of Argentina has already tightened monetary policy three times. Despite these efforts, inflation in Argentina is at an all-time high since 1992. According to Bloomberg, “The inflation rate rose to almost 55 percent in March, with consumer prices rising 4.7 percent in the month, exceeding all of the forecasts in a Bloomberg survey of analysts.”
In response to acute inflation, there has been a massive adoption of Bitcoin usage in Argentina. According to a data of LocalBitcoins/coin.dance, the volume of Bitcoin trading in Argentina are reaching all-time highs.
The financial times noted that the Argentine suffers chronic inflation to the extent that no monetary measures seem to work. Financial times explained that “Argentina is trapped in a vicious circle. Demand of just a few million dollars in an illiquid market can weaken the peso, as has been the case since early March. Exchange rate depreciation leads quickly to increases in inflation, portfolio dollarization, and higher interest rates — now the central bank’s only means of defending the currency.”
Bitcoin Replacing Argentinean Pesos
Virtually, the economic situation has made Bitcoin a darling to most Argentines because it is inflation resistant. Hence, there has been advocacy to the government for greater integration of cryptocurrency into the economy.
At the moment, Bitcoin is already integrated into many business activities in the country. For example, in over 37 cities, users of public transportation are indirectly using Bitcoin to pay for their rides. Also, Bitcoin ATM is becoming more prevalent in Buenos Aires, the capital of Argentina.
Notably, the president of Argentina Mauricio Macri has shown interest in Bitcoin and its underlying technology, blockchain. In March 2019, the government announced a partnership with Binance labs, the blockchain technology incubator of Bitcoin exchange giant Binance. The government promised to match 1:1 Binance investment in the announcement.
Cryptocurrency adoption in the emerging markets and the third world countries have been stimulated more by its use case than speculation which is prevalent in the developed economy.
This is evident in the rate of crypto adoption in Venezuela, Iran, Argentina among others in recent time. While Bitcoin adoption in Argentina is growing, it is still not vivid if the country will adopt a national cryptocurrency to overcome its economic woes.
In recent times, countries have been resulting to national crypto project to protect their economy.