Why Argentinians Save in Bitcoin and How Covid-19 affected Peso?
Lockdown is coming to the end in most of the countries (except for Argentina) and it’s time to explore its impact on the economies.
It’s been 9 months since I arrived to Argentina and I continue sharing the interesting facts and insights about the local market along with crypto-peso relations.
First of all, it’s needed to say that Argentina has several exchange rates: official rate, blue dollar, and financial dollar. The largest gap used to be between the financial dollar and the official rate, lately, due to the new government regulations of financial markets, this rate went slightly down. As for now, the highest rate that you can obtain in Argentina is a blue dollar rate that is 70–75% larger than the official rate. Before the pandemic, the best rate that I could get as a foreigner was through Western Union since it used financial dollar rate and it was higher than the blue dollar. Now my best choice would be to sell dollar cash or cryptocurrency at the OTC.
During the Covid-19 peak Argentinian peso dropped by 15% according to the official rate and by 50% according to the blue dollar. The other Latin markets also experience large national currency depreciation. Brazilian real lost 36% against USD. Mexican peso dropped by ~30% against USD during the pandemic. The dollar is a common saving tool in the country and many people quickly change all their savings into it, that explains a considerably high decline of the Mexican peso. Colombian peso also experienced a difficult time, it lost 21% against the dollar. Chilean and Peruvian national currencies performed slightly better than other countries’ currencies in the region, with a decline of 9% and 4.4% respectively.
As you may know from my other posts, the cryptocurrency market is quite big in Argentina. Despite relatively high Bitcoin volatility against USD, Argentinians still think it’s a good saving tool. Government restrictions for USD purchase and spending made it extremely difficult to purchase USD to protect money against national currency depreciation, thus Bitcoin became a common alternative due to its accessibility. I’ve been in Argentina for ~9 months already and experienced big peso drops and during this time the demand for cryptocurrencies used to increase. You could also get a premium of 1–2% on top of the blue dollar rate for selling Bitcoin with a broker. During the Covid-19 crisis the premium turned into a 1–2% discount at the OTC market since Bitcoin price is connected to the financial dollar rate and this rate decreased due to the government regulations. People are still willing to pay an extra commission to purchase Bitcoin at the OTC market and the demand is always high. The financial dollar restrictions slightly affected this trend, as there was an increase in exchange transactions and decrease at the OTC market since it was cheaper to buy the cryptocurrency at the exchange rather than at the broker’s place.
In the next post about I would like to write about “free” money in Argentina and arbitrage opportunities.