To combat inflation, Argentines exchange the dollar for bitcoin | Economy

Argentines are buying bitcoins to protect themselves from 276% inflation rather than rushing to exchange pesos for dollars, putting an end to a timeless strategy that turned the crisis-prone country into one of the world’s biggest havens for the American currency.

Bitcoin purchases in Argentina, one of the most cryptocurrency-adopting nations in the world, reached their highest weekly value in 20 months on local cryptocurrency platform Lemon, the most popular among retail customers in the South American country.

Argentines are looking for ways to survive a recession and one of the highest inflation rates in the world, as President Javier Milei implements his “shock therapy” policy aimed at revitalizing the economy.

Swapping pesos for dollars, the main safe-haven asset for decades, has lost some of its appeal in the past two months as the commonly used parallel exchange rate has strengthened 10% against the dollar, while bitcoin has risen nearly 60% in against the dollar in the same period.

Lemon recorded nearly 35,000 customer transactions to buy bitcoin in the week ending March 10, double last year’s weekly average. The behavior was similar to that of customers of other major exchanges in Argentina, such as Ripio and Belo.

One of the main factors behind the strengthening of the peso in recent weeks is Milei’s tight control over the amount of money in circulation.

Bitcoin and ether volume has increased tenfold so far in 2024 compared to the same period last year on the Belo digital wallet, its chief executive Manuel Beaudroit said in a phone interview. He noted that purchases of stablecoins – cryptoassets usually pegged to currencies such as the US dollar – fell from 70% to 60% during this period, as rising bitcoin attracted more buyers.

“A user decides to buy bitcoin when they see the news that the currency is rising, whereas with a stablecoin they are more pragmatic and tend to use it for transactional purposes, as a vehicle to make payments abroad,” said Beaudroit.

Argentina is one of the top two countries in the world, along with Russia, in shipments of U.S. dollar bills, according to a 2012 Federal Reserve document. The New York Regional Fed’s press office declined to provide more recent data.

Savers in the South American country hold around US$200 billion in US currency, a number that is second only to the United States and Russia, according to an analysis carried out by Argentine economist Nicolas Gadano based on data from the bank central.

Amid the rise of bitcoin, Argentines are getting rid of some of their dollar savings and starting investment options that allow them, for the first time in years, to protect themselves from inflation.

As a result, reports of cryptocurrency fraud increased fivefold in February, according to Bitcoin Argentina, the country’s leading non-governmental organization in the sector.

“Argentineans’ desperation to pay the bills and not lose their savings leads them to make hasty decisions without measuring the risks, making them easy prey for fraudsters,” said Gabriela Battiato, head of the legal department at Bitcoin Argentina.