There have been a number of cases recently where people have flocked to bitcoin as their own economies face uncertainty. China, Britain and Venezuela are the prominent examples but now Argentina may be added to that list as their currency and stock markets crumble.
Stock Market and Currency Crushed
Argentina is waking to fears of a full blown financial crisis today as the national currency and stock markets slump. In a surprise outcome to primary elections over the weekend, President Mauricio Macri’s demolition has rattled investors and caused an exodus to begin.
According to Bloomberg, the S&P Merval Index plunged 48% in dollar terms which is the second largest one day rout on any of the 94 stock exchanges the outlet has tracked since the 1950s. The fear stems from the likelihood of a protectionist government taking power later this year and unravelling trust that has been built up with international markets.
Argentina has billions in foreign currency debts and fears of defaulting are now beginning to develop. The report added that credit-default swaps now show that traders are pricing in a 75% chance that the country will suspend debt payments in the next five years.
In addition to the stock market collapse, the Peso plunged over 25% on Monday to a record low of 60 to the dollar. Argentina is no stranger to economic turmoil and worries of a return to times where currency controls, data manipulation, and protectionist policies on trade to protect national industries were commonplace, are growing.
People Turning to Bitcoin?
In Venezuela the population turned to bitcoin as the currency was crushed but is the same happening now in Argentina? Volume on Localbitcoins has been steadily rising since 2017 but this trend has happened elsewhere.
Analyst and trader Alex Krüger pointed out that bitcoin awareness is very low in the South American nation which is heavily hedged to the dollar. As a result the BTC market is very small there, just $220,000 USD last week according to Coin Dance. Krüger added that volume is only growing due to the depreciation of the Peso.
One could point at LocalBitcoins’ ever growing volumes. However, volume is only growing in ARS terms due to the depreciation of the peso. Volume has been dropping steadily and registered only 23 bitcoin in total last week.
One could point at LocalBitcoins' ever growing volumes. However, volume is only growing in ARS terms due to the depreciation of the peso. Volume has been dropping steadily and registered only 23 bitcoin in total last week. (would expect though a sharp increase this week) pic.twitter.com/OhRT2hHxWs
— Alex Krüger (@krugermacro) August 13, 2019
He added that a large spike was expected this week as bitcoin becomes a better hedge than the USD which is also being manipulated by the Trump administration in its protectionist efforts to battle with China over trade.
Is bitcoin becoming a better hedge in economic uncertainty? Add your thoughts below.
Images via Shutterstock, Twitter @Krugermacro, Localbitcoins