Argentina is now the biggest player in the crypto market in Latin America

Published on October 11, 2024
By: Ertix Truepatch
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Argentina has officially overtaken Brazil as the largest crypto market in Latin America. According to a recent Chainalysis study, between July 2023 and June 2024, Argentines deposited a staggering $91 billion into the crypto market, while Brazilians contributed $90 billion.

The southernmost country in the world is currently grappling with severe inflation, an intensified challenge since 2018. To put this into perspective, in March 2018 the exchange rate was 20 pesos per dollar, but by October of that year, it had jumped to around 37 pesos per dollar.

However, the worst was still to come. Today, the country is dealing with a complex system of multiple exchange rates, and the dollar on the black market is priced at 1,175 pesos. This translates to an astonishing devaluation of around 3,075.68%.

Given this unfortunate situation, Argentines have turned to more stable alternatives than their local currency. While they have experience saving in USD dollars —having faced severe crises in the 1970s, 1980s, and early 2000s—, this time the response is somewhat different: thousands of Argentines are now turning to Bitcoin, stablecoins, and other cryptocurrencies.

“Argentina’s decades-long battle with inflation and the Argentine peso’s (ARS) devaluation has left many citizens searching for alternatives to protect their savings and secure a more stable economic future. This year, unfortunately, Argentina’s economic situation has been especially volatile. By the second half of 2023, inflation was approximately 143%, the ARS’s value had declined precipitously, and four in 10 Argentinians were living in poverty. In December 2023, newly-elected president, Javier Milei, announced that the ARS would be devalued by 50%, which he described as “shock therapy,” and that the government would cut energy and transportation subsidies”.

–Taken directly from the Chainalysis report.

According to the report, from July 2023 to June 2024, 61.8% of crypto transactions in Argentina were made using stablecoins, while Brazil saw a figure of 59.8%. Both are well above the global average of 44.7%, although they lag behind Colombia’s impressive 66%.

Although Argentina has faced a challenging situation for quite some time, it’s worth noting that inflation is slowing down, at least for now. In December 2023, when Javier Milei took office, inflation hit 12% per month, averaging around 289.6% annually. However, ten months later, at the time of writing, the monthly inflation rate has fallen to about 4%.

It’s hard to say whether Javier Milei’s economic plan will be effective in the long run. While things seem to be under control for now, some figures in the financial circle are worried about his apparent hesitation to lift exchange controls. This concern is more significant than it might seem, as Milei’s strategy hinges on attracting foreign investments—which is unlikely to happen with the many restrictions on free trade currently in Argentina.

“The longer the president waits to lift the restrictions, the more the private sector will struggle in the medium to long term. These restrictions infringe on freedom and private property, meaning that anyone involved in exporting, importing, producing, investing, working, or trading in the private sector will be worse off the longer they last. There are no ‘good’ restrictions or ‘bad’ restrictions—if it infringes on freedom and private property, it’s always harmful”.

–Diego Giacomini, economist.

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