Published in El Pais, 29 January 2022.
Bitcoin just crashed going below $34,000, well down from its all-time high of over $60,000. Crypto enthusiasts have been claiming now is the time to “buy the dip”, a term used to buy more cryptocurrency while the prices are low and while if you have the disposable income, I say go for it, but what if you are gambling away a country’s economy?
President Bukele of El Salvador has long been a proponent of Bitcoin and has even made his country the first to make it legal tender. The move has been controversial and has seen the country’s debt rating downgraded after the previous price crashes. How does he react to this? He doubles down announcing the purchase of $15 million worth of Bitcoin claiming the prices are cheap.
I firmly believe the future of finance is blockchain, but this is not how you go about it. Countries can utilize existing networks to create stablecoins backed by their own currency and would only have to pay for the infrastructure and gas fees and not worry about price volatility. Utilizing stablecoins will also alleviate the fear that the El Salvadoreans may have that they will be exposing their money to price fluctuations. Cryptocurrency pegged to the US dollar will be worth $1 today, tomorrow, and next year.
Now I really want Bukele to be right for a number of reasons, for one if he is wrong the damage to his people would be enormous, two if he failed it would put an undeserved black eye on the entire blockchain industry and could cause other countries to push back when the idea of passing pro crypto laws are presented to them.
So, with that here is hoping to the president’s success. A lot more than his reputation is riding on it.