Measures that restrict the free trading of fiat currencies encourage the sale of Bitcoin. An analyst uses data on the Venezuelan economic crisis as an example.
A new analysis suggests that Argentina’s economic problems are the main reason why LocalBitcoins trading volume has increased in recent months.
The author, Matt Ahlborg, published his comments on his webpage (under the title “Will Argentina Be the Next Venezuela?”), presenting this hypothesis based on the increase in the Bitcoin-Argentine pesos (BTC-ARS) trading volume, in its equivalent in US dollars (USD), and how this relationship has behaved in the case of Venezuela. He says that the exchange of BTC for ARS in LocalBitcoins reached all-time highs in April, which coincided with the implementation of new exchange controls that have accelerated this situation since last fall.
The author considers that exchange controls and other economic measures have played an essential role into the increase of trading volume, which reached a first all-time high in early 2018. Since then, it has increased by nearly 200%, currently reaching USD 1.6 million in transactions.
He also highlights that the trading of USD in LocalBitcoins Argentina also rebounded, with a daily volume for January of about USD 20,000. It could have increased from then until now.
Ahlborg explains that people in Venezuela do not use the acquisition of Bitcoin to save the cryptocurrency as an asset, but to access “more stable (fiat) currencies” like the US dollar.” People in Argentina usually conduct exchanges in clandestine spaces known as “cuevas” (caves). Argentines do not need to buy Bitcoin, thanks to an attractive exchange rate of ARS to USD in the informal market.
He believes that this factor adds to two other variables that have had an impact on the increase in BTC trading volume in Argentina. For instance, Venezuelans buy BTC in exchange for ARS and then sell them in exchange for Bolivars (VES) to send remittances by bank transfer. In the author’s opinion, this activity is the reason for a large part of the ARS-BTC trading volume.
The author thinks that Bitcoin-related products, developed by local companies, would gain further momentum if they helped evade exchange controls or create derivatives that have USD-like stability. He cites the initiative of the company Valiu to issue a virtual asset anchored to the US dollar and backed by BTC, in addition to Bitsika’s debit cards or Abra’s investment windows.
Ahlborg states that the growth of Bitcoin trading volume in Argentina will compete with that of Venezuela. Some variables are the Argentine government’s decision of whether or not to release exchange controls, the closure of clandestine caves, the more user-friendly and accessible products, and services around Bitcoin, and the fact that the USA allows Argentine citizens to use its online services without restrictions.
Furthermore, he believes that the shift towards an open financial ecosystem will have a lot to do with the progress of the currencies of emerging economies. To test this hypothesis, there are very few places to do it, except in Argentina. The best way to make it happen is to buy Bitcoin and US dollars, as he concluded.
By Alexander Salazar
