El Salvador’s president is triumphant after his bet on bitcoin comes true

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This article was published 05/12/2024 (632 days ago), so information in it may no longer be current.

SAN SALVADOR, El Salvador (AP) — As bitcoin reached historic highs, surpassing $100,000 for the first tim e, El Salvador’s President Nayib Bukele was triumphant on Thursday about his big bet on the cryptocurrency.

The adoption of bitcoin — which has been legal tender in the Central American nation since 2021 — never quite matched the president’s enthusiasm, but the value of the government’s reported investment now stands at more than $600 million.

Bitcoin has rallied mightily since Donald Trump’s election victory last month, exceeding the $100,000 mark on Wednesday night, just hours after the president-elect said he intends to nominate cryptocurrency advocate Paul Atkins to be the next chair of the Securities and Exchange Commission.

Just two years ago, bitcoin’s volatile value fell below $17,000. Bitcoin fell back below the $100,000 by Thursday afternoon, sitting just above $99,000 by 3 p.m. E.T.

Bukele on Thursday blamed his beleaguered political opposition for causing many Salvadorans to miss out on the bonanza.

There were street protests when the Congress made bitcoin legal tender in June 2021, though that move was not the only motivation for the protesters.

The tiny Central American country has long used the dollar as currency, but Bukele promised bitcoin would provide new opportunities for El Salvador’s unbanked and cut out money transfer services from the remittances Salvadorans abroad send home. The government offered $30 in bitcoin to those who signed up for digital wallets.

Many did so, but quickly cashed out the cryptocurrency.

“It’s important to emphasize that not only did the opposition err resoundingly with bitcoin, but rather, differently from other issues (where they have also been wrong), this time their opposition affected many,” Bukele wrote on Facebook.

Bukele drew an “impressive” comment from Elon Musk on the social media platform X Thursday.

El Salvador’s former Central Bank President Carlos Acevedo pointed out on Thursday that while there has been a gain, it remains an unrealized one until the government’s bitcoin is sold. That said, he credited Bukele’s administration with doing well on the bitcoin move, especially in light of Trump’s election.

Acevedo said “the markets’ optimism that a Trump administration will be friendly with the markets and particularly with bitcoin” explained its sustained rally over the past month.

But the cryptocurrency’s volatility was a persistent risk, he said.

“The average Salvadoran doesn’t use bitcoin, but obviously there are Salvadorans with economic resources who even before had already invested in bitcoin, but it is a small group,” Acevedo said.

Esteban Escamilla, a worker in a clothing store in Santa Tecla, outside the capital San Salvador, said he had cashed out the original $30 of bitcoin offered in 2021.

“I don’t use bitcoin because I don’t have (money) to invest and speculate with, but I know it has gone up a lot,” he said, recognizing that he would have more money now if he had kept it in bitcoin.

Josefa Torres, 45, said as she was doing her grocery shopping that she didn’t have any bitcoin either. “I took out the money and used it for household expenses,” she said.

At the conclusion of meetings between the International Monetary Fund and El Salvador’s government in August, the IMF issued a statement that mentioned the country’s bitcoin holdings.

“While many of the risks have not yet materialized, there is joint recognition that further efforts are needed to enhance transparency and mitigate potential fiscal and financial stability risks from the Bitcoin project,” the IMf said.