The Argentine peso has collapsed, and the U.S. emergency rescue is strongly questioned by Bitcoin holders.

Argentina's economy is in a severe crisis, with the peso's exchange rate experiencing a big dump that has triggered market panic. The U.S. Treasury has urgently pledged to provide financial assistance. However, Crypto Assets experts and Bitcoin holders have expressed strong skepticism about this "lifeline," believing that TradFi intervention cannot solve the fundamental issues, while digital assets have become the local people's preferred hedging tool against inflation.

Argentina's economy has fallen into the abyss, and the United States extends a "helping hand"

(Source: Trading View)

The Argentine peso experienced a big dump of about 4.5% last week, as investors raised serious doubts about President Javier Milei's ability to implement fiscal and structural reforms. This crisis of confidence stems from Milei's party's poor performance in the Buenos Aires provincial elections earlier this month, and corruption investigations targeting his family have further exacerbated political uncertainty, resulting in massive capital outflows.

"Argentina is facing a typical confidence crisis," explained a Latin American financial expert. "When political uncertainty combines with economic fragility, market reactions often deteriorate rapidly, creating a vicious cycle."

According to a report by Bloomberg, the Central Bank of Argentina was forced to spend about $1.1 billion in just three days to defend the exchange rate of the peso. Given that the country only holds about $20 billion in liquid foreign exchange reserves, the scale of this intervention is shocking and has raised serious concerns in the market about whether the central bank can continue to defend the currency.

At this critical moment, U.S. Treasury Secretary Scott Bessenet issued a statement on Monday, stating that Washington views Argentina as a "systemically important ally" in Latin America, and claimed that "all options for stabilizing the situation are under consideration." Bessenet revealed that the aid measures being discussed include currency swap lines, direct purchases of Argentine currency, and using the U.S. Treasury's Exchange Stabilization Fund to buy Argentine government bonds.

"The U.S. intervention reflects concerns about regional financial stability," said an international monetary expert, "but it has also raised questions about the effectiveness of aid and the additional conditions attached."

The market has briefly warmed up, but the fundamental issues remain unresolved

Bicent's remarks did indeed bring a brief market relief. According to the Financial Times, the Argentine Merval index soared over 9% in USD terms on September 22, and USD bonds also experienced a significant rebound. However, there are still major doubts about whether this optimism can be sustained, especially considering that the Merval index has still fallen by about 49% this year.

"This rebound is more like a technical rebound, rather than a signal of fundamental improvement," pointed out an investment banking analyst, "the market is still waiting for specific assistance plans and implementation details."

Milei's presidential term has been filled with controversy. He once supported LIBRA (a cryptocurrency project widely criticized as a pump-and-dump scheme), a stance that triggered a federal investigation, although he later disbanded the special task force responsible for the case. This controversy further undermined investors' confidence in his government.

Bitcoin Expert's Severe Criticism: 'Debt and Inflation Ponzi Scheme'

The author of "The Bitcoin Standard," renowned economist Saifedean Ammous, has sharply criticized the economic policies of the Milei government, arguing that they have actually exacerbated Argentina's predicament, describing it as a "looming end of a debt and inflation Ponzi scheme."

Amus accused Milei of failing to effectively control inflation and pointed out that the Argentine Ministry of Finance achieved a successful sale in its most recent bond auction with an astonishing annual interest rate of 88%. He also criticized the government for significantly expanding the money supply under the liberal stance claimed by Milei.

"There is a fundamental contradiction between Milei's policies and his rhetoric of a free market," explained a scholar familiar with the Argentine economy. "He promises to cut government spending and control inflation, but the actual policies have led to the opposite result."

Although the inflation rate has decreased since Milei took office in December 2023, Argentina's annual inflation rate still remains in double digits. Amus emphasized on social media that the peso has already experienced a collapse since Milei took office, a fact that cannot be ignored.

Argentinian citizens turn to Crypto Assets for hedging

(Source: Lemon Argentina)

Under the dual pressure of economic and political forces, the people of Argentina are accelerating the adoption of Crypto Assets as a means of preserving value. Although the peso operates within a managed currency range—fluctuating between 948 and 1,475 against the dollar—the uncertainty surrounding the elections is forcing Argentinians to seek stronger alternatives, particularly dollar-backed stablecoins.

The business manager of the cryptocurrency trading application Lemon, Ignacio Gimenez, stated: "The uncertainty of the elections has prompted Argentinians to seek stronger currencies than the peso, such as cryptocurrency dollars." He noted that September 14 was the day with the highest stablecoin purchase volume on the platform since 2024.

"Since mid-August, the US dollar has been rising, and we have noticed that the sell volume of stablecoins has exceeded the buy volume, except during the peak election period. This indicates that as the dollar strengthens, many Argentines are choosing to sell and buy pesos," Gimenez explained.

This phenomenon reflects the distrust of the Argentine people towards the government's monetary policy, as well as their increasing reliance on crypto assets as a hedging tool. "Argentinians continue to use stablecoins as a real-time hedge against our country's political and economic uncertainties," Gimenez emphasized.

Bitcoin has become the top choice for Argentinians as a hedging asset

In addition to stablecoins, Bitcoin has also gained increasing popularity among the people of Argentina as a means of storing value. Since 2024, with the exchange rate relatively stable and inflation decreasing, Bitcoin has become more attractive than the US dollar in certain situations.

"Currently, there are more Argentinians holding Bitcoin on the Lemon platform than those holding crypto dollars," Gimenez revealed, highlighting Bitcoin's status as "digital gold" in high inflation economies.

Stablecoins and Bitcoin in Argentina are not only used to prevent currency depreciation but are also widely applied in international payments, remittances, and decentralized finance activities. This versatility makes Crypto Assets an indispensable tool in the daily economic life of the Argentine people.

In a country where the traditional financial system is continuously failing, "cryptocurrency offers an alternative solution," said a blockchain researcher, "it is not just an investment, but a survival strategy."

U.S. Aid and Cryptocurrency: A Comparison of Two Solutions

The financial aid proposed by the United States stands in stark contrast to the trend of the Argentine people turning to Crypto Assets. The former represents an intervention model of the TradFi system, while the latter embodies the autonomy of decentralized finance.

"U.S. aid may provide short-term relief, but it cannot address the structural problems of the Argentine economy," a financial analyst pointed out. "In contrast, Crypto Assets offer the public a means of self-preservation that does not rely on government or external assistance."

Bitcoin supporters argue that Argentina's crisis precisely demonstrates the necessity of decentralized currency. In their view, government-controlled fiat currency systems are inherently susceptible to political interference and mismanagement, while crypto assets like Bitcoin provide an alternative option that is not influenced by these factors.

As the crisis in Argentina develops, global markets will closely monitor the specific details of the U.S. aid plan and its implementation effects, while also observing the ongoing adoption of Crypto Assets in this high-inflation economy. Regardless of the outcome, Argentina's experience provides a thought-provoking case for the competition between the TradFi system and emerging digital assets.