Bitcoin is Proving More Valuable for Developing Countries in Latin America

Bitcoin has grown in leaps and bounds into one of the most talked-about assets in the world. A massive difference to when it was first introduced 12 years ago. However, while Western countries are conflicted about integrating the asset into their financial systems, it seems to have found a way to blossom in less developed countries. 

One of the hallmarks of a faltering economy is a significant reduction in the value of the country’s currency. Essentially, people in these countries get less value for their funds over time, and are in need of a hedge asset to keep the value of their wealth. In a lot of these countries, Bitcoin has become the unlikely savior.

Argentina and Its Debt Crisis 

Argentina has been the hallmark of how Bitcoin could save a country facing economic strains. For the South American sputtering giant, the economic crisis at hand is the result of self-inflicted debt crisis. Argentina’s economic recession began back in 2018, and while selloffs and severe drought across several emerging markets could also be blamed for the situation, the major cause of this problem was a budget deficit that ended up being ill-financed by investors.

the situation of withdrawing fiat immediately is nice on theoretical grounds but nothing like the actual experience of living in a country like argentina. i don’t see bitcoin volatility being sorted out long term, but if there are any theories i’m all eyes.

— santi.eth – devcon2020 ? (@santisiri) December 11, 2019

As of December 2019, inflation in Argentina was recorded to be a staggering 52.9 percent. Things are expected to only get worse despite the government’s intervention on the economy. New President Alberto Fernández began an austerity plan that cut back on citizens’ borrowing on the dollar. The goal was to force Argentinians to hold more of the Pesos. But, the locals have been here before. No one wants to hold a currency whose value is constantly depreciating. In the face of the crisis, Argentinians have turned to Bitcoin as their safe haven.

Last December, LocalBitcoins reported that there had been a significant uptick in the Bitcoin trading volumes in Argentina, with trading on assets crossing the $20 million mark on two separate occasions. 

Sanction-Hit Venezuela Has Been Forced to Accept Crypto 

Another Latin American country in the same boat as Argentina has to be Venezuela. However, while the Argentine crisis is fueled by an increasing debt profile, Venezuela’s problem stems from several causes. Number one on the list has to be economic sanctions from Washington due to government mismanagement and political crises. The drop in oil prices has also been a factor hindering its success. 

Since launch last year, @joewaltman has done a great job running a number of initial experiments around directly transferring crypto to people in places like Venezuela where the economic system has collapsed.

— Brian Armstrong (@brian_armstrong) December 17, 2019

In the wake of all this, Venezuela’s inflation has hit the stratosphere. The country is the most inflation-hit nation in the world, with a 10.398 percent annual inflation rate. The country’s currency- the bolivar- measures about 74,000 to the dollar. Things are that bad. Still the country has been known to turn to crypto as a means of abating the situation. Yesterday, The Block’s Research and Analysis Director Larry Cermak showed on Twitter that the yearly trading volumes for Bitcoin in Venezuela stood at $305 million. However, the country has also been bolstered by the government, which has seen cryptocurrencies as an important component of its economy.