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Inflation woes may be driving crypto adoption in emerging markets — and in the U.S.

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Inflation woes may be driving crypto adoption in emerging markets — and in the U.S.

Last Wednesday, the U.S. reported a 7% jump in consumer prices (the highest yearly inflation spike since 1981!), Bitcoin rallied 3.3% to nearly $44,000, and crypto HODLers breathed a temporary sigh of relief. The largest crypto by market cap had seen a rocky start to 2022 as the Federal Reserve signaled (and then confirmed) it would unwind pandemic-era stimulus policies sooner than most had expected. With countries including Turkey and Brazil suffering even steeper currency devaluation, we’re digging into several ways that Bitcoin — which was designed to resist inflation — has come into play in a global economy beset by inflation and supply chain woes.

As Brazil’s inflation hovers above 10%, crypto is increasingly seen as an answer. Brazil’s second-largest city, Rio De Janeiro, plans to invest 1% of its treasury in crypto. Mayor Eduardo Paes joined Miami mayor and crypto advocate Francis Suarez to announce the plan, which may also allow residents to save on taxes paid in BTC. In other news: the country’s lone stock exchange plans to enter the crypto market and Brazil’s largest crypto exchange has tripled its users since 2020 — boosted by citizens trading $11.4 billion in U.S. dollar-pegged stablecoins last year.
Crypto adoption is accelerating in Turkey after inflation ballooned to 36% at the end of 2021. As the Turkish lira devalued at a record pace against the dollar — losing nearly half its value last year — crypto exchange volume in the country soared to an average of $1.8 billion a day in the fourth quarter of 2021. Beyond BTC, traders in Turkey have embraced Tether, the largest dollar-pegged stablecoin. On December 21, the lira spiked to nearly 60% of Tether’s total trading volume by currency.

Argentina, which has the highest inflation among major economies, has enabled crypto payments. Strike — the Lightning Network-powered Bitcoin payments app that helped El Salvador adopt Bitcoin as legal tender — launched in Argentina this week. The move came after Ethereum co-founder Vitalik Buterin met with Argentina’s former president in December to discuss how crypto could foster business in the country. According to a local survey, “two-thirds of Argentines who invest in crypto say they do so to protect their savings.”
In Mexico, leading supermarket and banking chain Grupo Elektra announced it would accept BTC payments. Real-estate transactions in BTC are also emerging there, with an apartment in the popular beachfront city of Tulum changing hands for 5.78 BTC (about $240,000) via the Latin American real estate platform La Haus. An exec at the firm said, “This shows that the way we buy a home is changing. Not only do we do it digitally, breaking geographical barriers, but now we do it by breaking monetary boundaries.”
Why it matters… Bitcoin, with its maximum supply of 21 million, was designed to resist inflation — and recent news seems to support both the inflation-hedge narrative and the cryptocurrency’s path to global adoption. A new Visa survey revealed that almost a quarter of small businesses across nine countries plan to accept crypto in 2022, with the number topping 30% in Brazil. And since January 2021, Bitcoin has appreciated by 34% against the U.S. dollar. Against the Argentine peso? It’s up a striking 60%.