The economic crisis in Argentina has been making headlines recently, with the Latin American country experiencing hyperinflation. The devaluation of the peso, which dropped its value by 70% in two years, has led to several repercussions, one of which is a shortage of United States dollars for the government and companies to pay for imports and remittances. But what does this current situation mean for traditional financial assets and the impact on cryptocurrencies like Bitcoin and gold?
Crypto analyst Marcel Pechman, host of Macro Markets, dives deep into this topic, discussing the role of gold during this financial crisis. According to Pechman, gold presents substantial drawbacks, primarily because there is no foolproof method to ensure the authenticity of the precious metal, and it doesn’t work for remittances. As a result, people resort to using dollars and euros as their preferred means of savings and exchange, especially those affected by a weakening domestic currency.
Delving further into the Argentinian financial landscape, Pechman highlights the limitations faced by fintechs in the country. Costs and government control hinder their growth and potential, resulting in many turning to stablecoins as the go-to option for remittances. However, cryptocurrencies have not managed to captivate people in these fragile economies, including countries like El Salvador.
Shifting gears to the United States, the Macro Markets show casts its attention on the recent $16 billion loss experienced by the Federal Deposit Insurance Corporation (FDIC), as reported by Reuters. The 113 biggest banks in the country now face the responsibility of covering the FDIC’s loss, resulting from saving failed financial institutions. This chain reaction sees the remaining banks obliged to mitigate the losses.
Pechman predicts that the Federal Reserve will eventually reduce interest rates, thus benefiting risk-on assets, including Bitcoin. Despite the financial turmoil in Argentina and the troubles faced by the FDIC, cryptocurrency enthusiasts can still find a silver lining.
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Source: Cointelegraph
