The Milei Carry Trade

Before you read this: This is not investment advice. Everyone who tried the Argentine peso carry trade before Milei got burned. I'm writing this to explain something that was previously only available to sophisticated funds with dedicated infrastructure and is now accessible worldwide to anyone with some crypto knowledge and a browser. I'm not suggesting anybody should act upon this article. Do your own research, fully understand the mechanics, the risks, and consult a qualified professional before making financial decisions. Balls of steel are also advised but not exclusionary. Read the disclosure and disclaimer at the end.

Milei just did something nobody in crypto is pricing in: he made the Argentine peso a yield story.

I've been building crypto infrastructure in Latin America for +12 years. I've watched Argentina cycle through currency crises, capital controls, and bank freezes. I've also watched Milei do something I genuinely didn't think was possible: stabilize the peso, eliminate the fiscal deficit, dismantle the cepo, and secure a $20 billion IMF program backing his reforms.

If you believe this trajectory holds — and the data is starting to make it hard to argue otherwise — there's a thesis here that the DeFi world hasn't considered yet.

The macro setup

Argentina's peso currently offers yields in the mid-20s on-chain — daily liquidity, no lockup, fully permissionless. That number exists because Argentine savers have always demanded compensation for holding ARS. Historically, that made sense: the peso lost over 80% of its value per year. But Milei's reforms are rewriting that equation.

Inflation has dropped from over 300% to roughly 30%. The fiscal deficit is gone — Argentina is running a primary surplus. The strong capital controls were mostly dismantled in April 2025. And reference rates are falling fast: the BCRA benchmark went from over 100% to around 20% in the span of months, as the government gained confidence in stability.

This is what's notable: on-chain ARS rates haven't compressed as fast as BCRA benchmarks. The spread between current DeFi yield on ARS-denominated stablecoins and the cost of borrowing dollars remains wide. That's because on-chain demand for pesos is probably driven by organic borrowing from Argentines using crypto as collateral to access local currency.

If the peso continues to hold, the yields currently available on DeFi start to look less like compensation for devaluation and more like returns. For comparison, US Treasuries yield 4–5%, EM sovereign bonds 6–10%, and DeFi USDC lending yields 1–3%.

Past rates are not indicative of future rates. These figures reflect current market conditions and can change at any time.

The concept: a fully on-chain carry trade

The general concept is straightforward and well-known in traditional finance: borrow in a low-yielding currency, lend in a high-yielding one, and pocket the spread. Carry trades have existed in FX markets for decades — the yen carry trade is probably the most famous example.

What's new is that DeFi infrastructure now makes it possible to express this kind of trade on-chain: somebody having (or borrowing against BTC, ETH, etc.) USD-pegged stablecoins (the low-yielding currency) may swap those on-chain for any ARS-denominated stablecoin (the high-yielding one) and supply these to a lending protocol in order to earn APY currently around the mid-20s.

Example trade with wARS

This is a fully on-chain carry trade. You never sell your crypto.

Step 1: Deposit your ETH, WBTC, or cbBTC as collateral on Aave or Morpho (Ethereum mainnet).

Step 2: Borrow USDC against it. Cost: ~3-5% APY.

Step 3: Swap your USDC for wARS on Uniswap. wARS is a 1:1 ARS-denominated stablecoin issued by Ripio, backed by local reserves in ARS and ARS denominated instruments.

Step 4: Supply your wARS on one of the lending protocols that support it:

Morpho — live on WorldChain with wARS markets already available.
CapyFi — Ethereum. Earning ~26% APY. Daily liquidity.
Any other protocols that start activating ARS denominated stablecoins.

Net spread: ~21-23% APY as long as ARS holds its value against USD. You keep your ETH. You keep your BTC. You add a 20%+ yield layer on top of what you borrow.

The mechanics are conceptually simple, but executing any leveraged position involves complexity and risk that go well beyond what can be covered in an article. Anyone considering this kind of strategy should understand DeFi protocols, liquidation mechanics, and FX risk — or consult someone who does.

