As the economic turmoil in Argentina continues to harm citizens and devalue the peso, it appears that residents are turning to Bitcoin. Recent data revealed that Argentines are constantly increasing their purchases of the primary cryptocurrency.
The crypto asset has seen a huge increase in popularity among Argentines as the country sees a possible default of nearly $ 70 billion in external debt.
Despite being one of the best-performing assets of the 2010s, the use of Bitcoin as a safe-haven asset has long been questioned. The flagship cryptocurrency has had a roller coaster ride for the past 11 years, even sinking as much as 50% in a single day in the mid-May chaos of mid-March.
However, looking at the bigger picture reveals that, despite its sharp price changes, Bitcoin is still considered a great hedge against economic and geopolitical crises.
People from Argentina are downloading large amounts of Argentine pesos for Bitcoin (BTC) at LocalBitcoins.
According to the report, the weekly volume of bitcoin purchased with the pesos has increased a staggering 1028% since January 2018. Volume growth in terms of BTC has also registered a 407% increase, while in USD terms, the volume deposited has increased by 139%. These figures on the exchange between popular pairs represent the remarkable growth in terms of real value for BTC in Argentina.
(2/2) The volume has increased 1028% in Argentine pesos, 407% in BTC and 139% in USD since the beginning of 2018, showing a substantial growth in real terms as well. pic.twitter.com/BTvH4kKH2P
– Arcane Research (@ArcaneResearch) April 23, 2020
The Argentine economy has deteriorated day by day. In an attempt to rescue the economy and shore up the pesos, the country's central bank imposed capital controls late last year, thus restricting foreign exchange purchases. However, this move failed terribly as citizens flocked to Bitcoin.
What followed was that the central bank prohibited citizens from buying bitcoins with credit cards. However, demand for the world's largest cryptocurrency has continued to rise in Argentina despite crippling restrictions.
Bitcoin as a hedge in receding economies
To make matters worse, Argentina is now analyzing a possible default on its debt with international creditors. The Argentine government recently presented a proposal to restructure its $ 66 million debt issued under foreign law which will likely culminate in a default.
Additionally, the country defaulted on $ 500 million in interest payments on bonds that matured on Wednesday (April 22, 2020), officially entering a grace period that expires on May 22.
Argentina has been dealing with a recession for a long time. The chance of this becoming a reality has increased due to the coronavirus pandemic that has plagued the global economy.
With the Argentine government on the verge of defaulting on external debt and pesos on the brink of hyperinflation, disgruntled Argentine investors are turning to bitcoin to protect their assets.