Argentina and crypto
Argentina’s economy is set to take the world by surprise as the nation continues to make leaps into crypto products. After decades of economic depression and unrelenting stagflation, the government continues to work on the inflation challenges which are up 52% just this year alone. Argentina’s consumer price index rose 3.5% in the month of October, 2021 (according to bloomberg.com).
| Inflation rate compared to previous year according to Aaron O’ Neil with statista.com on October 13th, 2021, | |
|---|---|
| 2021 | 52.10% |
| 2020 | 42.02% |
| 2019 | 53.55% |
| 2018 | 34.28% |
| 2017 | 25.68% |
Find more statistics at Statista
Data from the numbers above show that the average inflation rate for the last five years is 41.52%. Complete destruction of purchasing power continues to drown the Argentinian nation, consequently its people are looking for alternative options to protect their savings. In the past, Argentina’s citizens have rushed into US dollars by paying massive premiums as they want a more stable currency.
The transfer rate can be as high as a 58% premium in some cases, hence, crypto has become an attractive alternative and has been gaining in a much wider acceptance.
CHART (2016 – 2021) – PESO VERSUS $USD
Source: https://www.xe.com/currencycharts/?from=ARS&to=USD&view=5Y
If you view the one year and five-year charts above, you can see the massive devaluation of the Argentinian currency in comparison to the US dollar. For example, five years ago, one Argentinian peso was worth $0.065 US dollars and today it is worth $0.01 US dollars, while the US dollar is currently paying 100.49 pesos, up 25.08% this year alone.
Today, cryptocurrency is the new and exciting method of exchange. Currently, there are 10 large exchanges in Latin America: Bitso, DaexS, Volabit, Panda Exchange, Ripio, Bitex, Mercado Bitcoin, Buda, Cryptofacil, and Livecoin.
Crypto is by far cheaper for the Argentinian people to convert their pesos as opposed to traditional methods, not to mention faster and this provides more choice in currencies to choose from. Furthermore, Argentina showcases a strong indication that it will become the first Latin American exchange to launch a Bitcoin (BTC-USD) futures product on an exchange.
Matba Rofex, which is the largest futures and options exchange in Argentina submitted the necessary paperwork to the securities regulators in November, 2021. As of last week, news was announced that Argentina will levy a 0.6% tax on the exchanges that transact digital currencies.
This cryptocurrency news is overshadowing the legislative midterm elections that concluded on November 14th, 2021. It is clear president Fernandez will immediately introduce his new vision for the country as he has now lost control of the senate.
President Fernandez has not only shown interest in the digital currency markets, but he has also showcased some savvy trading in the NFT markets as well. Sotheby’s hosted a digital auction in Argentina in July 2021, and pulled in 17.1 million USD in digital art sales which President Fernandez took part in. The very popular CryptoPunk collectible known as Covid Alien (which costs 11.75 million USD) according to Forbes.com).
Argentina continues to lead the way into digital markets with the launch of the Elecciones PASO, which is the first edition of Argentine politics NFTs on OpenSea. This collection is comprised of 171 collectible items that are available for purchase on the NFT Open Sea network according Benzinga.com on September 10th, 2021.
Argentina’s NFT’s look to bridge the gap between arts and politics, as well as bring as many people as possible into the electoral process, to create traction towards digital arts according to newschannelnebraska.com. Everyday digital assets are gaining more and more popularity amongst its citizens in both digital asset markets and digital art sales. With this, Argentina is currently ranked 21st in the world in realized bitcoin revenue according to Forbes.com.
Over the past couple of days, Argentinian bonds have traded higher as President Fernandez promised to address the hyperinflation concerns of the people. With the midterm elections now over, President Fernandez will now be forced to negotiate with his opposition if he wishes to get any laws passed through the Senate. Over a week ago, Fernandez’s cabinet lost control of the Senate for the first time in 40 years! The Frente de Todos party is set to take office shortly and was brought in with the sole purpose to mobilize the economy.
President Fernandez expressed a “new stage of government” in his speech last Wednesday when he addressed thousands of his government supporters. Fernandez assured his followers that he will work hand in hand with his opposition to come up with a solution for their economy. It is clear the current president needs to come up with a holistic plan to please his people, the now divided senate, and save his economy all at the same time.
Cryptocurrencies and Bitcoin could be the tools that Argentina is looking for a currency that is totally disconnected with the Government and Central Bank. We suspect that many more countries will follow El Salvador’s lead with declaring Bitcoin legal tender. The only question that remains is which Governments and leaders will cede control of their currencies where they have no control. Time will tell, stay tuned!
Sources
https://www.forbes.com/sites/afontevecchia/2021/06/28/a-crypto-revolution-in-argentina/?sh=752371622529
https://www.newschannelnebraska.com/story/44707149/argentina-nft-launches-their-first-nft-collection-on-opensea
https://www.worldpoliticsreview.com/articles/30131/in-argentina-elections-shake-up-the-political-landscape
https://cryptoslate.com/argentina-introduces-a-crypto-tax-regime-on-back-of-el-salvadors-bitcoin-story/
https://www.bloomberg.com/news/articles/2021-11-01/argentina-aims-for-first-crypto-futures-in-latin-america
https://batimes.com.ar/news/economy/cryptocurrencies-argentina-as-a-bitcoin-farmer.phtml
https://www.exchangerates.org.uk/USD-ARS-exchange-rate-history.html
Image Sources
Image 1 – Aaron O’ Neil with statista.com
https://www.statista.com/statistics/316750/inflation-rate-in-argentina/
Image 2 – @Chartoasis.com
https://www.chartoasis.com/mxn-usd-forex-chart-1-year-cop0/
Image 3 – @xe.com
https://www.xe.com/currencyconverter/convert/?Amount=1&From=ARS&To=USD
https://www.xe.com/currencycharts/?from=ARS&to=USD
