Argentines are reportedly buying Bitcoin to protect themselves from 276% inflation instead of rushing to exchange pesos for dollars
Argentines are reportedly buying Bitcoin to protect themselves from 276% inflation instead of rushing to exchange pesos for dollars.
Argentinians are turning to Bitcoin as a hedge against the country's staggering 276% inflation rate, a shift from the traditional strategy of exchanging pesos for dollars that has long characterized the crisis-prone nation's financial landscape.
Bitcoin purchases in Argentina, a country with high levels of cryptocurrency adoption, surged to near their highest weekly value in 20 months on Lemon, a popular local cryptocurrency exchange among retail customers.
The move to Bitcoin comes as Argentinians seek ways to weather a recession and grapple with one of the world's highest inflation rates under President Javier Milei's implementation of shock therapy policies aimed at resetting the economy. While exchanging pesos for dollars has been the go-to safe haven for decades, it has lost some appeal in recent months as the parallel exchange rate has strengthened by 10% against the dollar, while Bitcoin has soared nearly 60% against the greenback over the same period.
Bitcoin trading volume for the week ending March 10 doubled the weekly average from the previous year. Similar behavior was observed among customers of other major exchanges in Argentina, such as Ripio and Belo.
Milei's stringent control over the money supply, preventing its expansion while the central bank replenishes its dollar reserves, has been a key factor in the peso's recent strength.
At digital wallet Belo, CEO Manuel Beaudroit noted a tenfold increase in Bitcoin and Ether volume in 2024 compared to the same period last year. He also mentioned a decline in stablecoin purchases, which are crypto assets often pegged to currencies like the US dollar, from 70% to 60% over the same period as Bitcoin's rally attracted 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 explained.
Argentina has long been among the top two countries in the world, along with Russia, for US dollar banknote shipments, according to a 2012 Federal Reserve paper. While more recent data was not provided by the New York Federal Reserve, savers in Argentina are estimated to hold around $200 billion in US currency, a figure surpassed only by the United States and Russia, according to an analysis by Argentine economist Nicolas Gadano based on central bank data.