On Sunday November 19, 2023, Argentina elected its next president, Javier Milei, which briefly caused “a noticeable surge in the price of Bitcoin and underscores the direct impact of political shifts on the crypto ecosystem.” Milei is a libertarian who aims to upend the economic policies of the past in Argentina that have led to hyperinflation. Milei has advocated doing away with the central bank and dollarizing the economy, thus tying Argentina to the world’s largest economy.
Grayscale notes in a report that Milei’s win “is particularly noteworthy due to his pronounced pro-Bitcoin stance and his criticism of centralized financial institutions, notably the Central Bank of the Republic of Argentina.”
Milei views central banks as “major contributors” to economic instability and often advocates for alternatives, like Bitcoin, which he “sees as modern money and a tool to fight against inflation.”
Milei’s Bitcoin Advocacy: Rooted in Economic Ideology
Milei’s support for Bitcoin is “intricately tied to his economic beliefs, as well as Argentina’s monetary struggles, which include hyperinflation in consumer prices of 143% and a 117% depreciation in the Peso vs USD year-over-year. In addition to spiraling prices, the real economy is contracting with GDP falling about 5% in the year to Q2 2023.”
Grayscale also mentioned in its report that “as an advocate of the Austrian school of economic thought—identifying as an anarcho-capitalist—Milei sees Bitcoin as a crucial tool in countering the inefficiencies and corruptions of centralized financial systems. His perspective has deeply resonated with a segment of the Argentine population, including protest voters and cryptocurrency enthusiasts, who view Bitcoin as a viable alternative to traditional economic structures.”
The Significance of Bitcoin in Developing Economies Like Argentina
Grayscale’s report added that in countries like Argentina “where hyperinflation is a systemic challenge, cryptocurrencies may offer a unique opportunity to modernize monetary policy. Argentina has endured several years of some of the highest inflation rates in the world, which has eroded public confidence in the Argentine peso and sparked debate for a more stable alternative. Milei’s economic policies, aimed at radical restructuring and reducing government intervention, reflect a response to these challenges. His vision aligns with the idea of Bitcoin as a super-sovereign currency, offering a decentralized, inflation-resistant store of value that transcends national monetary policies.”
The election of Javier Milei as Argentina’s president “marks a pivotal moment for Bitcoin in the country. His presidency could pave the way for greater acceptance and integration of cryptocurrencies in Argentina’s economy, offering a potential solution to the long-standing issues of inflation and financial instability. Milei’s victory could signify a paradigm shift in how developing economies like Argentina perceive and use digital currencies. Ultimately, Grayscale Research views this as a meaningful step forward for crypto adoption, as Bitcoin moves closer toward fulfilling its role as a super-sovereign means of exchange to accelerate a more accessible and inclusive financial system.”
Grayscale Research regularly provides analyses “of notable geopolitical events’ impact on Bitcoin and the crypto asset class, as we strive to bridge the knowledge-gap between traditional finance and crypto.”