September 27, 2022

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Bitcoin Experiment Has Failed in El Salvador?

5 min read

Bitcoin Experiment Has Failed in El Salvador?

 

Bitcoin Experiment Has Failed in El Salvador?


The recent sharp fluctuations in Bitcoin have once again attracted the attention of the small Central American country of El Salvador.

The country’s President Ibrahimovic Bukley posted a photo of himself wearing a McDonald’s uniform on Twitter, arousing people’s curiosity: the world’s first What happened in the past six months in the country that declared bitcoin legal tender?

 

Bitcoin Experiment Has Failed in El Salvador?

 

 

El Salvador officially giving Bitcoin the same legal status as the U.S. dollar is tantamount to conducting a rare controlled experiment to see if Bitcoin can truly become money.

Needless to say, the experiment has failed.

Although the failure was expected, the believers absolutely did not believe that Bitcoin could not become a currency if this experiment was not carried out.

Of course, the failure of this experiment doesn’t change the beliefs of most Bitcoin believers, at least so far.

 

 

 

Saying that the experiment with Bitcoin as legal tender has failed in El Salvador can be seen in several ways. First of all, most ordinary people do not accept Bitcoin.

Nine out of 10 people want dollars instead of bitcoin, and there have even been demonstrations against bitcoin.

The government gave a $30 bonus to encourage people to download trading software, but most people uninstalled the software after they got the bonus.

While it has not been seen how much bitcoin is being used in the transaction of goods and services in the country, it is estimated to be an extremely low number.

 

The common people don’t like Bitcoin, the reason is very simple, in their opinion, this thing is not reliable.

For the vast majority of people who have no money left at all and have no investment needs, the money that flows through them is nothing more than to buy food and meet basic living expenses.

How much can be bought with this limited amount of money must be roughly There is a limit to owning a thing with a price that suddenly goes up and down, unless it is a strange disease.

One of the motivations for the introduction of bitcoin in the country is that everyone uses bitcoin, so that foreign relatives and friends can send money to avoid those high transaction costs.

Since most of the people reject bitcoin, this goal cannot be achieved.

 

Second, engaging in the Bitcoin mining industry and driving the economy was another motivation for the legalization of Bitcoin at that time, and this goal was also unsuccessful.

In order to engage in this business, the country issued related bonds to finance it, and this bond plummeted, indicating that engaging in the mining industry is also wishful thinking.

 

Third, the country’s official Bitcoin holdings are in the red. The timing of El Salvador’s preparation to test the waters of Bitcoin is actually quite good.

In mid-2021, there was a “big pit” in the Bitcoin market, but the country’s official investment still failed. It is said that it has lost 20 million US dollars in Bitcoin.

It seems to be a trivial figure, but considering that the country has a population of only 6 million, per capita GDP is less than 4,000 US dollars and the economy relies heavily on external blood transfusions, this loss is a bit heartbreaking, and this incident also makes people suspect that the country is fundamentally Don’t have the talent to surf the speculative market.

 

In fact, it is impossible for Bitcoin to act as a currency to play the role of a medium of exchange. This should be a simple reason that any normal person can see.

It is impossible for El Salvador, where the financial infrastructure is underdeveloped and the people have little savings, and it is also impossible in a rich country with complete facilities.

It is also impossible. I hope that in the future, rich countries will be willing to conduct a similar experiment to verify whether this judgment is accurate.

Of course, Bitcoin as an “asset” can attract people to continue trading, continue to rise and fall by faith.

 

When Bitcoin fell sharply recently, the “coin fan” president spent a huge sum of $15 million to buy 410 coins.

Some people joked that this move would make El Salvador from a “third world” country to the number one in the world. a “Fourth World” country.

In the past 100 or 200 years, some politicians in Latin American countries have come up with various tricks and tricks to bring down the currency and the economy.

Of course, we cannot assert that this “currency fan” will definitely bring down El Salvador in this novel way.

Maybe one day Bitcoin will rise again, and the wealth held by the country will rise with it, but a country will make great treasures.

Betting on such a volatile and risky asset is not the right way to seek development after all.

 

When human currency entered a stage of complete credit support in the second half of the 20th century, government behavior played a decisive role.

After experiencing countless times of currency collapse, many Latin American countries have experienced currency substitution, that is, foreign currencies (mainly US dollars) have not only become the main store of value for residents, enterprises, and financial institutions in the country, but also become transaction media.

The local currency is close to disappearing. This is a no-brainer solution.

It brings a relatively stable expectation to ordinary people and allows the economy to run reluctantly. Economic development must be down-to-earth, and the problem must be solved step by step.

The legalization of Bitcoin will really not solve any problems.

 


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