Bitcoin hits all-time high in Argentine pesos
Bitcoin prices measured in the peso now stand at an all-time high of about 394,000 pesos, surging even beyond the records seen before prices in the cryptocurrency collapsed in December 2017.
“If an Argentinian had bought bitcoin at the highest point of the ‘biggest bubble in history’, in 2017, he would have been better off than leaving his money in his bank account,” tweeted Josu San Martin, a Mexico City-based crypto investor.
The driver for the surge in prices is the fear that the peso is yet again on track for hefty losses, even after the IMF authorised the use of its funds for the Argentine central bank to intervene in the currency if approaching elections spook local and foreign investors into dumping peso assets.
The peso plumbed new lows against the dollar in April after losing more than half of its value last year, when both the peso and Turkish lira tanked as investor expectations for rising US rates left the two currencies exposed.
Incumbent President Mauricio Macri has gained investors’ confidence with his response to the crisis, said Gordon Bowers, emerging market research analyst at Columbia Threadneedle. However, the potential return of previous president Cristina Fernández de Kirchner to office has introduced a “democracy discount” to the peso as foreign investors contemplate the prospect of a return to unorthodox policymaking. While Mrs Fernández is only running as deputy to presidential candidate Alberto Fernández, some fear her influence could still be significant.
“Asset prices have reacted very negatively over the past month to the rising chance of Kirchner returning to power,” said analysts at asset manager Amundi, adding that while risks were priced into the currency, “we stay alert to a currency run that may occur in a short period of time”.
Argentina’s sky-high interest rates at about 70 per cent make the peso an attractive currency for investors who want to benefit from interest rate differentials by selling low-yielding currencies and buying high-interest rate units. Still, Mr Bowers said Columbia Threadneedle stopped trading the peso in April this year as election risks intensified. While both the lira and the peso suffer similar headwinds, such as slowing global growth and a strengthening dollar, Argentina’s currency is suffering more due to its challenging electoral dynamic.