The risks

If you've traded EM carry before, you know the meme: picking up pennies in front of a steamroller. Argentine carry has been exactly that for decades. What Milei is trying to do — and what the data increasingly supports — is remove the steamroller.

ARS devaluation is the primary risk. If the peso collapses again, any ARS-denominated position loses value in USD terms and no yield compensates for it. A 50% devaluation would wipe out almost two years of carry. This is not a theoretical concern. The Big Mac index currently has the peso as one of the most overvalued currencies in the world. Skeptics at PIIE and elsewhere argue that peso stability is artificially sustained by the carry trade itself — and that a reversal could be sharp.

Liquidation risk: Any strategy that involves borrowing against volatile collateral (ETH, BTC) carries the risk of liquidation if asset prices drop. This is a well-understood DeFi risk, but it compounds the FX risk above.

Smart contract risk: No protocol is risk-free. Even battle-tested and audited code can have vulnerabilities. Diversification across protocols and conservative sizing are standard risk management practices.

This thesis is specifically a bet on Milei's reforms succeeding. If you don't believe in the reform trajectory, the risk/reward calculus looks very different.

Converging factors

Several factors distinguish the current environment from prior Argentine cycles:

The IMF program is locked in. In April 2025, the IMF approved a $20B Extended Fund Facility — their largest-ever exposure to Argentina. $12B was disbursed on day one. Subsequent reviews have passed. This represents a significant institutional commitment to the reform program.

Political mandate. Milei's coalition more than doubled its congressional seats in the midterms. This gives the reform agenda stronger legislative footing and suggests continuity.

Capital controls are largely gone. In April 2025, Argentina lifted most capital controls for the first time in six years. The peso now floats in a managed band that adjusts monthly at roughly the rate of recent inflation, replacing the old arbitrary crawl. The exchange rate is no longer a political fiction.

DeFi infrastructure is ready. ARS-denominated stablecoins now have real liquidity across multiple chains and lending protocols. A year ago, this trade simply couldn't be expressed on-chain with any meaningful depth. Also, peg stability (check for instance Dune Analytics — wARS price history) is appearing with near-zero deviation over several months of on-chain data. Peg stability is a necessary (but not sufficient) condition for any ARS carry thesis to work. Historical peg stability does not guarantee future stability.

The combination of macro reform and DeFi infrastructure maturity creates a new type of opportunity. Whether it's the right opportunity for any given individual depends on their risk tolerance, conviction in the reform thesis, and understanding of the mechanics and risks involved.

The bigger picture

I'm a tech founder. I built Ripio because I believe Latin American currencies deserve the same programmable, self-custodied infrastructure that DeFi gave to dollars. wARS is the first local-currency stablecoin with strong infrastructure behind in Argentina. More ARS-denominated instruments may follow from other issuers.

Fiscal surplus. Falling inflation. IMF backstop. Reserve accumulation. The cepo gone. None of this guarantees the peso holds. But it's the first time in my 12 years building in Argentina that the fundamentals actually support the thesis instead of contradicting it.

Whether you're an Argentine saver, a macro observer, or a DeFi participant, the dynamic is worth understanding. ARS-denominated yield on-chain is a new primitive, and the macro conditions underpinning it are historically unusual.

Disclosure: I'm the CEO and co-founder of Ripio, a group of crypto companies some of which issue fiat-denominated stablecoins in several countries in LatAm, including wARS — an ARS-denominated stablecoin in Argentina. Ripio earns revenue from wARS adoption. The views expressed here are my own and should be read with this interest in mind.

Disclaimer: This article reflects my own personal views and is meant for informational and discussion purposes only — it is not financial, investment, legal, or tax advice. Digital assets are inherently volatile and carry significant risks, including the possibility of losing your entire investment. Nothing in this article should be taken as a recommendation to buy, sell, or hold any particular asset. Always do your own research and consult a qualified professional before making any financial decisions. Neither I nor Ripio assume any responsibility for actions taken based on the content of this article. This article is not directed at, and should not be acted upon by, persons in jurisdictions where the instruments or activities described may be regulated, restricted or prohibited.

Originally published on X.