On El Salvador’s One-year Bitcoin Adoption, Let’s See Where It Went Wrong

The celebrations for El Salvador’s Bitcoin adoption anniversary are turning into a sour affair!

Is it already one year? The crypto market and the world went spiraling into the debate when a small Central American nation named El Salvador made history exactly a year ago as it officialized BTC as a legal tender, becoming the first-ever country to do so. The nation went into the BTC mining business, but it chose a more untraditional approach. It started using its excess volcanic power to mine new bitcoins, and the first mined BTC came in early October 2021. Another one saw the building of a massive pet hospital fueled by the profits from its BTC endeavors. It opened in early 2022, and each procedure costs $0.25 worth of cryptocurrency. Shortly after, a bitcoin education center popped up as well. The country’s officials also invited representatives of 40 other central banks to talk about the bitcoin adoption, the asset’s financial inclusion into a nation’s state, and much more. But perhaps the most ambitious idea came at the end of last year when El Salvador revealed plans to build an entire city dedicated to and focused on bitcoin. Additionally, it said it will fund the Bitcoin City by raising $1 billion in the form of BTC-backed bonds – $500 million for more BTC purchases and the remaining for the city itself. Separately, the country has used quite a few opportunities to purchase BTC, and it currently holds 2,381 coins. All of the above seemed to have helped quite a few local sectors, especially tourism. The Minister of Tourism – Morena Valdez – recently claimed that the number of people arriving in the country and spending more on it had increased by 30% since the adoption of BTC. Well, not everything has been so good. El Salvador spent just a little over $100 million to accumulate its stash, but the market turned sour in the last several months, wiping out billions of the entire industry. As such, the country’s 2,381 bitcoins are now valued at $44.6 million – meaning, a massive unrealized loss. Even though, interest by locals is meant to spike initially and decline once the asset’s price retraces, government officials are meant to defend their decision. But the fact that the asset’s price is down by about 70% since its peak (reached after the BTC adoption) and El Salvador sits on a massive unrealized loss but has not given up on its idea should count for something.