Right before the volatility in digital assets late last week and the breakout of bitcoin (BTC) to the downside due to rising interest rates and low market liquidity, Javier Milei made global news by unexpectedly winning the Argentinean primary election.

A libertarian candidate and member of the “La Libertad Avanza” party, Milei is a Bitcoin advocate, saying it “represents the return of money to its original creator, the private sector.” He also calls for the abolition of the country’s central bank, which, he says, “is a scam, a mechanism by which politicians cheat the good people with inflationary tax.” While it’s unsurprising that a candidate in a country infamous for inflation (currently estimated above about 100% annualized) would have a critical view of the central bank, it does raise questions more broadly about the global experience for cryptocurrency holders.

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When we hear that “Bitcoin is too risky,” as citizens of the U.S. and as holders of dollars we must remember that this simple statement comes from a position of substantial privilege, specifically “exorbitant privilege.” First termed by French Finance Minister Valéry Giscard d’Estaing in the 1960s, exorbitant privilege refers to the unique benefits that the U.S. enjoys due to the widespread use of the dollar in international trade, finance and as a global reserve currency. Some of the benefits from the global ubiquity and near-insatiable demand for dollars are the U.S. government’s ability to print dollars with minimal consequence and to borrow at lower interest rates than other countries, many with checkered financial pasts (like Argentina). Global reserve status also simplifies monetary policy decisions for the U.S., as the Federal Reserve is the de facto global central bank, setting the tone for other central banks to follow similar rate policies to defend their exchange rates. Or, as John Connally, President Richard Nixon’s Treasury Secretary, bluntly put it to a group of European finance ministers: “The dollar is our currency, but it’s your problem.”

So, how has the bitcoin investment experience been for global holders outside of the local dollar system? Over the past five years, most bitcoin holders outside of the U.S. experienced greater gains in bitcoin (see Figure 1 below), due to the depreciation of their local currencies relative to the dollar as a consequence of the U.S. interest rates going up in addition to the 31% return of bitcoin relative to the dollar (see orange bar for bitcoin vs. USD return for comparison). Bitcoin over the past five-year period has been stronger than a stronger dollar.

Figure 1: Average five-year return of bitcoin holders by foreign currency. Source: CoinDesk Indices Research, FactSet.

Notable outliers over the period include Argentina (providing context for Milei’s primary election success) and Turkey (whose leader recently came around to reinstating traditional economic theories after a foray into “Erdoyanomics” in pursuit of the stimulative effects of lower interest rates). With five-year realized inflation for Argentina and Turkey at 60% and 33%, respectively, BTC holders in Argentina and Turkey have been able to preserve their purchasing power and mostly weather the political and economic conditions within their countries by leveraging a decentralized and digital store of value.

Pretty neat, huh?

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