Bitcoin's first anniversary in El Salvador comes at a time when BTC has lost more than 60% of its value in a year, but that doesn't mean the country's Bitcoin experiment has failed. September 07, 2022, marked exactly one year since El Salvador became the first country in the world to adopt Bitcoin (BTC) as a legal tender through the implementation of the Bitcoin Law.
Advocating for Bitcoin as a legal tender last year, the President of El Salvador, Nayib Bukele, promised that the adoption of Bitcoin would benefit 70% of the local population who did not have access to banking services by 2021.
The Salvadoran government has also praised Bitcoin as a tool to help the economy, attract foreign investment, create new jobs and reduce dependence on the US dollar.
What has the adoption of Bitcoin brought to El Salvador?
The real benefit of Bitcoin adoption in El Salvador is currently being questioned as Bitcoin has lost roughly 60% of its value since the country adopted the cryptocurrency as a legal tender.
A year ago, BTC was trading at around $46,000, according to CoinGecko. On September 6, 2021, the Salvadoran government made its first Bitcoin purchase, buying 200 BTC for $10.36 million, or an average price of $51,800. This stands in stark contrast to current BTC prices, as Bitcoin fell below $19,000 earlier this week.
At the time of writing, Bitcoin is trading at $19,199, down more than 64% from last year. The government of El Salvador has bought a total of 2381 BTC so far, which at current prices is worth $62 million less than the price El Salvador paid for its bitcoins.
The Minister of Finance of El Salvador, Alejandro Zelaya, emphasized that despite the drop in prices, the country did not experience any losses when buying BTC because they did not sell them. The Salvadoran government has also repeatedly delayed its Bitcoin bond project, citing unfavorable market conditions and geopolitical issues.
Amidst the sharp drop in cryptocurrency prices and the current bear market, some analysts have begun calling Bitcoin adoption in El Salvador a “failed Bitcoin experiment”. Others would disagree, as Bitcoin has clearly had a positive impact on El Salvador's economy and financial market.
Bram Cohen, the creator of BitTorrent and the founder of the Chia Network, announced himself via a Twitter post and pointed out that the amount of benefits often "doesn't exactly correlate with the amount of money that is earned".
He pointed out that some banks in the country had to reduce rates due to the emergence of cheaper Bitcoin transactions.
The lesson is that the amount of good something does isn't very correlated with the amount of money it makes.
Sometimes a product can cause massive gains in overall market efficiency while barely making a penny. — Bram Cohen🌱 (@bramcohen) September 6, 2022
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