The Central Bank of Argentina has announced a further increase in its base interest rate to 97% in response to soaring inflation in what has been tipped as a win for Bitcoin (BTC). With inflation reaching almost 109% on a year-on-year basis in April, this is the second time the government is taking such hawkish measures to address this issue in recent times.
The increase in inflation in Argentina, despite price controls and regular rate hikes, is a troubling phenomenon. It demonstrates the country’s difficulties in properly managing inflationary pressures and sustaining price stability.
The possibility of a return to hyperinflation, as seen in Argentina just over 30 years ago when 12-month price hikes reached triple digits, raises major concerns about the overall economic condition.
Meanwhile, Argentina is hardly the only country boosting interest rates. Recently, the US Federal Reserve raised interest rates by 25 Basis Points in what looks to be a continuing effort to control inflation.
Could Bitcoin Be Used to Hedge the Inflation?
Following the announcement, there have been reports that the government has plans to unveil a variety of measures to address the country’s inflation and economic issues, such as currency rate interventions and allowing imports to bring down costs.
Markedly, these policies can be viewed as efforts to address the underlying causes of inflation and improve the overall economic condition.
In such cases, individuals may consider various financial methods, such as diversifying their portfolios to buffer against inflation and future currency depreciation. Some may explore alternative assets like Bitcoin or other cryptocurrencies as potential stores of value.
Notably, Bitcoin has often been marked as a hedge against inflation due to its limited supply and decentralized nature. Some people may resort to Bitcoin as a strategy to protect their capital in countries with high inflation rates or economic instability. Argentina has a history of inflation, which may make Bitcoin appealing to some.
However, it is worth noting that the crypto regulatory environment in Argentina is still evolving and this may pose challenges to Bitcoin adoption. In the past, Argentina banned banks from offering any digital asset-related services, but the residents appears to see differently now.
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