Crypto is Vibrant in Argentina with Economic Challenge

At the beginning of 2020, Ripio, one of Argentina’s largest crypto exchanges, had around 400,000 users. He finishes the year with 1 million.

Ripio’s chief brand officer, Juan Mendez, told CoinDesk that about 70% of Ripio’s consumers are from Argentina, with the rest concentrated in Brazil. According to Mendez, the platform also saw a tenfold increase in trading volume this year compared to last year.

“I’ve been with the exchange more or less from the beginning and I’ve never seen this kind of growth. This is more than the 2017 spike on operations and on demand, ”said Mendez.

Argentina’s economic woes, from huge debt obligations to high inflation, exacerbated by the COVID-19 pandemic, drove its population to look for other ways to store their wealth this year. But as the government restricted US dollar purchases from its citizens, crypto quickly proved to be the next best thing.

Along with Ripio, the crypto exchanges operating in Argentina saw record-breaking growth in 2020, with some experiencing all-time highs in trading volumes towards the latter half of the year.

Mexican crypto exchange Bitso, which expanded operations to Argentina as recently as February this year, has already seen a 68% increase in trading volumes on the platform in the third quarter of 2020 against the second. Bitso’s move to Argentina also helped the platform pass the 1 million user milestone earlier this year.

LocalBitcoins’ peer-to-peer (P2P) crypto trading platform also saw a 547% increase in trading volume between August 2019 and August 2020, with an all-time high of over $ 1 million worth of bitcoin being traded in the second week of the month. August this year. . Another P2P platform, Paxful, has seen near-zero trading volume for the past five years, but trading rose this year, recording a staggering 60641% increase from September 2019 and September 2020.

The unprecedented growth in Argentine crypto trades is reflected in a larger regional trend as LocalBitcoins and Paxful also see record-breaking trading peaks in many South American nations including Chile, Colombia and Bolivia. Business in the region is so good that on Wednesday, CoinDesk reported that Bitso has raised a $ 62 million jaw drop to finance its expansion into Brazil.

The rise in the use of cryptocurrencies is set against a backdrop of a devastating economic collapse of the COVID-19 pandemic, with the World Bank declaring Latin America and the Caribbean as the “hardest hit” regions. the world.

Instead of curbing crypto usage, the combination of bitcoin’s price hike, prompted the country-created inflation economies desperate to mitigate the effects of the pandemic and the drive for faster digital payments (especially for cross-border payments) to adopt in South America . year.

Within this landscape, Argentina stands out.

Compared to hyperinflationary economies like Venezuela – whose economy is forecast to shrink 6.8% in 2020 – Argentina seems even worse in terms of wear, thanks in part to a long and complex economic history. In May, the government defaulted on a $ 503 million interest payment on dollar bonds issued under New York law, putting the country in its ninth sovereign sovereign debt in its history.

The country’s GDP is expected to contract 12% this year, with nearly half of its population already living in poverty.

“Cryptocurrencies are in a sense allies for individuals, especially in countries with a higher level of political or economic uncertainty,” Andrés Ondarra, Bitso’s Argentine country manager, told CoinDesk by email.

Read more: Reshaped Money: Warnings of Argentine Tragedy

As the Argentineans, nervous of the country’s declining economy, increasingly buy US dollars to store their wealth, the country’s reserves are shrinking, forcing the government to depreciate the currency and place restrictions on how much foreign currency citizens are held.

In an attempt to salvage diminishing reserves, in September Argentina’s central bank limited the amount of US dollars citizens can buy to $ 200 a month with a 35% tax.

This led to more problems: After difficult negotiations with creditors, the government managed to restructure $ 65 billion in foreign debt back in August, but thanks to investor concern over forex restrictions, international bonds issued sharply fell through in September and people continued to buy. dollars despite the tax.

Every time the peso is devalued people scramble to find a way to protect the value of their wages, Mendez said. Furthermore, in early December, Argentina’s parliament passed a one-time wealth tax on the country’s millionaires to help fund pandemic relief efforts.

Ondarra said Argentina is a strange crypto market due to its consumers’ continued search for access to value reserves and various financial solutions.

“Argentineans are always trying to find a stronger currency,” said Mendez.

According to Mendez, there is a fundamental difference between crypto users in Argentina and Brazil, where Ripio also operates. The two countries have been separated because of Argentina’s systemic economic failures through the years, he explained.

“Argentina has had to overcome many economic disasters over the years. We are used to governments and strategic economic planning failing, and we are more willing to try different things to keep the country going, ”said Mendez.

Mendez said Argentina’s topsy-turvy economic policy may be reflected in the sharp spikes in trading on crypto platforms throughout the past few months.

For example, the government usually announces new financial restrictions in the late hours toward the end of the week (which are scheduled to be implemented the following Monday), Mendez said.

“So during that weekend and that whole week, we always expect high demand for crypto,” said Mendez.

Argentineans see crypto as a great alternative store of wealth, though its platform warns consumers that currencies like bitcoin are volatile digital assets, Mendez said.

Ondarra and Mendez agree that the Argentine’s strong curiosity about alternative wealth funds and growing knowledge of cryptocurrencies has helped the growth of the local crypto space.

But Ondarra also attributes the rapid growth this year to the price hike.

“An important factor explaining the rise in volume in recent months has been the upward trends in the price of bitcoin, which has undoubtedly kept people focused on the price action and led to higher trading volumes,” he said Ondarra.

He also explained that Argentine investors are keeping a close eye on the actions of major movers such as MicroStrategy, which recently converted approximately $ 500 million of its cash investments from US dollars to BTC.

This year, Argentina was ranked 28 out of 154 countries in the crypto adoption index Chainalysis, with other Latin American countries including Venezuela, Colombia, Brazil and Peru placing ahead of Argentina as adoption in the region continues to grow at a rapid pace fast.

“It’s thriving. Everyone’s attention is focused on Latin America. And it’s growing fast, ”Mendez said.