Argentina is facing another tough phase in its history as the country strives to put things in order due to economic challenges. The South American nation has one of the highest crypto users in the world, and it appears another dimension is about to take over.
Recently, the country has been facing political uncertainty and economic turmoil, which worsened after key government officials’ resignations. After last weekend’s resignation of the minister of the economy, followed by other governments’ appointees, the price of stablecoins shot up to 11% on some crypto exchanges.
It seems citizens are now moving their life savings to stablecoins as the economic situation continues to deteriorate at an alarming rate.
Exchange Rate Continue to Soar
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The exchange rate for the fiat currency exchange between the USD and Peso has plummeted significantly amid the chaos.
One of the main reasons why the current climate of despair hovers over Argentina is the resignation of Martin Guzman, the minister of the economy. Guzman is credited with spearheading the deal inked by Argentina and the International Monetary Fund (IMF).
The deal was to restructure the bailout loan given to Argentina by the IMF to help it recover from the economic crisis. Guzman’s resignation had a spillover effect as other notable government appointees also tendered their resignations.
As a result, the exchange rate of the Peso to USD reached a record high on different exchange platforms in Argentina. Bloomberg reported that the rate is now close to 257 Pesos on the Binance exchange platform. This indicates a 6.6% exchange rate rise.
Furthermore, the Lemon Cash exchange platform shows a rise of 279 Pesos, indicating an 11% increase. The sudden increase in the exchange rate for fiat in Argentina has pushed the citizens to other alternatives, which are stablecoins.
Rising Inflation and Devaluation Pushes Argentinians to Crypto-assets
The economic situation presents stablecoins as the likely alternative for those looking for ways to escape the biting inflation rate and currency devaluation.
Dollar-pegged stablecoins like USDT are mostly used by Argentinians as trading volume increases due to high demand. According to some exchange operators, there has been a 500% increase in trading volumes involving stablecoins over the weekend.
Moreover, traders are hoping for a favorable response to the arbitrage opportunities the traditional market can leverage to make huge returns. Interestingly, the USDT exchange rate has overtaken the fiat USD rate, which indicates the choices the citizens want to stick with as the economic uncertainty rages on.
The government appointed a new minister of the economy, but it did nothing to improve the situation as the market has yet to recover from the setback.
Local media outlets reported that after the appointment of the new minister, the exchange rate further plunged, with 280 Pesos exchanged for a dollar. In some exchanges, 300 Pesos equals one US dollar.
It is unlikely that the present economic and political climate will make things better as the government is yet to come to terms with how to address the situation.