As inflation continues to plague Argentina and Turkey, citizens of these nations are turning to cryptocurrencies as a safe haven, seeking refuge from their crumbling local currencies.
The adoption of digital currencies is remarkably high in both countries, with Turkey leading the world at a 27.1% ownership rate, followed by Argentina at 23.5%—significantly higher than the global crypto ownership rate estimated at 11.9%, according to research firm GWI.
Inflation and capital controls drive crypto adoption
Both Argentina and Turkey face high inflation rates, causing their local currencies, the peso and the lira, to tumble to record lows. In March, Turkey’s annual inflation rate reached 50.51%, while Argentina’s soared to an alarming 104%.
Capital controls in both nations have further deterred residents from taking money out, driving them towards cryptocurrencies for financial stability.
Stablecoins, such as USD Coin (USDC) and Tether (USDT), which are crypto tokens pegged one-to-one to traditional assets like the U.S. dollar or gold, have become popular alternatives for Argentineans and Turks seeking scarce dollars.
Ehab Zaghloul, chief research scientist at Tribal Credit, explains that people are searching for ways to hedge against currency devaluation by holding assets pegged to stronger currencies like the US dollar.
Crypto adoption and political instability
Kaiko analyst Dessislava Aubert notes that trading volume for the USDT-Turkish lira pair reached a multi-month high last week, driven by the weakening Turkish currency and upcoming landmark presidential and parliamentary elections.
K33 Research analysts add that crypto adoption generally tends to be higher in countries with capital restrictions, financial instability, and political instability.
Despite Bitcoin’s recent 72% increase this year, reaching $30,000, its highest in 10 months, overall trading volumes have yet to return to levels seen last summer following a series of crypto player collapses. Kaiko data reveals that trading volumes for spot Bitcoin are highest during US opening hours, with little change from 2022.
Shift in derivative trading volume
Recent regulatory issues faced by crypto exchange Binance have led to a slight shift in derivative trading volume from the Americas towards Asia Pacific hours. Excluding dollar-to-crypto volumes, the South Korean won emerges as the next most dominant currency in crypto trading.
Matrixport analysts report that crypto trading volumes in South Korea have returned to levels seen in the first and second quarters of 2022, following a weak fourth quarter.
The dominance of altcoins in South Korea’s market stands in stark contrast to other exchanges where Bitcoin and Ethereum account for the majority of the volume.
