This week Argentina’s currency Peso dropped over 30%, recording an all-time low to 65 pesos per 1 US dollar. Argentina’s currency has been suffering for a long time because of the political situation in the country. After the primary votes signaled that the current government in charge might be replaced in a few months, which caused the market to nearly collapse.
The country sold $265 million worth of its reserves to revive the currency, but it did not help as the Peso fell further. This was not the first time when Argentina government sold reserves to revive the economy. The freefall of the country’s economy has left the investors in a panic. Earlier this month Bitcoin was selling at a premium in the country. Argentina is not the only country where the economy is on the verge of collapse. Venezuela and Zimbabwe are also suffering from hyperinflation.
However, this situation represents a solid case for why bitcoin is valuable. Unlike fiat currency, bitcoin can not be affected hyperinflation as it is limited in nature. Peso’s freefall has caused investors to put their hard-earned money in the leading cryptocurrency.
When current president Mauricio Macri lost the primary votes to his leftist opposition leader Alberto Fernandez, it caused a massive collapse in the economy as the stock market tumbled to its lowest in history.
According to a study by Argentina’s Catholic University, more than 35% of the population is below the poverty line in the country as compared to 29% in 2015. Inflation in the country is high as 60%, decreasing the purchasing power of the national currency. Argentina will choose its president on 27th October, and the ongoing financial crisis will play a key role in it.
Can bitcoin be the solution?
There are no signs of Argentina’s situation getting any better as the investors continue to suffer. The case in Argentina can be used to understand why trusting government-backed currency can be dangerous. Many economists and businessmen, including Bill Gates, have predicted a global recession like 2008 in the coming years. This time the leading cryptocurrency would be the major difference as more and more investors would trust bitcoin to keep their funds safe as it is not affected by governments policies.
The fact that that bitcoin was selling at a premium earlier this month proves that market for bitcoin is increasing in the country. An Argentinian economist and crypto supporter, Alex Krüger tweeted a while back ago that people in the troubled country should invest in bitcoins, but their primary goal should be to save the country’s economy.
Before bitcoiners start using Argentina (my country) as excuse to yell "Buy Bitcoin" and generate clicks and sell newsletters.
Argentines want to protect themselves against the peso losing value versus the dollar. And for that, they buy dollars.
— Alex Krüger (@krugermacro) August 12, 2019