The crypto meltdown hits El Salvador's bitcoin journey

Bitcoin popularity in El Salvador appears to have reached a snag recently.

El Salvador's remarkable bitcoin adoption appears to have reached a snag recently.

Bitcoin has dropped over 70% from peaking at about $69,000 in November 2021. El Salvador, which is already dealing with a major financial problem, has been harmed by the global drop in bitcoin prices.

The Central American country's investment of $105 million for 2,301 bitcoins has dropped in value by more than half to roughly $51 million.

President Nayib Bukele, a bitcoin fan, remains upbeat. Mr Bukele suggested on Wednesday that the nation would acquire additional bitcoin.

El Salvador was one of the early bidders to become the first country to legalize bitcoin in September 2021.

"Governments invest with a long-term view in mind, considering the risks inherent in each asset type." El Salvador will continue to invest in bitcoin with confidence," Jin Gonzalez, Chief Architect at Oz Finance, says.

Despite Mr. Bukele's optimism, the reality on the ground in El Salvador does not appear to favor bitcoin adoption.

According to a recent study conducted by an El Salvadorian university, more than 60% of those polled still choose to hold the dollar over bitcoin.

Only approximately one-fourth backed El Salvador's decision to make bitcoin legal money.

According to a National Bureau of Economic Research survey, bitcoin adoption is minimal and confined mostly among the educated, banked, and male population.

Indeed, one of the major motivations for bitcoin acceptance was to empower the massive unbanked population — around 70% of the population.

"The failure (in individuals accepting bitcoin) is mostly due to bad government planning and implementation." Failure to create payment infrastructure around bitcoin has proven deadly," according to crypto specialist Dan Ashmore.

Mr. Ashmore further says that it would be incorrect to suggest that El Salvador was the first to accept Bitcoin.

"What if El Salvador's acquisition triggered a high-stakes game theory effect?" This would have prompted other countries to follow suit, and the price of bitcoin would have skyrocketed," he claims.

According to cryptocurrency specialists, the ongoing decline in bitcoin prices is mostly due to central banks raising interest rates, the global inflation issue, the deteriorating geopolitical environment, and regulatory uncertainties in several countries, including India.

Mr. Bukele's enthusiastic tweets about bitcoin indicate that El Salvador will continue with its groundbreaking endeavor. However, this might be a warning flag for other governments considering making cryptocurrencies official tender.

"El Salvador is the first to learn and adapt its plan in order to discover what works best for it." Other nations will undoubtedly be more cautious until there is less volatility in the market," Mr Gonzalez predicts.

The global volatility in bitcoin values, on the other hand, presents a chance to demystify the sophisticated digital asset for the general people - whether in India or throughout the world.

"A long-term plan to educate the public on what bitcoin is, its benefits over fiat currency, and how to use it is required for effective bitcoin adoption," Mr Ashmore argues.

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