As China banned not only bitcoin trading but also mining, Argentina in Latin America is expected to be in the spotlight as a new mining base, Bloomberg News reported on the 1st.
Argentina is emerging as a mecca for Bitcoin mining in South America, though not in the world, due to the lowest electricity rates in South America and the high demand for Bitcoin as a store of value due to chronic inflation (inflation).
Nicholas Bourbon, a bitcoin miner in Buenos Aires, said, “The price of bitcoin has dropped significantly recently, but it is still very profitable because of the low electricity cost.
Argentina has the lowest cost of electricity in Latin America because the government subsidizes electricity rates because of the strong socialist Peronism still remaining. Electricity bills account for only 2-3% of the monthly cost of living. This is about half that of neighboring countries Brazil, Colombia and Chile.
And chronic inflation often causes the peso to plummet. Accordingly, the demand for Bitcoin, which is called ‘online gold’ and is a representative store of value, is explosive. Argentinians are investing in Bitcoin as a hedge against the peso plunge.
As a result, investors are paying a premium to buy Bitcoin. The official price of Bitcoin in Argentina is 3.4 million Argentine pesos, but the actual transaction is 5.9 million Argentine pesos. That’s almost double the premium. Korea’s ‘kimchi premium’ is enough to stop the pedigree.
As a result, foreign companies are also appearing to mine Bitcoin in Argentina. Bitfarm, a Canadian mining company, recently entered Argentina.
Bitfarm CEO Jeffrey Fury said: “Argentina’s economy is in recession and electricity is running low. Under these circumstances, it is a win-win for Bitcoin miners to enter Argentina.”
A ban on bitcoin mining in China, which produces more than 60% of the world’s bitcoin, could make Argentina an alternative mining base, Bloomberg predicts.
