Nayib Bukele, the president of El Salvador, announced late Wednesday that his government plans to buy one Bitcoin every day starting on Thursday. And while Bukele hasn’t said when the purchases will stop, it’s likely to further the financial disaster his country’s cryptocurrency experiment has already wrought, based on the massive loss he’s already taken by buying bitcoin at an all-time-high last year.
“We are buying one #Bitcoin every day starting tomorrow,” Bukele tweeted on Wednesday around 11:30 p.m. local time in El Salvador.
The current price of one Bitcoin is roughly $16,540, down 1.5% from a day earlier and down 73% from a year ago. Bitcoin was trading at an all-time high of over $68,000 in November 2021 when El Salvador was purchasing large quantities of Bitcoin.
President Bukele has already lost El Salvador tens of millions of dollars, according to the latest calculations by Bloomberg News. El Salvador hasn’t publicly confirmed how many bitcoin purchases the country has made, but based on Bukele’s tweets we can determine he’s purchased 2,381 Bitcoin since the start of his experiment. The price for all the country’s Bitcoin holdings has totaled $105 million to purchase, according to Bloomberg, while the current worth is roughly $39.4 million. Bukele would’ve been smarter just holding U.S. dollars as cash, even with annual inflation at almost 8%.
Despite declaring Bitcoin an official currency in El Salvador in late 2021, few people are actually using the crypto for purchases in the country. And one of the common reasons cited for declaring it a currency, sending remittances back to the country from abroad, has been a bust as well. Roughly $6.4 billion dollars was sent as remittances to El Salvador from September 2021 until June 2022, but less than 2% of those were in cryptocurrency, according to Reuters.
The Bitcoin experiment has also caused El Salvador’s credit rating to get knocked down repeatedly, with the country’s rating currently sitting at CC, due to the likelihood it will default on bond obligations that are coming due in 2023, according to CoinDesk.
Bitcoin, like all cryptocurrencies, is a tricky system to funnel money from the poor to those who are already wealthy and influential. Most people lose money trading bitcoin, as a recent study made clear. But that doesn’t stop a lot of regular people from trying. And those same regular people are getting hurt financially, as crypto exchanges declare bankruptcy left and right.
Recent implosions in the crypto industry have put a damper on enthusiasm as gigantic frauds like FTX have shown. The people who started FTX took real money from users, and gambled it away on a hedge fund called Alameda Research, all while inventing at least two cryptocurrencies to hold on their books as “assets.” Those assets were garbage, and when rival CEO Changpeng Zhao from Binance tried to cash out $580 million of those garbage assets last week, it sent the entire house of cards at FTX tumbling down.
Is any of this going to stop people from continuing to buy Bitcoin? Clearly not, as we’re seeing arguably the most powerful Bitcoin promoter in the world double down on his bad investment. Bukele is like the gambler who thinks he’s just one more hand away from the big score. But the house always wins, and the people of El Salvador will suffer while he’s gambling away the country’s future.