El Salvador: Bitcoin Adoption Fails
Why have Bitcoin adoption failed in El Salvador? Almost a year after BTC became official as a legal currency, the country does not appear to have improved its economic-financial situation.
El Salvador is almost a year away from Bitcoin adoption.
It was a chance from the president Nayib Bukele will make Bitcoin legal tender in El Salvador on September 7, 2021but almost a year after the adoption, the the country’s economic-financial situation does not seem to have improved.
Actually according to reportsBitcoin has not transformed El Salvador’s economic reality, and this is partly due to the long “crypto winter” that has affected the sector since the beginning of 2022.
And indeed, state BTC lost about 60% of its supposed value during the recent market crash. Bitcoin usage among Salvadorans has also plummeted, and the country is running out of cash after Bukele failed to raise new funds from cryptocurrency investors.
With these results, critics say the Bukele government shows shortcomingscalling it authoritarian and image-centric, and raising doubts about the economic sustainability of its ambitious plan to modernize El Salvador.
El Salvador: between first promises and failed results
Nevertheless, Bukele’s election last September was promising. His government had allocated the equivalent of 15% of its annual investment budget to try to anchor Bitcoin in the national economy.
Not only that, but to increase BTC adoption among citizens, as early as October Bukele established Chivo walletthe state-run wallet, offers $30 (almost 1% of what an average Salvadoran earns in a year) to every individual citizen who would download and use it. The result was that almost 3 million Salvadorans would download the wallet app, almost 60% of adults.
The main problem is that after the crash of BTC, only 10% active users of Chivo remained.
Remittances to send/receive in Bitcoin as an alternative to traditional payment channels as well accounted for only 2% of the total.
Despite these financial problems, Bukele’s popularity seems unaffected. On the contrary, opinion polls show it more than eight in 10 Salvadorans continue to support the presidentthanks in part to his widely supported crackdown on criminal gangs and fuel subsidies that have eased the burden of global inflation.
Bitcoin’s Long ‘Crypto Winter’
Going back in time, on the famous September 7, 2021, Bitcoin was worth $47,000, ride the bull market wave. In fact, just a few months later, the price of the queen of cryptocurrencies would touch its ATH – All-Time High (or all-time high) above $67,500.
This is precisely the time when the first BTC was purchased by the Salvadoran government and given to citizens in exchange for the use of the Chivo wallet.
The situation would be better if it hadn’t been unexpected “crypto winter” that has followed all of 2022.
And indeed, from $47,000 at the beginning of the year (which has not yet been retouched), the price of BTC has fallen in various price rangesmake big dumps in May 2022 and June 2022, fluctuating at the time of writing between $20,000 and $25,000, exactly half the price of BTC last year.
