The fall of bitcoin causes an economic disaster in El Salvador

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The government of Nayib Bukele has spent more than $100 million buying these digital assets, which are now worth less than $50 million due to cryptocurrency crashes

The fall of bitcoin causes an economic disaster in El Salvador< /p>President Nayib Bukele (EFE)

The Bitcoin cryptocurrency, the most popular of all because it is considered the most reliable, fell 21% this week and touched a minimum price not seen in two years. This drop in price hurt not only the people who invested in it, but also El Salvador, a country that implemented cryptocurrency as a common currency last year by decision of the president.

The government of Nayib Bukele has spent more than 100 million dollars in the purchase of these digital assets, which are now worth less than 50 million dollars due to the variation it has presented.

When Bukele announced that El Salvador would adopt bitcoin as legal currency, the cryptocurrency was worth 35,000 dollars; when it was made official, its value was at $45,000. However, after the so-called “crypto winter” the currency fell below $20,000.

The newspaper El PaísHe highlighted that since Bukele bought the first bitcoins on September 6 of last year with public coffers, they have lost 67% of their value.

The fall of bitcoin causes an economic disaster in El Salvador

The Salvadoran president presented himself as a rockstar last year at “Bitcoin Week” in Teotepeque (Reuters)

While this plummet was fueled in recent days by the FTX crisis, it is the latest in a series of crashes, amid tightening global financial conditions. The bet losses are already around 70 million dollars.

“This has a very high opportunity cost for a country like El Salvador, because it represents, for example, almost the total budget of the Ministry of Agriculturein a country where half the population suffers from food insecurity,” says Ricardo Castaneda, an economist at the Central American Institute for Fiscal Studies (ICEFI), in statements to El País.

In a dollarized country, Bukele has made great efforts for citizens to use bitcoin in their daily lives, but these have not borne fruit, since there is strong mistrust among the population, Castaneda added.

The Spanish media explained that according to data from the Central Bank of El Salvador, only 2% of remittances are made through bitcoin. “This week's losses are almost a fatal blow to the chances of mass adoption of cryptocurrencies in El Salvador,” says Castaneda, “people have experienced firsthand the volatility and problems associated with the lack of transparency.”< /p>

THE INNOVATIVE COUNTRY

In Latin America, El Salvador made bitcoin a legal tender in September of last year, at the initiative of Bukele, who sought to bank the population en masse.

The pioneering measure in the world was questioned by the Bank World Cup, the IMF and the IDB, which warned about the high volatility of cryptocurrency.

The fall of bitcoin causes an economic disaster in El Salvador

A Bitcoin sign is displayed outside an auto shop where the cryptocurrency is accepted as a method of payment in San Salvador, El Salvador, July 13, 2022. REUTERS/José Cabezas

The Bitcoin, which maintains a downward trend, is not used by the majority of Salvadorans who consider that this emblematic bet by President Nayib Bukele has been “a failure,” according to a university survey released in mid-October.

< p class="paragraph">When asked “So far in 2022, have you ever used bitcoin to buy or pay for something?”, 75.6% of those consulted responded negatively, while 24.4% indicated that they used the cryptocurrency in transactions, assured a survey carried out by the Jesuit Central American University (UCA).

A nationally representative survey indicates that 20% of Salvadoran households use Chivo Wallet to operate bitcoin cryptocurrencies; of them, only 20% of the owners of some commercial business accepted bitcoins as a method of payment.

The survey was carried out throughout the country one year after El Salvador adopt bitcoin as legal tender on a par with the dollar. “Approximately 77 out of 100 Salvadorans” consider that the adoption of bitcoin in the country “has been a failure”, and for this reason it is “failed” with a grade of 4.61 on a scale from 0 to 10, the study indicates.

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