El Salvador’s president says it’s time to buy the dip, as Bitcoin crashes below $30,000. But the country’s citizens are less bullish

May 10, 2022, 6:26 AM UTC

Bitcoin’s price may be down 50% since its peak last November, but at least one bull thinks it’s time to buy the dip.

On Monday, El Salvador President Nayib Bukele announced that the country had bought 500 Bitcoin at an average price of $30,744 each. It’s the largest volume of Bitcoin the Latin American country has purchased since Bukele made the cryptocurrency legal tender last September.

According to Bloomberg, the country now holds 2,301 Bitcoin, worth about $73 million at current prices. El Salvador last purchased Bitcoin in January, when it bought 410 Bitcoin for an average price of $36,585. 

Yet most Salvadorans are not as enthusiastic about Bitcoin as their president is.

El Salvador tried to encourage wider adoption of Bitcoin by setting up a network of Bitcoin ATMs and launching an e-wallet called “Chivo” with a sign-up bonus of $30 in Bitcoin. At the time, Bukele argued that Bitcoin could help provide financial services to El Salvador’s unbanked, which make up about 70% of the population. However, almost eight months later, most Salvadorans have ditched Bitcoin.

A survey published last month by the U.S.-based National Bureau of Economic Research (NBER) suggests that only 20% of Salvadorans are still using the Chivo e-wallet. Most users stopped using the service after claiming a $30 reward the government launched to incentivize Chivo downloads. The 20% who remain active are mostly using Chivo to store and trade dollars, not Bitcoin, NBER says.

The survey found that the users who stuck with Bitcoin were young, male, educated—and already banked, meaning that unbanked Salvadorans were mostly sticking with cash.

El Salvador also tried launching a “volcano bond” in March, which was a $1 billion Bitcoin-backed bond meant to fund the construction of “Bitcoin City,” a Bitcoin mining center powered by geothermal energy. There is competing information about how well the bond has performed—El Salvador’s finance minister claimed in March that demand for the bond was $1.5 billion, but Bloomberg suggests the bond has flopped in international markets.

Rating agencies and international financial institutions have criticized El Salvador’s shift to Bitcoin, with the International Monetary Fund saying it “entails large risks for financial and market integrity, financial stability, and consumer protection.”

Despite international warnings on using Bitcoin, some countries are moving forward with plans to officially embrace the cryptocurrency. The Central African Republic announced that it would accept Bitcoin as an official currency in late April. Panama’s legislature also recently approved a law to allow the use of Bitcoin and several other cryptocurrencies as a means of payment, as well as launch a Chivo-like national e-wallet.

The price of Bitcoin sank to just below $30,000 on Monday before recovering to $32,270 as of publication time—providing quick, but maybe temporary, gains to El Salvador’s new currency.

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