One year down, how has El Salvador’s Bitcoin experiment paid off?

One year down, how has El Salvador’s Bitcoin experiment paid off?

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In October 2021, Bukele added 420 BTC to El Salvador’s treasury. The following month, BTC hit an all-time high (ATH) of around $69,000, and things looked peachy for the developing nation. It seemed as if it was starting to pay off to be the first mover.

It has been exactly one year since El Salvador’s President Nayib Bukele announced Bitcoin as legal tender in the country. At the time, Bukele also made a series of promises and initiatives to increase Bitcoin adoption and showcase the country as 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 all residents of El Salvador through a publicly issued digital wallet called Chivo.

In October 2021, Bukele added 420 BTC to El Salvador’s treasury. The following month, BTC hit an all-time high (ATH) of around $69,000, and things looked peachy for the developing nation. It seemed as if it was starting to pay off to be the first mover.

However, 12 months later, BTC prices are bottoming out, currently trading at around $19,000 and down more than 70 percent from the November 2021 ATH. The old coin’s price movement also sums up El Salvador’s Bitcoin experiment — while it spawned much of excitement at the beginning, it has been fizzling out ever since. This is evident from the progress of Bukele’s Bitcoin experiments.

For example, while there was a lot of hype surrounding Bitcoin City, Reuters reports that the site remains a densely wooded area with no sign of construction workers, raw materials or machinery. Furthermore, 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 first $30 provided by the government.

Crypto remittances also failed to take off, with the country’s central bank reporting that only 2 percent of the $6.4 billion received in payments between September 2021 and June 2022 came from crypto wallets. But perhaps the biggest concern would be the country’s BTC reserves. According to a report from Binance, El Salvador bought 2,301 BTC between September 2021 and July 2022 for almost $104 million. This inventory is now worth just $44 million, leaving El Salvador with a massive loss in value.

In many ways, the country’s Bitcoin experiment has lost momentum, but it hasn’t stopped completely, at least not yet. This is a sentiment echoed by Carlos Acevedo, the former head of El Salvador’s central bank.

“No one really talks about Bitcoin here anymore. It’s kind of been forgotten,” Acevedo said in an interview with Fortune. “I don’t know if you’d call it a failure, but it certainly hasn’t been a success,” he added.

On the other hand, officials have tried to paint a better picture of the Bitcoin experiment and have urged people to be patient. “We’re not going to have results overnight. We can’t go to bed poor and wake up millionaires. New technology has shown how people were afraid of things like websites and digital business in years past, but it’s been shown over time that reality imposes himself, El Salvador’s finance minister, Alejandro Zelaya, said in an interview with Bloomberg.

“With the use of bitcoin, tourism has increased by 30%,” said Morena Valdez, El Salvador’s tourism minister, 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 adopting Bitcoin as legal tender. The influx of tourism and crypto firms should drive revenue generation for the country and create jobs in the IT and travel sectors.

However, everyday use of Bitcoin is what will drive mainstream adoption and determine the success of El Salvador’s BTC experiment. Unfortunately, things are not going so 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 had helped their sales.

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

“If you go to a market in El Salvador, you’re more likely to get an insult than to be able to buy something in Bitcoin,” said Laura Andrade, director of El Salvador’s Universidad Centroamericana Jose Simieon Canas. The university recently conducted a survey in which more than 70 percent of respondents believed that the newly introduced Bitcoin did nothing to help their family’s financial well-being.

It is for these reasons that most El Salvadorans see Bukele’s Bitcoin experiment as his second biggest failure behind his inability to deal with inflation. However, crypto markets are cyclical in nature and a quick upturn could help put Bukele back on track for most of his plans.

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