By James Eugene @ Frontier Markets
High inflation, a weakening currency and capital controls have all provided a catalyst for traders in Argentina to seek alternative investment products in recent times, with cryptocurrencies – in particular Bitcoin – being placed in the spotlight.
Argentina has suffered from an inflation rate of over 50%, while the peso has lost similar value in a 12 month period. While recent debt talks with bondholders have been successful, the overall condition of the economy is not providing investors with a sense of security and cryptocurrencies have been placed under the microscope as a potential hedge against further devaluation in the currency and inflationary pressures.
That’s where Bitcoin steps into the scene. Transactions in the cryptocurrency have surged past $1 million so far in August and has also strengthened by 169% against the Argentine peso. The capital city, Buenos Aires, has also become a Bitcoin hotspot in recent years and already has 11 Bitcoin ATMs in the city. Officially recognised platforms for Bitcoin include Ripio, Binance and Cryptomkt.
Another key event is the government’s willingness to support beginners in learning about cryptocurrencies. The Government of Argentina even released a guide under the name of “What Are Cryptocurrencies?” in order to educate those who are looking to learn about the fundamentals of cryptocurrencies and mentions the list of crypto assets, including Bitcoin.
The rise in demand for cryptocurrencies will increase as investors continue to shy away from the bond and currency markets. The removal of capital controls which have been in place for a year may slow down the diversion capital flows from these markets, but the overall health of the economy will be under close scrutiny by both domestic and international investors.