The economic crisis in Argentina is driving investors to buy Bitcoin in order to protect their wealth, pushing the cryptocurrency’s price higher in-turn. In parallel, to satisfy the increasing demand, the first of 12 Bitcoin ATMs has already begun to operate in a Buenos Aires mall. The number of stores accepting Bitcoin also continues to rise.
As the country’s currency plunges, Argentinian investors and ordinary people are exchanging their pesos for Bitcoin (BTC). In this regard, economist and mathematician D.H. Taylor writes:
Ever since I went to college at both Pasadena City College and the University of Denver, I have followed the Argentinian economy; I wrote several papers for my economic classes. Argentina’s economy seems to continuously swing from boom to bust and back again. Once more, as back in the 1990s and so many other occasions, the Argentinian economy is in a financial crisis. The current malaise stems from either the country’s own doing or just plain bad luck. The economy is currently reeling from both a severe drought that wreaked havoc on the country’s highly-dependent agriculture and interest rates increasing in the United States. The current administration in the federal government is making moves to try to stabilize and reprioritize the federal system. This has added to economic instability. Because of this, the Argentinian peso is dropping precipitously.
Unlike other previous financial problems in Argentina, there are alternatives to the financial calamity that is increasingly taking hold. The biggest solution is Bitcoin, or BTC-USD and, according to the data, Argentinians are buying large amounts. At the same time, the Argentinian Central Bank is considering diversifying their currency reserves into BTC. This is an interesting move and pundits are saying this will push the price of BTC-USD higher. I do not believe the central bank’s actions in itself is going to be a catalyst for BTC moving higher. Instead, I see the push for bitcoin higher being the people of Argentina purchasing and price supporters of BTC. I think this is going to be big. Very big.
Argentina’s economy has rapidly deteriorated. At the end of 2017, the economy was quite robust with GDP Growth coming in at 3.5%. But, part of the reason for their growth boom was ultra-loose interest rates in the United States. In the United States, the Federal Reserve lowered interest rates to an effective rate of 0% because of the financial crisis of 2008. Money abhors a vacuum; if you ever have an opportunity in life to make a loan for 0%, including to the US Government, I say don’t.
