I could lecture on monetary theory and describe the characteristics of a currency and compare them to Bitcoin, or I could about of the supply shortage curve of Bitcoin, or about another of the myriad reasons Bitcoin is likely to be successful in the long term. Today, though, I’d like to talk about adoption.
One look at South America will help you understand why Bitcoin has become such a phenomenon.
In my last article I gave small examples of what already happened in Brazil in monetary terms and how it impacted my perception of Bitcoin’s value. Today I want to move on to Argentina, and address the reasons for that country’s adoption of Bitcoin.
Populist governments don’t know math; after some time the money runs out and it becomes necessary to use “creativity” in their accounting. It is not by chance that there are at least two recent economic facts that impacted the Argentines and made them realize the value of a deflationary currency.
The first was the “Corralito,” when in 2001 the government froze all money in bank accounts for a full year, only allowing extremely limited withdrawals for household necessities.
In 2011, exactly 10 years later, the “cepo” exchange control implemented by former president Cristina Kirchner was created. This move led the country to revive symbols of hyperinflation from the 1980s, such as the figure of the “arbolitos” – money-changers stopped (like trees) at the corners of the tourist spots – and the “cuevas” normal stores with black market exchange for those who wanted to sell dollars in a much better price than in the official government exchange rate, basically the market was paying double.
Just two years after the emergence of Bitcoin, the Argentines felt betrayed by their own national currency, suffering from heavily manipulated exchange rates. Those who suffer from the effects of such monetary policy are likely to look favorably upon a new, deflationary, currency such as Bitcoin. Argentina is ahead of many South American countries in terms of adoption; their crisis began in 2011, while Brazil’s only began in 2014.
Wall Street bankers with their million dollar bonuses might not understand Bitcoin or see any point to it, as they make lofty proclamations from their Manhattan penthouses. But for ordinary people suffering under crippling economic conditions, Bitcoin could literally keep them alive as their national currency drops like a stone.