El Salvador makes a bold bet on Bitcoin
September 2021 marked a sea change, as the President of El Salvador boldly accepted Bitcoin as legal tender, ushering in a new era of financial innovation. Driven by a vision of increased inclusion, seamless remittances, and economic progress, the country embarked on an ambitious cryptocurrency reform movement. This year, transparency took center stage on the public Bitcoin Vault website, inviting real-time scrutiny of the country’s digital reserves.
El Salvador’s treasury holds 5,748.76 Bitcoin, worth a whopping $360 million. The treasury has made strategic acquisitions, including the purchase of 7 BTC for more than $438,000 in the past week, and a staggering 31 BTC in the past 30 days, totaling $1.94 million. This crypto accumulation blitzkrieg has been underpinned by President Nayib Bukele’s bold “buy one Bitcoin a day” strategy announced in November 2022.
The average purchase price of Bitcoin in El Salvador is $43,097, which translates to unrealized profits of more than $57.4 million at current trading levels above $62,000. A Bitcoin price of $100,000 would allow El Salvador to achieve financial independence and even settle for an IMF loan.
This commitment to radical transparency is reinforced by the public mempool access of the Bitcoin Office of El Salvador, inviting citizens to verify their holdings in real time. Amid this cryptocurrency revolution, adoption among Salvadorans remains low, with only 12% using Bitcoin for transactions in 2023, a stark contrast to 24.4% in 2022.
Meanwhile, institutional inflows into U.S. spot Bitcoin ETFs have turned positive, with massive inflows reaching a net inflow of $413 million last week, which could impact Bitcoin’s price trajectory.
El Salvador’s bold Bitcoin experiment faces mixed results. While the promise of transparency and financial gains is strong, low domestic adoption and market volatility present challenges. The country’s future remains tied to Bitcoin’s price and its ability to drive financial inclusion.
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Note: All content represents the author's personal views only, is not investment advice, and should not be construed in any way as tax, accounting, legal, business, financial or regulatory advice. Before making any investment decision, you should seek independent legal and financial advice, including advice on tax consequences.
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