Bitcoin adoption in El Salvador is lagging behind that in Argentina, according to a note sent to investors by Ark Invest research associate David Puell on Monday.

El Salvador hit the headlines in 2021, giving bitcoin legal tender status. However, the nation's actual adoption of the cryptocurrency paints a mixed picture, according to Puell.

Puell pointed to comments from Signum Growth Capital CEO Angela Dalton during a recent podcast with Ark, sharing her observations from a trip to the Central American nation. “Awareness is high, yet usage is still low, … but there is a general sense of pride in the population that El Salvador is an early adopter of new technologies,” Dalton said. 

However, tourist destinations, such as Bitcoin Beach in El Zonte, are exceptions, showcasing a more widespread acceptance of the digital currency, Dalton added.

The Salvadorans' preference for the U.S. dollar and volatility in the price of bitcoin are the main reasons behind this cautious approach, Puell argued. Adopted as legal tender in 2001, the dollar has helped shield El Salvador from the inflationary woes that have plagued its neighbors, offering a more stable and trusted monetary system. Meanwhile, bitcoin is down over 20% since El Salvador passed a bill to recognize bitcoin as legal tender, having previously doubled in the intervening period.

Argentina's soaring inflation and pro-bitcoin presidential candidate

In contrast, Argentina's relationship with bitcoin is evolving rapidly, Puell said, driven by economic challenges. With inflation rates predicted to reach 147% in 2023, the Argentine populace is seeking alternatives to safeguard their wealth.

Argentina’s economic backdrop has set the stage for Javier Milei, a pro-bitcoin libertarian presidential candidate, to rise in political prominence. Milei's victory in the country’s summer primaries on Aug. 13 not only signaled a potential shift in Argentina's economic policies but also triggered a sharp increase in bitcoin's price, soaring more than 20% to 10.2 million Argentine pesos within 24 hours, Puell said.

BTC/ARS price chart. Image: CoinGecko.

If Milei clinches the presidency in October's general election, both bitcoin and the Argentine people's purchasing power stand to gain immensely, Puell added.

Earlier this month, Binance got the green light to become El Salvador’s “first fully licensed” crypto exchange.

Last week, ARK Invest and Glassnode unveiled a new metric for analyzing bitcoin supply and demand dynamics.