i.e. “It’s only a loss if you sell.”
On September 7, 2022, the country of El Salvador and spectators around the world took a
moment to reflect on the tiny country’s big bet on Bitcoin. El Salvador made history by
becoming the first country in the world not only to adopt Bitcoin as legal tender, but also to
provide digital wallets and a small amount of free cryptocurrency to its citizens. To kick things
off, the Salvadoran government made its first Bitcoin purchase – 200 coins for $10.36 million
dollars USD – at an average price per coin of $51,800.
Critics, many within the country and government itself, were vicious in their condemnation of
the move, claiming it was an irresponsible and reckless misuse of the country’s scarce funds.
Proponents saw it as a bold step that would not just bring the country into the digital age, but
propel it to the very forefront.
Even the staunchest opponents have conceded that some good things have happened for the
people of El Salvador. Banks were forced to lower their rates in order to compete with crypto
transactions, which in turn has helped everyday citizens. Many lower class individuals have
become banked for the first time, and with fiat and crypto accounts no less. Various tech jobs
have come to the country, and tourism has exploded, with the first half of the year seeing an
81% increase as compared to pre-pandemic numbers.
Now for the Bad News
The price of Bitcoin has absolutely tanked. Out of the 10 purchases the govt has made, all ten
are currently sitting at a loss. For a brief period of time after its first purchase, El Salvador was in
the green on its investment, as six weeks later the price was at $58,000. The country bought 420
more coins at that price, and Bitcoin has since plummeted. On the one-year anniversary, Bitcoin
was at about $19,000, meaning the country has lost about 60% of its investment, i.e. millions of
dollars that could have gone to social programs, education, etc. Like a true Bitcoin “hodler”
though, the government has not sold anything at a loss, instead averaging down multiple times
and remaining confident that things will improve.
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