Argentines flocking to bitcoins as safe haven from peso inflation

Last week, the government of Argentina announced that it would freeze the price of gasoline and diesel sold at service stations for the next six months in the hopes of curbing inflation. This comes as Argentina imposed a two-month price freeze on all supermarket products, which was expanded to June. How bad is the economy in Argentina?

Although annual inflation rates are about 25 percent, one report from the Market Monetarist suggests that Argentina might have already exceeded 100 percent inflation. It cited Iran as nearing hyperinflation and Venezuela dealing with runaway inflation so using a variety of factors the author concluded that Argentina must be experiencing a dramatically high inflation rate.

With Argentines being prohibited from acquiring United States dollars and having their wealth depreciated in value, a lot of people are turning to bitcoins as a safe haven, even though the digital currency’s bubble popped in one day.

It was reported that TradeHill Inc., a bitcoin exchange firm based in San Francisco, California, plans to establish an office in Latin America after there was an increase in demand for bitcoins. Rodolfo Andragnes, an agent for bitcoin buyers and sellers, told Bloomberg News that trading of bitcoins is only 0.1 percent of the $1 billion foreign exchange sector, but it has doubled in the last two months.

Due to the inflationary troubles, most Argentines are attempting to curtail the depreciation of their savings by purchasing anything that has some value, including gold and vehicles. Bitcoins are trading at roughly $55 (at the time of this writing).

“Some Argentines are willing to take very risky investments and bet on this thing which feels almost like a Ponzi scheme because they feel their options locally are even more dangerous,” Claudio Loser, a former director at the International Monetary Fund, said in an interview. “They don’t see an easier way to save money.”

Bitcoins have also made their way to Cyprus. Economic Collapse News reported last month that the world’s first bitcoin ATM would be established in the island nation of Cyprus. The main purpose was to help Cypriots protect their wealth from the financial bailouts, the economic collapse, capital controls and bank closures.

As many European countries face severe economic declines and austerity measures, more and more people are fleeing their currency and heading to alternative forms of money, such as bitcoins. The digital currency is already popular in a nation like Spain.

“I’ve even recently relayed to TDV subscribers that I see bitcoin-related businesses as being the next multi-billion dollar (or multi-million bitcoin) businesses and will be relaying many of my business ideas to them over the coming weeks,” stated Jeff Berwick in a blog post at Dollar Vigilante. “And, to top it off, we have already started some game-changing bitcoin businesses that I think will shock the world. I’ll be announcing one of them, related to the crisis in Cyprus, on Monday here at the TDV blog.”

Many still see utilizing bitcoins as a “risky experiment.” Since bitcoins fall off of the government’s and central bank’s radar, it’s harder to monitor and regulate. Despite this, some experts say government policies must solve the inflation issue and not alternative currencies.

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