The first anniversary of Bitcoin in El Salvador. Today, it has been a year since Bitcoin became legal tender in El Salvador. A year full of events and the opportunity to take stock of this world premiere!
A year of ups and downs
On September 7, 2021, El Salvador made Bitcoin legal tender through legislation. This event has toured the planet and for good reason, it was a world first that has since inspired other countries. The Central African Republic has notably followed suit. Other countries have also shown interest, such as Honduras, a neighbor of El Salvador. The latter recently announced the creation of a Bitcoin Valley.
President Nayib Bukele has made Bitcoin one of his hobbyhorses. For him, the king of crypto-currencies is one of the best ways to allow the use of financial services to the more than 70% of Salvadorans who do not have access to them. The aim is also economic and commercial since El Salvador wanted to position itself as a crypto hub and attract investors from all over the world.
Since this adoption Bitcoin has had a very 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 beginning of a bear market that has been set up for the largest capitalization of the crypto market.
A long-term strategy for the country
A year ago Bitcoin was trading for $46,000. Today it trades at just under $19,000 . This represents a considerable 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. Subsequently, President Bukele used to tweet at each dump, to signify El Salvador's purchases.
Bitcoin price for a year (source: coingecko.com)
According to monitoring data from the Salvadoran wallet, the country is in loss on the last 10 purchases of BTC made since the latter became legal tender. In total, nearly 2381 BTC were purchased . The loss would amount for the time being to some 62 million dollars.
Nevertheless, El Salvador is committed to a long-term Bitcoin strategy . Salvadoran Finance Minister Alejandro Zelaya said the country suffered no losses. Indeed for the time being, El Salvador has not sold anything.
A failure or a success?
Barely one after its establishment, some observers are already talking about a failure for the small Central American country. For others, this news has resulted in many benefits for Salvadorans. Positive even if this one is not perceptible at first glance!
Bram Cohen, the creator of BitTorrent, clarifies this thought by highlighting the reduction in tariffs implemented by many banks following the emergence of Bitcoin transactions and their low costs.
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According to the Central Bank of El Salvador, the Salvadoran diaspora living in the 4 corners of the planet sent more than 50 million dollars from January to May 2022 . Transactions via Bitcoin bypass traditional cross-border senders like Western Union. The latter charge significant fees for this type of shipment.
Added to this, the adoption of BTC and the Salvadoran wallet Chivo contributed to the 400% increase in transactions on the Lightning Network. As a reminder, the Lightning Network is the overlay backed by Bitcoin, allowing 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 is going to be a field of experimentation for so many innovations in the field of Bitcoin. No country combines the regulatory framework, the political will, the adoption and the range of tools necessary but above all the need for a currency like Bitcoin. El Salvador is the ideal place to safely experiment with new applications, especially for Lightning. This is the country to develop a thriving ecosystem of reliable, proven and interconnected services."
The icing on the cake, tourism is on the rise in the country . The latter is experiencing an increase of 82% or 1.1 million tourists for the first half of 2022. El Salvador continues to carry out various projects related to Bitcoin.
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