All eyes have been on the Latin American nation that became the first to adopt Bitcoin as a legal tender, despite warnings from international organizations like the International Monetary Fund (IMF) and World Bank.
The President of El Salvador, Nayib Bukele, has taken to Twitter to give facts about the milestones and achievements the country has reached so far since the adoption of the Bitcoin Law.
Salvadoran adoption
From what the President has tweeted, the adoption of the law has been taken positively by the people of El Salvador as his latest report on the adoption of the government-issued wallet reveals that 3 million Salvadorans are now using the wallet named Chivo.
El Salvador is a nation with approximately 6.5 million people according to the World Bank and before the adoption of Bitcoin as a legal tender, only 30.4% of the adult population of the nation had a bank account, leaving 69.6% unbanked.
The adoption of the Chivo wallet means that 46.15% of Salvadorans have now been banked through its Bitcoin law and this has happened in just 4 weeks, a feat that the traditional banking system has failed to achieve. The President also mentions that $1 million in remittances is being received every day through the Chivo wallet with 65,437 transactions being processed every second.
A nation that ‘buys the dip’
A day before the official adoption of Bitcoin as a legal tender, President Nayib Bukele took to Twitter to announce that his country had bought 400 BTC. He first announced the initial purchase of 200 BTC, and moments later he announced the purchase of another 200 BTC. On this day, Bitcoin’s price closed at $52,633.54, according to Coinmarketcap.
On the day of the adoption, the price of Bitcoin seemed to ruin the parade as it crashed by almost $10,000 to trade as low as $43,285 on the day. The President was unmoved by the price dip and announced that the nation bought an additional 150 BTC in an attempt to ‘buy the dip.’
The President seemed to accuse the IMF for the price action on the day as days before the adoption, the IMF released a publication titled, “Cryptoassets as National Currency? A Step Too Far,” which criticized the adoption of cryptoassets as a national currency, stating that the action is ‘ill-advised.’ At this point, this puts the nation’s BTC holdings at 550 BTC and it did not end here.
13 days after the official adoption of Bitcoin as a legal tender, the President announced that the nation had bought the dip again to the tune of 150 BTC, when bitcoin’s price dropped below $45,000 as September proved to be a bearish month for the flagship asset. This puts the total holdings of the nation at 700 BTC. On this day, he also tweeted a word of encouragement to his followers stating, “They can never beat you if you buy the dips.”
The benefits of buying the dip
After the bearish month of September, now comes October, where Bitcoin’s price has surged approximately 30% to trade as high as $55,568 yesterday, returning to its trillion-dollar asset status, a status the coin attained for the first time in February 2021.
According to many analysts, the average cost of El Salvador’s Bitcoin holdings stands at approximately $32 million and as at yesterdays high; and it puts the nation’s holdings at approximately $38.9 million. This means the nation is up over 20% on its investment.
President Bukele explained that the gain for each citizen depends on when they downloaded the Chivo wallet. When responding to a Bitcoin Magazine tweet, he stated that “at least 10%. Depends on when they installed. For some, it has gone up 20%. Good lesson in the Bitcoin starter pack.” He further stated, “Actually for people that onboarded Chivo wallet on September 21, the value of their Bitcoin has gone up 35% in just 15 days. Millions experiencing DEFLATION is real time.”
The first nation to officially mine Bitcoin
The President took to Twitter to announce that the nation had officially begun to mine Bitcoin using volcano as its power source, incentivizing sustainable energy usage to mine. Last month, the president posted a video that includes shots of a government-branded shipping container full of Bitcoin mining rigs, technicians installing and plugging in ASIC miners, as well as sweeping landscape aerials of an energy factory in the thick of a forest, bordering a volcano. The President caption the video as “first steps.”
In June the Nayib Bukele announced that he had instructed state-owned electrical company that harnesses the power of the volcano to generate sustainable energy to “put up a plan to offer facilities for #Bitcoin mining with very cheap, 100% clean, 100% renewable, 0 emissions energy from our volcanos.”
Although the President explained that the country is still testing and installing the mining rigs, he touts that this is the first time Bitcoin is being mined from a volcano. At the time, he tweeted a picture of the statistics, which indicates that the nation had mined a total of 0.00599179 BTC, which at today’s prices put the dollar value at about $327.
Benefits of the Bitcoin law
Asides from getting free $30 worth of bitcoin, the President has been embarking on campaigns to further encourage Salvadorans to adopt the crypto asset as legal tender. He took to Twitter to announce that the state-owned Chivo wallet had negotiated with the largest gas companies in the country to sell each gallon of fuel $0.20 cheaper if they pay with their government-issued wallet.
A bumpy ride to adoption
Although there have been great economic and financial benefits to the adoption of Bitcoin as a legal tender, it has not been a smooth ride for some of its citizens. The first hiccup comes when the Chivo wallet was not functional in the first few days after the September 7th adoption. The President took to Twitter to announce maintenance being done on the wallet several times in the last 4 weeks.
Asides from this, there have been protests by the opposition against the bitcoin law enacted by President Bukele. This has led to one of the 200 bitcoin ATMs being burned down by protesters. According to Time, another protest against Bukele’s government and the adoption of bitcoin is planned for October 12.
Also, according to Time, many Salvadorans bailed as soon as they could, converting their free bitcoin into dollars via one of the 200 Chivo ATMs installed across the country. To promote adoption, the $30 in free bitcoin does come with the condition that it be used in a transaction before it can be converted into cash. As a work-around, Salvadorians send the bitcoin to a relative, who’ll then send it back, thereby lifting the block.
There have also been issues raised by citizens concerning the Chivo wallet being down from time to time, according to some merchants. Time interviewed Josue Martinez, a 26-year-old barista at Cafe Fulanos in San Salvador who explained that the Chivo wallet is often down. He explained that the coffee shop started accepting bitcoin on September 7, but some customers walk out after being told the payment system isn’t working correctly.
Also, the issue of value being lost due to the volatile nature of bitcoin is also one that cannot go unnoticed. Time also interviewed Wilfredo Hernandez, a 37-year-old line cook, who planned to withdraw the $60 that he and his wife had in their Chivo wallets from the ATM, but found it had dropped to $57 by the time he got in line at the ATM.
Bottomline
Valeria Vasquez, Central America analyst for risk consultancy Control Risks stated that the Bitcoin law is a big risk for President Nayib Bukele. She explained that if Salvadorans start to lose money in their crypto wallets, it could cost him popular support.
She further stated that President Bukele wants to change the constitution to allow re-election and needs to maintain his high approval ratings to allow this to happen.
With all that has been mentioned, we can see that a lot has happened in 4 weeks in the Latin American nation but it is still too early to tell whether or not the adoption of bitcoin as a legal tender is a success or not.
