Bitcoin Premium Develops in Argentina Amid Financial Crisis

Bitcoin is a bit more expensive in Argentina than global prices, trading at a premium of about $300, up from a premium of about $100 back in May.

On Argentina’s self-proclaimed oldest crypto exchange, one bitcoin is at 526,413.15 Argentine Pesos (ARS), worth about $11,600. That’s while bitcoin’s price on Coinbase at the time of writing stands at about $11,300.

Peer to peer Localbitcoin purchases have an even bigger premium of about $1,000, the cheapest one going for circa 560,000 ARS or about $12,300.

Ripio and ArgentBTC, both more of a broker, also have this $300 premium, suggesting there’s higher demand for bitcoin in Argentina and not enough arbitrage.

The latter is perhaps because arbitrage can be very risky as inflation in Argentina is running at 55%, with central bank interest rates even higher than that and seemingly changing by the day, but at about 60%.

Another reason why arbitrage might be a bit risky in Argentina is because currency controls could be back on the table as a recent vote indicated left leaning socialists might win the election.

“A ticket involving former President Cristina Fernández emerged as the strongest vote-getter in Argentina’s primary elections Sunday, indicating conservative President Mauricio Macri will face an uphill battle going into general elections in October.

With nearly 59% of polling stations tallied late Sunday, official results gave the presidential slate headed by Alberto Fernández and his vice-presidential running mate, Cristina Fernández, about 47% of the votes. Macri and his running mate, Miguel Ángel Pichetto, had nearly 33%.”

So says France24, with the general election to be held this October in a country where the value of their money has plunged.

With crazy high interest rates, they’re clearly printing like no tomorrow, destroying savings and debts denominated in Pesos.

For the government, no one would lend them in pesos. It appears now they won’t lend them even in dollars with Reuters stating:

“Re-electing Macri would mean seeing through painful cuts in public spending as part of the $57 billion standby agreement he negotiated with the International Monetary Fund last year.”

While Fernández, his opponent and a so called Peronist, might implement currency controls, limiting the ability to buy dollars which Argentinians use for savings.

In addition, Fernández promises to give them free money, nationalize pension funds, more government jobs, stronger trade unions and what sounds like general socialism.

“Argentina remains one of the most closed economies in the world,” says Benjamin Gedan who served as South America director in the Obama White House. Of the two candidates, he says:

“For 12 years, the [Fernández] Kirchner family had ruled the country, tugging the dominant Peronist party toward statism and friendships with China, Iran and Venezuela.

Macri, a former mayor of the Argentine capital, Buenos Aires, was a multimillionaire whose young political coalition celebrated free markets and sought close ties to the United States.”

So corporate media is crying doom at the suggestion Kirchner might be brought back into power, but during her time in government in 2007-2015, inflation was at 5% or so.

Moreover according to the World Bank, the middle class doubled in Argentina during her term.

In addition they had some growth during her term between 2010-2015, at times even reaching 15%. While since 2018 the economy has been contracting some 6%.

So it’s no wonder she has led the polls by what looks like a landslide, but with currency controls, trade might be a bit more difficult.

There’s always bitcoin of course. Can’t currency control that one as easily as fiat. So Argentinians might discover like Venezuelans the uses of the decentralized currency which can’t just be printed away.

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