Bitcoin officially became legal tender in El Salvador on September 7, this year making it the first country to adopt the currency. While the move pushed Bitcoin and the larger crypto market’s narrative in terms of mass adoption it also unleashed a wave of speculations in El Salvador from the opposition as well as the citizens.
On October 18, thousands of Salvadorans took to the streets in the nation’s capital to demonstrate against the leadership’s economic policies, including the decision to make BTC legal tender in the country. The protesters shouted slogans like “Bitcoin is fraud” and “No to dictatorship” while Bukele seemed to downplay the discontent displayed. But in this clash of ideologies what would be Bitcoin’s fate?
Macro-event triggered cycle
The year 2021 was a year of extreme highs and lows triggered by global macro-events and FUDs that fueled the momentum of space, well mostly of BTC. Clearly, Bitcoin’s social sentiment had heavily impacted its price throughout the year.
Notably, when the Bitcoin Law was passed by the Legislative Assembly of El Salvador on June 8, BTC’s price pumped by close to 25% in the following three to four days. The El-Salvador hype, however, didn’t do much for the price as BTC fell below $30K in the following fortnight.
Likewise, Bitcoin’s price fell sharply after the coin gained the status of legal tender within El Salvador on 7 September. Its price saw a close to 18% fall as did the larger market amid a flash crash.
So while from the perspective of mass adoption the El Salvador hype pushed the narrative, in terms of affecting BTC’s price the same didn’t fare out as expected. Nonetheless, at the time of writing as anticipation of a new BTC price ATH was high and so was the hope of a BTC ETF, can these protests actually affect BTC’s global status? Well, for that, it is crucial to look at the El Salvador BTC fiasco and what it entails.
With BTC’s adoption in El Salvador, Bukele had hoped that the use of BTC could help the country retain the more than $400million worth of financial fees lost when Salvadorans send remittances home from abroad. Such payments make up about 22% of the country’s gross domestic product (GDP).
Bukele had also highlighted last month that 2.1 million Salvadorans are were actively using the Chivo Wallet. In fact, in less than three weeks, it had more users than any bank in El Salvador. These facts however seemed questionable since only about a third of Salvadorans use the internet, while a large number of the population lived below the poverty line.
Further, a survey had highlighted that more than 65% of Salvadorans strongly disagree with the use of bitcoin as a legal tender. Yet, again however the survey presented a skewed opinion since it only had a target audience of 1,281 people which in comparison to El Salvador’s population of around 6.49 million was a small group.
On the other hand, more concrete data presented that El Salvador preferred Bitcoin over the US dollar, as highlighted in this article.
Nonetheless, with protests against Nayib Bukele intensifying could it actually mean that El Salvador turned out to be a global Bitcoin laboratory where the tests on BTC had failed? Even though a clearer picture of the same would come with time, if the 1st country to legalize BTC, throws off the narrative within the first few months it could hurt BTC’s price and its image during this uncertain period of ETFs approval and further hamper with BTC reaching its ATH.
At the time of writing, Bitcoin noted a 0.55% price drop as it traded at $60,796 as the protests took place. A fall below the $60K level, however, can be worrisome for the coin’s trajectory in the near future.