Argentina, similarly to Mexico, is a country favorable to Bitcoin, despite its title of most advanced country in South America, Argentina keeps suffering from a difficult inflation. Bitcoin is looming over the horizon as an alternative tool useful to avoid the effects of inflation.
“Countries that might pounce on Libra from Facebook, taking account of their inflation for 2019 (FMI)”
Context of economic crisis
Argentina has a long history linked to inflation, for more than 30 years the country has been trying to keep its currency at a value close to the dollar’s but with no avail. Reaching over some periods an inflation rate of 1000%. in 2018, peso had lost 83% of its value compared to the american dollar. With a peso depreciated of 44% for 2019, the population seeks to protect its capitals. This is how Bitcoin represents a solution as an alternative reserve of currency, that we are now starting to call, “digital gold“.
Evolution of Bitcoin purchase volume in Argentine. Source : Coin.dance
We can observe an important increase in Bitcoin investment in Argentina. Following the announcements of an inflation phase, BTC is establishing itself as a new value allowing to save the capitals of Argentinians. We can therefore see, that economic crisis promote investments in crypto-currencies, seen as an alternative and efficient way to save one’s capitals.
Today 1 BTC is sold at about 350 000 pesos for only 7000 euros in Europe.
National adaptation to Bitcoin
As well as being a currency of economic « rescue », Bitcoin has littoral become, in Argentina, a currency of usage. The country tends to adapt to its use by generalizing it and making it more accessible. Notably by the implementation of bitcoin ATMs. Also, a partnership between Bitex and Banco Masventas allows Argentinians to transfer funds internationally through Bitcoin, in the aim to avoid intermediaries fees while reducing transfer delays.
But that’s not it, in 2018, Siri, a crypto enthusiast living in San Francisco, has come back to his home country to advise counselor Luis Caputo, the former Argentinian Central Bank president, by suggesting him to invest 1% if his reserves in bitcoin and to dedicate a part of the Argentinian nuclear power into mining. An interesting suggestion considering its relationship with Bitcoin, and the Chinese threat on mining industry.
Country considered as one of the most powerful economically in Latin America and part of the G20, Argentina got talked about for its hyperinflation and its adoption of the Bitcoin. Opportunity to acquire a form of economic stability, Bitcoin is making itself a place of choice in this country with an inflationary ecosystem bearer of development opportunities in spite of itself.
An use of crypto-currencies under a traditional form in a society where it becomes more than an alternative could be accountable for a larger global adoption of Bitcoin. By becoming a key player in Latin America, Bitcoin could become an international matter for all nations wishing to develop its commerce and stay competitive.
Venezuela, between Petro, Bolivar and Bitcoin
We recall that Venezuela is already facing a great political instability still not resolved. Conflicts between président Nicolàs Maduro and his opponent Juan Guaidó does not show signs of a possible peaceful outcome. Whereas the international community slowly recognizes Guaidó as president and asks for the de-escalation of violences during rallies, the economic situation in Venezuela is very alarming. In a situation of economic crisis, sanitary and humanitarian, the country is facing a shortage leading a movement of people to neighbouring countries.
Hyperinflation is lasting in this country whose economy is based on oil extraction, due to a lack of modernization in its oil industry and the USA blockade, Venezuela has found itself in a situation of under-production and inflationary crisis.
“Government issued new Bolivares banknotes. 10,000 Bs. / 20,000 Bs. and 50,000. Bs.. 50,000 Bs. are around 8 USD, since the time they announce them and people get them at the banks they have lost 10% of the value.
This after 5 zeroes were shaved from the currency less than a year ago and 3 zeroes more 12 years ago. So it would be 5,000,000,000,000 Bs.”
Source : Venezuelan redditor
In 2017, Nicolas Maduro announced the creation of the « Petro » a digital currency. Launched in 2018, it had to allow Venezuelans to subvert the « financial blockade » from The United States. This initiative turned out to be a failure, Petro does not within a Blockchain was not able to gain the trust of the population. But the most aggravating factor, is how Petro’s value is calculated.
Maduro’s goal was to replace Bitcoin with his own cryto-currency in the aim to have control over. Whereas Venezuela is the most profitable country in terms of Bitcoin mining, only 500 euros of energy costs for 6000 euros in France. Miners have to mine clandestinely to make a living are even targets to the government’s hostility.
A mistake from Maduro who could benefits from his advantage on Bitcoin production at a moment where Venezuela is internationally economical excluded due to a weak currency.
For impoverished Venezuelans, bitcoin or « borderless money » for its convenience in international trade, has become a currency of financial survival. Nevertheless transactions between bitcoin and bolivar must not exceed 50$ in order to stay under the government’s radar. Miners for their part, have moved on Ethereum, way less power hungry to be mined, that way they can stay hidden from authorities and keep being profitable.
Trade volume exchange in Venezuela. Source : coin.dance
Despite the government’s distrust toward it, Bitcoin remains privileged currency to save money and knows a strong growth in its investments coming from Venezuela since 2018.
The digital currency serves other Venezuelans to leave the country, toward neighbouring nations in the aim to find a more comfortable life. For those whose mining has become a full-time job, they have started importing goods. Business owners using Bitcoin manages to save their businesses from going bankrupt thanks to their importation from foreign countries, but only if they are not detected or robbed by the government or the growing criminality.