One year later, how did the Bitcoin experience in El Salvador come about?

One year later, how did the Bitcoin experience in El Salvador come about?


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by CNBCTV18.com IST (published)

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In October 2021, Bukele added 420 BTC to El Salvador’s treasury. The following month, BTC reached an all-time high (ATH) of around $69,000, and things were looking bleak for the developing country. It seems that being the first mover is paying off.

Exactly a year has passed since El Salvador’s President Nayib Bukele declared bitcoin as legal tender in the country. At the time, Bukele also made several promises and initiatives to promote Bitcoin adoption and offer the country a haven for digital assets.

He promised to create a Bitcoin City, a hub for crypto investors that would have its own airport, along with residential and commercial complexes. Bukele also distributed $30 worth of bitcoin to every citizen of El Salvador through a government-issued digital wallet called Chivo.

In October 2021, Bukele added 420 BTC to El Salvador’s treasury. The following month, BTC reached an all-time high (ATH) of around $69,000, and things were looking bleak for the developing country. It seems that being the first mover is paying off.

However, 12 months later, BTC prices are in spools, currently trading at around $19,000 and down more than 70 percent from ATH as of November 2021. The price movement of the old coins also sums up Bitcoin’s experience in El Salvador – while creating a lot of excitement At first, it has since faded. This is evidenced by the progress made in Bukele’s experiments with Bitcoin.

For example, while there was a lot of hype around Bitcoin City, Reuters reported that the site remains a densely wooded area with no signs of construction workers, raw materials, or machinery. Moreover, a report by the National Bureau of Economic Research (NBER) found that only 20 percent of citizens continued to use the Chivo app after spending the initial $30 provided by the government.

Cryptocurrency transfers also failed to take off, with the country’s central bank reporting that only 2 percent of the $6.4 billion in payments received between September 2021 and June 2022 came from cryptocurrency wallets. But perhaps the biggest concern is the bitcoin stockpile in the country. According to a report from Binance, El Salvador purchased 2,301 BTC between September 2021 and July 2022 for approximately $104 million. That stock is now only worth $44 million, leaving El Salvador with a massive impairment loss.

In many ways, the bitcoin experiment in the country has lost ground, but it has not completely stopped, at least not yet. These are the sentiments echoed by Carlos Acevedo, the former president of El Salvador’s central bank.

“Nobody really talks about bitcoin here anymore,” Acevedo said in an interview with Fortune. “It has been kind of forgotten.” “I don’t know if you would call it a failure, but it certainly wasn’t a success,” he added.

On the other hand, officials have tried to paint a better picture of the bitcoin experience and encouraged people to be patient. “We are not going to achieve results overnight. We cannot sleep poor people and wake up millionaires. New technologies have shown how in previous years people were afraid of things like websites and digital businesses, but that has emerged over time,” El Salvador Finance Minister Alejandro Zelaya said in an interview with Bloomberg: “Reality imposes itself.”

“With bitcoin, tourism has increased by 30%,” Morena Valdez, Minister of Tourism of El Salvador, said in an interview with a local news channel. In addition, the country’s central bank stated that nearly 60 crypto and blockchain companies have come to El Salvador after they adopted Bitcoin as legal tender. The influx of tourism companies and cryptocurrency should generate revenue for the country and create jobs in the IT and travel sectors.

However, it is the daily use of Bitcoin that will drive mainstream adoption and determine the success of the BTC trial in El Salvador. Unfortunately, things do not go well in this department.

A survey released by the Chamber of Commerce in May showed that local businesses seemed unconvinced by cryptocurrencies; Only 3.6 percent of business owners surveyed felt that Bitcoin helped their sales.

“It’s basically only the big companies that use it,” said Jose Bonilla, a shoe store owner and one of the first citizens to sign up for a government-backed digital wallet. “Between bitcoin and cash, I prefer it

“If you go to any market in El Salvador, you are more likely to receive an insult than to be able to buy something with bitcoin,” said Laura Andrade, director of Centro America University in El Salvador, Jose Simón Canas. The university recently conducted a survey in which more than 70 percent of respondents felt that the newly introduced bitcoin did nothing to help the financial well-being of their families.

For these reasons, most El Salvadorans see Bukele’s Bitcoin experiment as his second biggest failure after his inability to tackle inflation. However, crypto markets are cyclical in nature, and a quick recovery could help get Bukele back on track for most of his plans.



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