El Salvadoran President Nayib Bukele’s $70.7 million bitcoin investment was down $3.4 million — about 5% — a headline in La Prensa Grafica screamed on Tuesday (Dec. 7). On Friday it was down another $2.3 million.
Volatility in bitcoin is nothing new, but if new investors are battered by fear, uncertainty and doubt — FUD is the crypto insiders’ mildly derogatory term — imagine being an investor who didn’t choose to buy bitcoin.
Specifically, learning that “you” are buying another 150 BTC because the price dropped 20% in the early morning hours of Saturday, Dec. 4.
With BTC dancing from roughly $47,500 to $49,800 and back in just eight hours on Friday morning, its fairly easy to see why the impoverished country’s citizens are not rallying around their new leader’s three-month old crypto adventure, which began with protestors taking to the streets.
But as anger and dismay grows, and citizens follow headlines tracking the bouncing ball that is bitcoin’s value, a recent report from financial services firm EMFI Group asks if that wasn’t the plan all along.
The London-based firm’s recent analysis, titled “Hiding the macro garbage under the Bitcoin carpet,” posits that Bukele’s goal was to use the uproar about what is — even for poor El Salvador — a comparatively small investment to hide a much more substantial deterioration in public finances.
And really, if you think about it, what better way to hide a complex disaster than with a loud but simple problem?
Not that the up-again, down-again price of BTC is the only problem Salvadorans have with the bitcoin experiment. Not withstanding pork-barrel promises like a 25-cent veterinary hospital in the under-construction “Bitcoin City,” Salvadorans have not been able to get a public accounting of what the Bukele government is doing with the $200 million the Legislative Assembly he dominates earmarked for the implementation of the bitcoin experiment. Or how and to whom those contracts are being awarded.
What they do know is that the Chivo wallets the government implemented — and seeded with $30 to entice people to sign up — are being accepted gleefully by fraudsters, who have impersonated at least 1,000 citizens (and likely far more, as 1,000 is just how many are shouting about it) to collect the bounty.
Attracting Investment
Still, Bukele’s bitcoin investment has attracted more than complaints.
Argentinean commercial bank Banco Hipotecario kicked off the first face-to-face session of its Bitcoin Bankathon on Dec. 6. The event brings together a group of 40 until-now virtual teams of designers, programmers, entrepreneurs and economists who have been working on projects since Nov. 19 that focused on topics including building the next neobank, redesigning remittances, fighting climate change, empowering women and empowering merchants.
Celina Padilla, president of Banco Hipotecario, told Diario El Salvador that the project is the result of the transformation that the country is experiencing in technological and financial matters.
“We are betting on the new environment of new technologies and, in addition, taking advantage of the benefits that the new Bitcoin Law” making bitcoin legal tender, she said.
Winners of four prizes totaling $150,000 in bitcoin will be chosen by a group of Salvadoran government agencies including the central bank and Ministry of Innovation.
Another company moving into the bitcoin business in El Salvador is MINED, a Peruvian firm that will invest $1.3 million to set up educational courses in trading bitcoin that will culminate in the award of certificates identifying them as trained managers/brokers, Diario El Salvador reported.
Trading bitcoin and other cryptocurrencies quickly becomes an incredibly complex form of day trading once you get past the basic buy-and-hold investments, and requires both a fair bit of capital and the willingness and ability to suck up large short-term losses.
MINED’s year-long courses cost $100 per month in a country with an average per capita income of $3,650, according to Statista, and a 22.3% poverty rate according to the World Bank.
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