Bitcoin and other cryptocurrencies such as stablecoins are giving a lot to talk about in places like Argentina, Venezuela and more countries in Latin America and around the world. Apparently, the more restrictions and pressure from regulators, the greater the need for bitcoin and other cryptocurrencies.
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To better understand the current situation in Argentina we have invited Nicolás Bourdon, a well-known Bitcoiner from Argentina committed to supporting the bitcoin movement in the region. He is also a moderator of Bitcoin Argentina facebook group, one of the most important facebook groups about bitcoin in Latam. Without further due, here is the article Nicolás shared with us.
Argentina, at times, is a strange country. I remember a business person from another country who knew Argentina very well, told me that he did not understand how it could be that while having a city as beautiful as Buenos Aires, the culture in general and many other things that are not relevant to mention, despite all this, we always find the way to live in a macroeconomic crises.
The reasons are many, and as expected, the inability to reconcile different visions of the country make us go from one extreme to another and we do not achieve continuity in any plan, so it is not surprising that the result is the current situation.
This is not an exclusive subject to Argentina since we have many similarities with many of the emerging countries, but undoubtedly the banking restrictions, the purchase of foreign currency, the constant devaluations, inflation and default are a mix as characteristic as the “Asado” (a traditional dish) or the “Mate” around here :) Argentines in general have become accustomed to living along all of these factors and looking for alternatives to defend ourselves.
That is why Bitcoin in Argentina has had a rapid acceptance because there is simply a real need. It is not surprising the amount of important projects, several of the Latin exchanges started here, Rootstock, Money On Chain, wallets like Muun, or at the time Copay with its local developers and even Defiant though you could mention many more.
The community is still small. Although the bitcoin community in Argentina is proportionally larger than that of other countries and the level of acceptance of Bitcoin as an alternative is high, we are still far from going to any store and being able to pay in Bitcoin as you may have read on some international news website.
What is very interesting is that the Bitcoin community in Argentina is growing and that growth does not depend on reaching an ATH because bitcoin already has a genuine demand from different groups of users.
Why is Bitcoin important in our countries?
Nowadays in Argentina the acquisition of dollars is limited to 200 dollars, and unless you want to keep Argentine pesos, those lucky ones who have the ability to save money, look for any alternative to get out of the pesos among which Bitcoin and recently the increasingly popular stablecoins appear.
In this spectrum of cryptocurrency users you have several groups:
Bitcoin Maximalists: A small group of people who live primarily with their entire economy based on Bitcoin.
Bitcoin Hodlers: Those who understand the fundamentals of Bitcoin and can dispose of a position of their savings in Bitcoin beyond the temporary fluctuations of its price.
Speculators / Traders: Those who found in Bitcoin a space to have a speculative position or to operate in Crypto markets.
Miners: With electricity rates again “frozen” in Argentina, mining will again be a good business locally.
Savers: A large group of new users who look for stablecoins or even through Bitcoin that then leave in dollars somewhere to protect their money. Many of them do not have speculative savings capacity and need to have their money liquid and at a predictable value.
Specific Needs: Everyone who collects a service or his salary abroad finds it very difficult to bring the money and if he/she uses a bank transfer to receive it, the money would be liquidated at an official price. Instead, by buying Bitcoin abroad and selling it locally people manage to increase more than 50% the pesos received.
Several of these groups are common in many countries. Here we also have more who are the savers in stablecoins and who find limited possibilities in the banking system, as well as other specific needs that perhaps in other countries are not so necessary.
The variety of local brokers is very wide. At least 12 of them allow access to bitcoin. Some of them allow bank accounts but we also have P2P platforms and in-cash negotiations. In a country where informally it accounts for around 50% of the economy, they also occupy a large part of daily operations.
Savings, Stablecoins and other popular uses
The more restrictions that governments put on us, the more use cases appear for Bitcoin and other cryptos. The restriction that only allows you to buy $200 per person in the bank and our local currency devaluation make people look for all kinds of alternatives to protect themselves.
To better illustrate today the different prices of the dollar locally:
- The official dollar is worth 76 pesos but if it is for savings the government charges you a 30% tax therefore you pay approx 99 pesos. Maximum $200 per person.
