Bitcoin transactions soar ahead of Argentina’s “worst crisis” ever

In brief
Bitcoin transactions are rising in Argentina, which is facing economic challenges on a number of levels.
The nation is expected to default on its foreign debt for the ninth time.
Analysts predict the worst crisis in Argentina's history.

gentina’s economy minister suggested that his government would default on its foreign debt for the ninth time, the Financial Times reported today.

It comes amid predictions of rapidly falling GDP and wages, and rising unemployment combined with hyperinflation. Analysts say this will create the “worst crisis” in Argentina ever.

Argentinians mulled an increasingly narrowing set of options, Bitcoin transaction volume on LocalBitcoins exchanges soared last week, according to data from aggregator Coindance.

Between January 2018 and April 2020, crypto analysis startup Arcane Research showed that the increase in weekly trading volume between the Argentine peso and Bitcoin, registered a 1,028% rise. This is partly because the peso is subject to rampant inflation, and devaluation; the currency has lost 30% of its value over the last year.

However, in US dollar terms, volumes are up from lows of $200,000 to $450,000 in the last few months, according to Arcane Research.

Meanwhile, popular Argentinian economist, writer and broadcaster, Javier Milei posted a link to a video by crypto evangelist Andreas Antonopoulos. Milei instructed his 300,000 followers to “Remember that the peso is the currency issued by the Argentine politician…”

On the video, Antonopoulos said: “If you are in Argentina, any percentage of wealth that you have put in Bitcoin fared better than Argentine money, every year for the last seven years… If your country has 45% inflation, then the volatility of Bitcoin will seem like a solid investment to you.”

According to the FT, talks to restructure Argentina’s foreign debt are in disarray. The South American nation owes approximately $323 billion, even though much of the debt was incurred by the previous administration.

Martín Guzmán, the economy minister, told the FT that Argentina is effectively bankrupt. The country’s economic challenges include inflation of around 50% and poverty that affects a third of the population.

But the FT advises that debt forgiveness is not the answer, and Argentina must attract private investment in order to grow its economy.

However, an unsustainable burden of debt would undermine the government’s ability to deal with the economic crisis, unnerve the private business sector, and send the economy in freefall, as per Guzman.

If agreement to replay $65 billion cannot be reached by May 22, a default will be triggered. When this last happened in 2001, Argentina was locked out of international markets for 15 years.