Can a Country Get Rich from Crypto – Where’s El Salvador Now?
El Salvador turned heads in 2021 by adopting Bitcoin as a legal tender, sparking global debate about the potential of how cryptocurrencies can enhance a country’s economy. This bold move was led by President Nayib Bukele, and aimed to attract international attention and investment while offering Salvadorans an alternative to traditional financial systems.
Internationally, interest in cryptocurrencies continues to grow. Coinbase is known for its careful evaluation of assets, and often highlights coins that show great growth potential. Cryptocurrencies that are listed on Coinbase typically experience a significant spike in value. Many crypto enthusiasts refer to this significant jump in value the Coinbase Effect which ultimately denotes the cryptocurrencies that increased by 91% in value over the last few days. According to crypto expert Michael Graw, the recently added cryptocurrencies on Coinbase are mainly to stay ahead of emerging trends.
El Salvador’s adoption of Bitcoin reflects a broader ambition to capitalize on the evolving and enormous potential of crypto markets. The plan included buying Bitcoin regularly—starting with one coin per day in 2022—and promoting its use throughout the country. By 2024, El Salvador’s Bitcoin holdings had reached 5,932 coins, worth over $525 million after Bitcoin hit a record price of $89,000.
While these figures sound promising, the strategy remains speculative. The government has not yet sold any of its Bitcoin, meaning the gains exist only on paper. The highly volatile nature of cryptocurrencies poses a risk as market shifts could result in the potential profits significantly declining should there be a drastic change in the market.
This concern becomes even more relevant in a country where a large portion of the population still relies on remittances that make up nearly 24% of its GDP. Additionally, Bitcoin adoption among Salvadorans has also been slower than anticipated. Many citizens remain cautious about using it for everyday transactions, preferring cash or conventional banking.
Despite these challenges, the government has made its Bitcoin strategy transparent by creating a public platform to track its portfolio. This openness has attracted attention worldwide, positioning El Salvador as a pioneer in the integration of cryptocurrencies into national policy.
Critics argue that El Salvador’s reliance on Bitcoin is risky, especially for a developing nation with limited resources. The potential downside of such a volatile asset could have severe economic consequences if the market were to take a sudden downturn. However, supporters highlight the innovative nature of this strategy, noting that El Salvador’s move could reduce dependency on foreign currencies and strengthen financial inclusion in the long run.
As El Salvador continues its experiment, the global community watches closely. Whether the outcome is one of financial triumph or a hard lesson remains to be seen, however, one cannot deny just how bold a strategy it is and has sparked a larger conversation about the role of cryptocurrencies in reshaping how nations approach economic growth.
With the spotlight firmly on El Salvador, its decisions could set the tone for how other countries evaluate cryptocurrency as a potential financial tool in the years to come.
