The Shift in Cryptocurrency Preferences in Latin America
USDT now dominates over 40% of cryptocurrency transactions in Latin America, surpassing Bitcoin in regional popularity. Inflation and currency devaluation drive Latin American traders towards stablecoins, seen as more stable than volatile Bitcoin.
A recent study by research firm Kaiko highlights a significant shift in the cryptocurrency landscape of Latin America. The report indicates that USDT, a stablecoin, now accounts for over 40% of all cryptocurrency transactions in the region, surpassing Bitcoin, which has long dominated the market.
Decreased Interest in Bitcoin
The findings suggest a decreased interest in Bitcoin alongside a surge in trading with stablecoins. This trend marks a notable change, as Bitcoin has been the preferred digital currency in Latin America for many years. The study attributes the start of this shift to as early as 2023.
The Influence of Inflation
This preference for stablecoins over Bitcoin is thought to be influenced by the ongoing inflation issues in the region. Historically, inflation has driven the adoption of cryptocurrencies in Latin America. Traders now seem to prefer stablecoins as they are viewed as a more stable mechanism against the devaluation of local currencies.
Inflation has historically been a major driver of cryptocurrency adoption in Latin America, which may explain merchant preferences for certain tokens and which now impacts the use of stablecoins.
Trading Pairs and Volumes
According to Kaiko’s report, the trading pairs involving stablecoins to fiat currencies represented 63% of the transaction volume in the last six months. The preferred stablecoins are those pegged to the US dollar, reflecting their use in transactions involving local fiat currencies like the Mexican peso (MXN), Colombian peso (COP), Argentine peso (ARS), and Brazilian real (BRL).
BTC gained more than 100% against the Argentine peso (ARS) and more than 70% against the Brazilian real (BRL) between January and May, outperforming other fiat-denominated pairs in those months.
Bitcoin's Appreciation
The report also highlights the significant appreciation of Bitcoin against local currencies in 2024. For example, Bitcoin gained more than 100% against the Argentine peso and over 70% against the Brazilian real between January and May.
This appreciation has made Bitcoin relatively more expensive, shifting some traders’ preferences towards more stable investments like USDT and XRP, particularly in Mexico following political changes.
Stablecoin Popularity & Bitcoin's Value
Despite the rise in stablecoin popularity, Bitcoin continues to hold value as a potential hedge against economic instability, providing an alternative for those in precarious financial situations. This is reinforced by the global increase in trust in Bitcoin, particularly after the approval of Bitcoin ETFs in the United States, a development that resonates in the Latin American market as well.
