According to reports, Argentina is currently facing its highest inflation crisis in two decades as the prices of commodities in the country keep skyrocketing. The Argentine government seems to have no answer, as March’s data showed that inflation reached 7.7%.
The interest rate hike formula has not worked for the South American country, seeing that inflation data keeps coming in hot each month. Argentina’s Central Bank hiked interest rates on Thursday by 300 basis points as inflation hit 104% annually. Inflation also ate into the country’s foreign currency reserves, further reducing the nation’s financial prowess.
Bitcoin is the only answer Argentina needs now; the features of the crypto asset have proven to be a proper hedge against the inflation rattling most countries worldwide.
Bitcoin Can Fix This
With Bitcoin’s total supply at 21 million, the crypto asset is not prone to inflation. Its finite supply implies that, unlike fiat, which the government can keep printing, the digital currency will get scarce eventually. This scarcity will ensure that Bitcoin’s value would continue appreciating over time.
The approach of most countries, such as Argentina, to inflation would be to keep hiking interest rates, a policy confirmed to hurt financial institutions in the country. Financial institutions such as Silicon Valley and Signature Bank came crashing down as they could not cope with the rate hikes.
The Perfect Inflation Antidote
Periodically, Bitcoin is halved, reducing the amount of Bitcoin mined by two. This makes Bitcoin even more difficult to mint, contrary to its fiat counterpart. A country’s central bank can print as much money as it can and devalue its currency value, but the amount of Bitcoin owned cannot depreciate as the currency has a fixed supply.
The decentralized nature of the crypto asset also makes self-custody and inclusion possible, as opposed to fiat, where the government can print as much cash as possible without consent. The adoption of Bitcoin by Argentina may not pay off in the short term, but it will do so soon.
