Crypto Caves: What Are They and How Do People Use Them?

Since its emergence in financial markets, crypto has been a divisive and often controversial asset, and while some embraced it, others were more reticent. The main criticism has always been that cryptocurrencies have no intrinsic value. Coupled with their frequent price fluctuations and the fact that investors could lose considerable amounts of money during the price shifts, cryptocurrencies have earned an unfavorable badge among both investors and legislators, who don’t trust their ability to act like actual assets and drive value. However, those who have them in their portfolios would disagree. In fact, many long-term investors hold onto their cryptocurrencies and watch their value increase several times over. According to Binance, the investors and their motives also become more diverse. If anything, this shows exactly how versatile and complex the market is.

Inflation shield

One of crypto’s main uses is to act as a hedge against inflationary pressures. Countries dealing with incredibly steep living costs are particularly interested in cryptocurrencies, and members of the general public have started using them to stave off the harmful effects of currency depreciation. Since the systems are entirely decentralized, there’s no risk that the coins will become lost or be confiscated.

Argentina is one of the last examples in this regard. The people have begun using so-called crypto caves, unofficial exchanges that allow them to buy stablecoins. This way, they can escape the currency controls and the country’s astronomically high inflation rates. Data shows that the traders are also shunning the coins they perceive to be more volatile to increase their gains. The crypto caves work as peer-to-peer exchanges but are located entirely underground and operate in secrecy.

They stay away from commercial associations and aren’t public knowledge. Those who want to buy crypto need confirmation so they can exchange fiat money for crypto coins.

The caves

The appeal of crypto caves is that users can get far better rates when trading in the crypto caves compared to using official exchanges. Banks and other financial institutions cannot officially accept US dollars, so wallets that store crypto have become popular. Access to cryptocurrencies allows the general public to save money in the long run, which is very important considering that the Argentine Peso is losing its value.

In fact, some investors have talked about how those who do not understand the importance of cryptocurrencies for challenged economies are ignorant and that digital money is the only way to avoid the dangers of hyperinflation that continues to depreciate the currency. As of December 21st, Argentina has ratified the use of Bitcoin as an official currency that can be used in contracts.

The current caves are remnants of the financial caves of the 1980s that operated as public money exchanges but had to go into hiding as Argentina brought in currency controls. This system led to the emergence of the blue dollar, the country’s informal currency, the blue dollar, which is always highly coveted and in demand. In 2023, the dollar’s exchange rate went over 1,000 pesos, a gain of about 200%. As a result, the rates climbed by an astronomical 60,000%.

In 2023, the inflation rates hit the highest level in over three decades, reaching 211.4% according to data, leading even more economists and researchers to discuss the importance of a fresh start for the country’s economy, in which the local currency is replaced with a new one that can regain credibility and help the financial situation improve.

Regulatory pressures

The push for regulations has been a defining characteristic of the crypto world in 2023. In the United States, after the collapse of several high-profile exchanges and the discovery of irregularities in the processes, lawmakers have begun seeing the need for regulations as a necessity to protect investors from substantial capital loss. However, investors believe the move is more about censoring the space and increasing centralization rather than averting any dangers.

In Argentina, analysts say that some of the crypto caves have been investigated and even raided by authorities, too, but that the consensus on the platforms and cryptocurrencies in general is not negative. The general public doesn’t consider crypto a threat at all but rather a way to avert money issues. Some have even discussed that the problems are a direct result of the lack of freedom in the markets and that people have no choice if they want their money to keep its value.

However, under the new presidency, the regulations are no longer expected to be an issue. It’s also possible that crypto caves will stop being a thing as access to official exchanges becomes available. Others believe there will always be an unofficial marketplace in Argentina as long as there’s tax pressure since there will always be people who want to steer clear of centralized finances.

Bitcoin troubles

Although Argentina legalized Bitcoin as a payment method for official contracts and forms as part of the plan to rejuvenate the economy and stave off the effects of hyperinflation, some analysts have maintained a reserved outlook. Some say that the move is simply unwise from a business perspective and that inflation is to blame. That is because the transactions must be converted into pesos at some point.

The fact that Bitcoin also records fluctuations, even during the same day, can spell trouble for the environment. Bringing together two volatile currencies won’t do anyone any good, and the volatility will certainly not help corporations progress. The move towards stablecoins is mainly because there aren’t as many conversions involved in the process.

To sum up, cryptocurrencies show promising results when it comes to helping maintain the value of money and support individuals who want to have more in savings. Those who live in countries where the currency is seeing severe depreciation and climbing inflation rates can benefit the most. As the world becomes more accepting of crypto coins, it is likely that regulatory pressures will cease to be a significant concern as well so that people can build their portfolios however they see fit.