Monday, November 28, 2022

Argentines Look To Stablecoins Amid Brewing Economic Crisis

It appears that Argentines are looking to stablecoins as a hedge against a possible devaluation of the Argentine peso (ARS). The move follows after Argentina’s economy minister Martin Guzmán resigned from his position on Saturday, amid an ongoing economic crisis.

Stablecoins to the rescue?

According to reports from top crypto firms within the country, the past weekend saw residents purchasing nearly three times the amount of stablecoins they usually would on a normal weekend. And this could be linked to nothing other than the brewing economic situation. Some crypto exchanges believe that it is in fact, the inflation that is driving consumers to buy stablecoins in such large amounts.

For instance, top exchange Buenbit says it saw an unprecedented increase in trading on Sunday. That was over a 300% increase as opposed to the same day from past weeks.

Presently, the Argentine peso is not exactly in the best of places as regards its buying power. Over the past year, the value of the ARS has depreciated quite significantly, even as inflation keeps getting worse.

Additionally, Guzmán’s resignation may have also had a negative impact. Shortly after his resignation, the peso fell by about 15% against the stablecoins DAI and tether on most local exchange platforms. Interestingly, both stablecoins were priced at ARS 245 as of Friday but rose to ARS 280 over the weekend.

As Ripio crypto exchange CEO, Sebastian Serrano says:

“Whenever there is one of these news stories in Argentina, because of the 24/7 nature of crypto, it is the first market where Argentina starts to look for a price for the U.S. dollar. This drives volumes up.” 

The economic state worsens in Argentina

Meanwhile, Guzmán’s resignation is notably an outcome of the fallout between Argentine President Alberto Fernandez, and the Vice President, Cristina Fernández de Kirchner. The first two citizens are in disagreement over the best way to navigate the economic situation of the country. As of May, inflation in Argentina saw a 60% spike on a year-over-year basis.

Compounding the woes, the central bank of Argentina also says it is running out of foreign currency reserves. And as expected, hindering imports, among many other resulting challenges.

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