A Cryptocurrency Argentina Revolution

Sotheby’s hosted a digital auction in Argentina a few weeks ago. The auction pulled in 17.1 million USD in digital art sales. The art sales included a CryptoPunk that is known by the name Covid Alien which cost 11.75 million USD. The auction happened while Argentina President Alberto Fernandez was in the spotlight for a racist blunder.  

A new reveal showed that in 2020, Argentina ranked 21st in the world for Bitcoin mining with 200 million USD. There was a heated argument between Martin Guzman, the Economic Minister, Axel Kicillof, the Buenos Aires province, and Cristina Fernandez de Kirchner, the Vice President. The argument was over energy subsidies in an election year and it helped feed the rise in cryptocurrency mining given extremely cheap residential electricity costs.

How Cryptocurrency is Changing Argentina

There was a cryptocurrency boom going around the world even when there was extreme volatility in the cryptocurrency market. The cryptocurrency saw the price of Bitcoin rise by 550%, recording above 60,000USD in a few months. It then drastically dropped to below 35,000 USD in 13 days.

Argentina‘s economy is a hotbed for the cryptocurrency world. The government of all colors has relied on price freezes and currency control to try and limit inflation. This is due to Argentina being stuck in a decade-long economic recession with its constant swirls of stagflation. Additionally, the destruction of purchasing power continues relentlessly, leading many people to try and find their way to the United States dollar by paying a massive premium for the “blue chip dollar” that is currently at 58%. 

Report on Argentina’s Crypto Activities

El Economista, a business daily, reports that Argentina holds 130 billion USD in a financial system. That represents 8% of the actual physical stock of dollars in the world. El Economista also reported that there is also 175 billion USD “under the mattress”.

Government restrictions are evaded by using Cryptocurrency to convert Poses into dollars . The conversion is done through peer-to-peer transactions at exchange rates that are more competitive than the above-mentioned blue-chip dollar.

In the middle of an electoral campaign, Frente De Todos, the ruling coalition, conducts an internal power struggle in regards to the elections of the economic plan.       

In the heat of an explosive recession aggravated by the latest episode of Covid-19 infections and deaths, Guzman sought to reduce the budget deficit. Guzman is in Fernnedz de Kirchner’s graticule. She believes that Mauricio Macri, the ex-president, lost the elections due to hiking utility bills during a recession. Crypto miners dream of having a populist promise of cheap energy. 

Cryptocurrency in Argentina 

Bitfarm, a publicly-traded bitcoin mining company, has announced that it will increase its operations in Argentina from 60 megawatts to 210 megawatts. The increase in operations is sufficient enough to support approximately 55,000 new generation miners generating 650 million USD in revenue. Bitfarm also indicated the breakeven cost of bitcoin in Quebec and Canada, where they operate, stood at 7,500 USD in the fourth quarter of 2020. Argentina would be at 4,125 USD if the operations were up and running at the time.      

Electricity absolves about 75% of mining costs, which explains the math behind paying for subsidies energy in poses. Just to turn around and unload bitcoin and the second-largest cryptocurrency, Ether at a premium over the official dollar exchange rate.

Argentina already has twenty cryptocurrency firms with several already taking advantage of the cold weather to Patagonia to lower cooling costs. 

Crypto Trends in Argentina

The latest trend has been about the Non Fungible Tokens, NFT just like most things in the cryptocurrency world. Its market grew rapidly and crashed quickly. NFTS connects pieces of digital content like digital arts and sports highlights then sold. 

In March, the Sotheby’s auction I had mentioned earlier, was then followed by a rival auction house Christie’s. Christie crowned an artist named Beeple as the third most expensive living artist selling a single NFT for more than 69 USD. Argentina’s creative community, famed for being good and relatively cheap, has a big opportunity in expanding the world of NFT. Some of the NTFs are involved in major projects from the metaverse to major digital museums. In sports, the Argentina football association(AFA), announced a partnership that will make the national team the first to issue its tokens by joining a series of clubs such as River Plate, Rosario Central, and Racing Club. 

All these things seem to have thrived for some reason. Beyond the disposition of the crisis and currency depreciation that inherently makes every Argentinian look for constant workarounds, the promise of a future payment has prompted a global crypto community to act. 

Crypto and Technology in Argentina

If the technology is building the future of money or its carbon footprint destroys us, the incentive to embark on cryptocurrency ventures goes hand in hand with the potential payday. Yet, the main advantage has been that Argentinian regulators are yet to regulate the space. It won’t last though as the central bank is investigating nine fintech companies for supposedly allowing depositors to earn interest on crypto holdings. In addition, the National Securities Commission joins the Central Bank in warning investors on cryptocurrency investments.  

The Administration Federal De Ingresos publicos (AFIP) , a tax agency, has started snooping around to see if it can take a cut soon. 

Economic slowdown igniting Argentina cryptocurrency trend 

 There is  economic slowdown in Argentina, with high volatility, a deflating currency and scarcity of Dollars to invest in. The strain has proved a shot in the arm of cryptocurrency. 

Argentinians used to buffering against economic crisis by putting their money into Bitcoin, Ethereum, Tether or Dai as they seek hide outs for their dwindling nests.

Effects of cryptocurrency in Argentina 

In January 2020, one of Argentina’s largest crypto exchanges, Ripio, had around 400,000 users. As the year came to an end it had one million users. Around 70% of Ripio users are from Argentina. The remaining 30% is mostly concentrated in Brazil. Juan Mendez, Ripio’s chief brand officer told Coindesk.

In 2020, Mendez stated that Ripio saw a tenfold increase in trading volume as compared to 2019. The growth amazed Mendez. He had never seen just a spike in operations and on-demand since the beginning of Ripio. 

Aggravated by COVID 19, Argentina’s economic constraints, from huge debt obligations to high inflation, drove its population to look for alternative ways to store their funds. Cryptocurrency proved to be the next big thing even with the American government limiting the purchase of the US dollar. 

From June 2020, along with Ripio, cryptocurrency exchanges operating in Argentina saw record growth with some experiencing all-time highs in trading volume. 

Bitso, a Mexico-based cryptocurrency, expanded its operations in Argentina in February 2020. Bitso saw a 68% increase in trading volume on its trading platform in the third quarter of 2020. That was the data of the second quarter. Bitso’s move to Argentina has helped the platform have over one million users.     

Our verdict 

A Lot has been going on in the cryptocurrency world, until now. So far, it has managed to go unnoticed to some extent. Bitcoin and other cryptocurrency assets are not only interesting from the financial speculation perspective. They have been creating massive hype that has brought along with it creativity and innovation.

Argentina has the opportunity to be at the front line if the political class does not notice it anytime soon. 

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