Naib Bukele, President of El Salvador, announced late Wednesday that his government plans to buy one bitcoin every day starting Thursday. And while Bukele hasn’t said when the buying will stop, it’s likely to be a shockingly stupid decision given the huge losses he’s already taken by buying bitcoin at an all-time high last year.
“We buy one bitcoin every day starting tomorrow.” – Bukele tweeted on Wednesday around 23:30 local time in El Salvador.
The current price of one bitcoin is approximately $16,540, which is 1.5% less than the day before and 73% less than a year ago. Bitcoin traded at an all-time high of over $68,000 in November 2021 when El Salvador was buying bitcoins in large quantities.
President Bukele has already lost millions of dollars to El Salvador, according to the latest count Bloomberg News. El Salvador has not publicly confirmed how many bitcoins the country has committed, but based on Bukele’s tweets, we can determine that he has bought 2,381 bitcoins since the start of his experiment. According to Bloomberg, the value of all bitcoin holdings in the country was $105 million, while the current value is approximately $39.4 million. Bukele would be wiser to just keep US dollars as cash, even with an annual inflation rate of nearly 8%.
Despite the announcement of Bitcoin as the official currency in El Salvador at the end of 2021, few people actually use the cryptocurrency to make purchases in the country. And one of the common reasons it was declared a currency, sending remittances back into the country from abroad, was also a failure. Approximately $6.4 billion was sent in remittances to El Salvador from September 2021 to June 2022, but less than 2% of that was in crypto. Reuters.
The bitcoin experiment has also led to repeated downgrades of El Salvador’s credit rating, with the country currently at CC due to the possibility of default on bonds maturing in 2023. CoinDesk.
Bitcoin, like all cryptocurrencies, is a complex system of redirecting money from the poor to those who are already rich and powerful. Most people lose money trading bitcoin. recent training clarified. But that doesn’t stop many ordinary people from trying it. And those same ordinary people are suffering financially as cryptocurrency exchanges declare bankruptcy right and left.
Recent explosions in the crypto industry have dampened enthusiasm, as giant scams like FTX have shown. The people who launched FTX were taking real money from users and investing it in a hedge fund called Alameda Research while inventing at least two cryptocurrencies at the same time to keep their books as “assets”. These assets were junk, and when rival CEO Changpeng Zhao of Binance tried to cash out $580 million worth of these junk assets last week, the entire FTX house of cards collapsed.
Will any of this stop people from continuing to buy bitcoin? Clearly not, as we see the world’s largest bitcoin promoter doubling down on their failed investments. Bukele is like a player who thinks there is only one hand left to win big. But the house always wins, and the people of El Salvador will suffer while it loses the future of the country.