A Month Since Bitcoin Became Legal Tender in El Salvador By DailyCoin
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- El Salvador is where the volcanic first appeared.
- El Salvador made Bitcoin legal tender September 7th.
- Brazil and more countries are exploring Bitcoin’s legal status.
Bitcoin’s role in the greater financial model is still unknown, with nation-states either embracing it or outlawing it entirely. As a financial instrument, Bitcoin hasn’t proven capable of fulfilling currency functions because of its volatility risk factor. El Salvador has adopted Bitcoin, despite volatile spikes in retail and institutional interest, as the legal currency.
There is no Bitcoin Honeymoon
Nayib Bukele, El Salvador’s president, introduced the initial “Bitcoin Law” bill in June 2021, which passed on September 7th, making El Salvador the first country in the world to make Bitcoin a legal tender, while countries such as China have declared it illegal, promoting their own secluded agenda.
It was seen as more of an advertising stunt than an economic incentive to accept Bitcoin. Steve H. Hanke, director at Troubled Currencies Project, criticized the idea of introducing an “untested idea” into an already functioning monetary system. Bitcoin is a “forced tender;” the decision to exercise an unusual financial model has proven beneficial to a certain extent.
Following crypto market price drops, Nayib Bukele announced that the country “bought the dip.” El Salvador purchased $6.4 billion worth of Bitcoin, 150 BTC, increasing their holdings to 700. The country made $1.5 billion in profit after the market rallied above $54,000.
El Salvador residents could claim $30 in BTC airdrops after the Chivo Wallet app was released. Every resident with Bitcoin received a 10% profit due to rising Bitcoin prices. The purpose of the Airdrop was not to encourage citizens to use the BTC payment options made available by the law.
To The Flipside
- As Bitcoin’s value has increased, it became a unit for change and an inflation hedge.
- Bitcoin is now worth more than half of its $64,000 high in 2021.
- Bitcoin-paying users will be more likely to save it rather than convert it into USD.
Check out these Achievements
There are many benefits to accepting Bitcoin legal tender. El Salvador is also an early adopter of crypto. Despite the disparities between tech development and the country’s status, El Salvador is embracing crypto. Over 3 million users have currently downloaded the Chivo wallet, which is half the country’s population.
Additionally, Nayib Bukele highlighted that Salvadorans “are inserting more cash” than they are withdrawing. Bitcoin’s lower transaction fees are due to El Salvador’s dependence on remittance network. More than 9 percent of all remittances are done now in bitcoin. Bukele points out that more than $2 million is being sent each day as people rely more on bitcoin wallets to replace regular banks.
Bukele securing geothermal power as a renewable and sustainable resource in order to support greener Bitcoin mining. Bukele made the announcement that the first volcano-powered geothermal bitcoin was mined. This amounting to 0.599179 BTC. Bitcoin volcanic bitcoins are possible with further stress testing.
Hinter the Bitcoin Curtain
Bitcoin’s mass release was not without reverberations. Reuters users reported that they experienced losses up to $220 trying to withdraw funds from the Chivo account. The USD is still more important in the economy. Bitcoin also has a 10% exchange fee, redefining Bitcoin as an asset of value.
What’s more worrying is Bitcoin’s stability, which makes spending BTC less likely, creating new precedents for price speculation. Bloomberg reports that Chivo’s ease of use has turned everyday individuals into day-traders, following the footsteps of their president, who is “buying the dip.”
Bitcoin’s volatility challenges financial stability in the emerging economy, with reports suggesting that citizens resent Bitcoin usage. What’s more, the ease with which economic transactions can be conducted increases the use of Bitcoin for illegal activities, while individuals continue to rely on the U.S. dollar for everyday payments.
Why you should care
Many consider Bitcoin’s implementation to be a test pilot of sorts, and a lot of attention is being paid towards the financial outcome of the Bitcoin Law. There is not enough evidence to prove that Bitcoin will benefit El Salvador in any way, either economically or otherwise. However, the test will show the rest of world how Bitcoin can serve as a currency.
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