Argentines spend USD to buy Bitcoin to fight inflation

The sharp increase in Bitcoin price this year caused Argentines to hoard digital currency instead of USD, to cope with inflation of nearly 280%.

Lemon - Argentina's most popular cryptocurrency exchange - recorded nearly 35,000 Bitcoin purchases in the country in the week ending March 10. This number is the highest in 20 months and double last year's weekly average. The developments at other major exchanges in Argentina, such as Ripio and Belo, were similar.

Argentines are looking for ways to protect their assets in the context of inflation here reaching 276% in February. But instead of hoarding USD like before, they are rushing to buy Bitcoin. Digital currency is a new investment choice for people in this country.

On Bloomberg , CEO Belo Manuel Beaudroit said the amount of Bitcoin and Ether purchases this year has increased tenfold compared to the same period last year. Meanwhile, purchases of stablecoins (digital currencies tied to USD) decreased by 60-70%. The reason is that Bitcoin's price has increased sharply, attracting more buyers.

Bitcoin logo at a cafe in Buenos Aires (Argentina). Photo: Reuters

Since the beginning of the year, Bitcoin's price has increased by 73%, reaching a peak of nearly 74,000 USD per coin in the middle of the month. Argentina is also currently one of the countries with the highest Bitcoin adoption rate in the world.

Meanwhile, the price of the Argentine peso increased 10% against the USD in the past two months. The main driving force helping the peso strengthen is President Javier Milei's tightening control over the amount of money in circulation. Argentina's Central Bank is also rebuilding its USD reserves.

The US dollar has been widely used in Argentina for decades, when the country's peso lost value due to economic problems. Companies pay salaries in USD. People also pay for rented houses on the Airbnb booking application in USD.

Inflation in Argentina is currently the highest in Latin America. In addition to the common causes with the world, such as the war in Ukraine and supply chain tensions during Covid-19, many economists believe that there are also internal problems. That is spending more than revenue and increasing peso printing to serve domestic needs. The country is falling into its 6th recession in the past 10 years.

Argentina's inflation exceeds 200%
Argentina just surpassed Venezuela to become the country with the highest inflation in Latin America, with 211% last month.

Argentine officials on January 11 announced that the country's consumer price index (CPI) increased by 211% in December 2023 compared to the same period last year. This is the highest level since the early 90s.

Compared to the previous month, inflation here was 25.5%. This speed is lower than economists' forecasts.

The latest figures make Argentina surpass Venezuela to become the country with the highest inflation in Latin America. In December 2023, inflation in Venezuela has cooled down to only 193%.

Vegetables for sale in a store in Buenos Aires (Argentina) December 2023. Photo: Reuters

"We have to limit spending on things that make life brighter. Previous pleasures such as inviting friends over for a barbecue are now impossible," said Susana Barrio (79 years old) on Reuters . .

Although Argentina has faced high inflation for many years, the current rate is still the highest since the early 1990s. At that time, Argentina fell into a period of hyperinflation, with food prices increasing rapidly.

New President Javier Milei wants to apply harsh austerity policies to reduce inflation, reduce the fiscal deficit and rebuild the government budget. However, he also warned that this will take time and things may get worse before gradually recovering.

Inflation in Argentina also has the same cause as the world. These include war in Ukraine, supply chain tensions and sharp increases in public spending. However, many economists believe that the problem lies in the country itself.

This country is spending more than it receives. Healthcare, education, energy, and public services here are heavily subsidized or free. Therefore, to compensate for the shortage, they increased the printing of pesos. Economists believe that the money printing policy and people's loss of confidence in the peso have caused the Argentine economy to fall into its current state.

Many Argentines are tightening their belts more than before. "Nothing is cheap. Before, I bought a kilo of potatoes, but now I only buy 3-4 so they don't spoil," said Graciela Bravo (65 years old).

Alejandro Grossi, a 49-year-old lawyer, said he was used to rising prices after years of inflation. "I adapt by buying less things. Inflation and price changes are normal here," he said.