The rate of global bitcoin adoption has slowed dramatically since peaking in April, but a number of standout locales are bucking the trend and seeing surges of enthusiasm. We noted China’s massive increase in adoption early last month, but a new outlier has since arisen: Argentina.
Between June and July, the South American nation’s share of global bitcoin downloads more than doubled from just over 1% to nearly 3%. In fact, of the countries ranking in the top 50 most bitcoin client downloads in June, Argentina is the only one to increase its rate of download so far this month.
In a story familiar to any bitcoin enthusiast, the digital currency is being sought after for two key reasons: debasement of national fiat and increasing capital controls. Inflation has been a significant problem for Argentina for years, but has come to the forefront after a series of public events highlighted just how bad the problem had become.
In March, economists from an opposition party to the reigning President Cristina Kirchner estimated inflation to be roughly 24%, more than double the government estimate of of just over 10%. Those economists were given fines of 500,000 pesos each, equivalent to nearly $100,000. The fines were overturned in May by the countries courts, sending an embarrassing blow to President Kirchner.
Argentinan economists aren’t the only ones who don’t believe the government’s inflation data. In February, the International Monetary Fund censured the Argentine government for misreporting inflation statistics.
To prevent Argentinian citizens, who are battling rising prices and wealth degradation, the government has instituted a number of increasingly strict measures over the past two years to prevent citizens from exchanging their Pesos, either directly or via offshore purchases, in an attempt to prevent further inflation.
As a result, black market trades for dollars, known in Argentina as “blue dollars” became commonplace. In fact, they were in such high demand that the value of a blue dollar peaked at more than double the price of the limited quantity of dollars that could be exchanged at the government regulated rates.
With the disparity growing to uncontrollable levels, the government instituted a clemency policy whereby citizens could trade illegally-obtained dollars for financial instruments that support government infrastructure and development, though most experts are pessimistic about the potential for success of this plan, as most Argentinians would still prefer to hold dollars.
Understanding that history, it’s clear to see why the enthusiasm for bitcoin has grown so significantly in Argentina lately. For context, when we spoke with popular bitcoin economist Tuur Demeester on July 3, he remarked that the Buenos Aires bitcoin meetup group he is a part of grew from eight attendees in October 2012 to 191 as of that morning. The group currently has 405 members subscribed.
Additionally, when considered in the context of other countries who have seen significant capital controls or may be at risk of imminent capital controls, Argentina still has room to grow with regards to bitcoin penetration. Looking at the countries we noted in our Mid-Year Outlook as being at risk of Cyprus-like events, most are above the trend line of bitcoin downloads per capita relative to internet penetration, particularly the ones with the highest risk of such measures. Argentina, even with it’s recent growth, currently sits directly on top of the trend line.
Further info about global adoption trends is available in our Mid-Year Review and Outlook.