- If you want more dollars in the informal cash market, the dollars cost you 135 pesos. Forces you to move with bills.
- Another way for more experienced people in banking is to get dollars through the purchase / sale of state bonds that allows you to acquire them at approx. 125 pesos.
As you can see, there are basically 3 different prices for the dollar: 99, 125 and 135. The bulk of our economy is informal and for that reason that segment gets paper dollars at approx 135 pesos and cannot access the other prices.
However, with Bitcoin in this mix of quotes, you can buy bitcoin at an implicit dollar value of 128 pesos or some stablecoin around those values. In that way, many people began to dollarize through stablecoins, something that many of the local brokers took advantage of to even announce in their slogans as the "legal" way to dollarize your savings.
On the other hand, a lot of people who also do arbitrage between both prices appeared. A process people call "El Rulo 2.0" by which they buy their 200 dollars from the quota and with that money they buy some crypto in dollars. Then sell it against pesos taking out the difference.
This phenomenon is interesting because it shows not only the speculative aspect of Bitcoin and its price but also other use cases where it really allows people to protect themselves from the bad economic policies of their countries.
Where are we going?
Bitcoin is a fascinating world and despite having been for so many uninterrupted years, it is clear that there is still a long way to go. The vast majority of people already know what Bitcoin is, or at least they know enough to understand that it is not going to disappear. That is a great first step.
The tools to enter Bitcoin are getting simple and it is no longer necessary to know all the technical aspects to enter (after all, one does not know too much about macroeconomics. We only know that they give us a paper that is worth X and we use it) . But in Bitcoin, even though the tools have improved, onboarding still takes a long time. This is still an entry barrier for newcomers that luckily is getting lower and lower, bringing more and more people who are encouraged to participate.
In particular, several developments are interesting to me:
Rootstock and the appearance of Money On Chain over Bitcoin are projects that despite coming from behind regarding what happens in Ether, can be the starting point of a great alternative path to Ether for Bitcoiners who do not want to be dealing with other cryptos.
Lightning Network seems extremely fast to me, I think that every bitcoiner should try Lightning to understand the possibilities that it can open up. How instant payment for small transactions positions bitcoin as a true payment network and as the native money of the Internet that hopefully at some point will materialize.
DeFi: The whole world of financial services based on smart contracts seems fascinating to me. The fact that one can directly borrow money in a smart contract by putting in collateral I think is something that we are not yet fully understanding the potential it has. I think that above that, there will be lots of startups that facilitate the interaction of non-expert users, but this ends up being a global liquidity network that democratizes access to capital regardless of race, country, origin, etc.
Stablecoins: It seems to me that stablecoins are the perfect bridge to crypto. Personally, I would like to hope that at some point the price of Bitcoin stabilizes and may finally be the reference currency, but for that to happen, it would take a long journey, perhaps a decade at least?
Thus, investing in Bitcoin is still far from being a real option for those unbanked in countries without access to other financial tools, simply because those people generally do not save or if they save, they cannot afford to be positioned in a quite volatile currency.
That is a luxury for a few people who can allocate part of our savings to Bitcoin because we know its fundamentals and we know that in the long term it will have been the best way to protect our personal finances.
Bitcoin will continue to develop, as it is the largest cryptocurrency everything takes much more work but there are also other developments that hopefully will generate more efficiency in transactions as well as allow more confidentiality to be included. It’s fair to say that all this will take time, and those of us who are fortunate to be a part, we will tell the future generations everything we have seen born in our time.
Author: Nicolás Bourbon
At LocalCoinSwap we want to thank Nicolás Bourbon for sharing these great insights about the Argentinian market with the LocalCoinSwap community. Each of the authors of these articles works day by day to build a more informed Latin America about bitcoin and other cryptocurrencies.
Nicolás Bourbon works at a prestigious market research company in Argentina. Nicolás is a Bitcoiner, data scientist, currently a moderator in one of the largest Bitcoin-in-Spanish communities. The group was originally for Argentina but today is home to bitcoiners from across the region. Visit Bitcoin Argentina on Facebook!
We invite you to follow Nicolás on Twitter https://twitter.com/bourbonni
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Until the next time!