Today, it’s been a year since Bitcoin became legal tender in El Salvador. A year full of events and a chance to appreciate this world premiere!
Year up and up
On September 7, 2021, the Salvador made Bitcoin legal tender through legislation. This event went around the planet and for good reason, it was world premiere which has since inspired other countries. The Central African Republic has followed suit in particular. Other countries have also shown interest, such as Honduras, El Salvador’s neighbor. The latter recently announced the creation of Bitcoin Valley.
President Nayib Buckle Bitcoin is one of his hobby horses. For him, the king of crypto-currencies is one of the best ways to approve use of financial services for more than 70% of Salvadorans which they do not have access to. It is also the aim economic and commercial since El Salvador wanted to position itself as a crypto hub and attract investors from all over the world.
Since the adoption of Bitcoin this has been an extremely eventful year. Its price reached its ATH in November 2021 at over $68,000. Since then, it has been a slow descent into hell and the start of a bear market which set itself up for the largest capitalization in the crypto market.
A long-term strategy for the country
A year ago Bitcoin was trading at $46,000. Today it trades at just under $19,000. This represents a significant drop of almost 60% in one year. At that time the government of El Salvador made its first purchase of 200 BTC for $10.36 million. After that, President Bukele used to tweet at every dump, to indicate El Salvador’s purchases.
According to monitoring data from the Salvadoran wallet, the country has been in losses on the last 10 BTC purchases made since the latter became legal tender. In total, these are almost 2381 BTC have been purchased. The current loss amounts to a few $62 million.
However, El Salvador is in the process of a long term bitcoin strategy. Salvadoran Finance Minister Alejandro Zelaya said the country suffered no losses. In fact for the time being, nothing has been sold in El Salvador.
Failure or success?
Barely after its establishment, some observers are already talking about the failure of the small Central American country. For others, this news is cause for concern many advantages for Salvadorans. Positive even if this one is not noticeable at first glance!
Bram Cohen, the creator of BitTorrent, clarifies this idea by highlighting the reduction in tariffs applied by many banks after the emergence of Bitcoin transactions and their low cost.
The same thing may be happening in El Salvador. Now that there’s a cheap-but-annoying method of making remittances using crypto, the banks have had to cut rates to the point that their slightly better user experience is worth the price.
—Bram Cohen 🌱 (@bramcohen) September 6, 2022
According to the Central Bank of El Salvador, the Salvadoran diaspora living in the four corners of the planet send more than $50 million from January to May 2022. Transactions through Bitcoin avoid going through traditional cross-border shipping players like Western Union. They take these significant costs on this type of shipment.
In addition, the acceptance of BTC and the Salvadoran Chivo wallet contributed to the increase 400% of transactions on the Lightning Network. As a reminder, the overlay supported by Bitcoin is the Lightning Network, which allows it to process a much larger number of transactions.
Some observers like Ibex Mercado CEO Jose Lemus are patient with El Salvador. The boss of the company, a payment service provider via BTC, says:
El Salvador will be an experiment field for so many innovations in the field of Bitcoin. No country combines the regulatory framework, political will, adoption and range of tools needed but above all the need for a currency like Bitcoin. El Salvador is the perfect place to safely try out new applications, especially for Lightning. This is the country that will develop a thriving ecosystem of trusted, proven and interconnected services
Icing on the cake, the tourism which is on the rise in the country. The latter knows that An increase of 82%. ie 1.1 million tourists for the first half of 2022. El Salvador continues to carry out various projects related to Bitcoin. he
To learn more about the impact of inflation on Bitcoin, find our article here.