[jfasi]

I’m about as far from a crypto defender as you can get, but I think this page misses the point. If El Salvador is planning to use Bitcoin as a medium of exchange, which by all accounts they are, their being “up” or “down” must be measured by the size of the economic activity that Bitcoin allowed them to facilitate. That figure is harder to get at.

Viewed this way, the additional purchases which seem foolish and laughable might even be signs of success: perhaps Bitcoin business is booming so hard they need to expand their reserves?

To be clear, I highly doubt that’s the case here, but if we’re going to assess success we should at least try to steelman their position. There’s plenty to mock about this change without taking cheap shots.

[JumpCrisscross]

They're investing FX reserves in Bitcoin. Their imports are not priced in Bitcoin. Bitcoin going down relative to the currencies they import in hurts El Salvador's ability to finance them. Which raises borrowing costs [1]. Which leads to exporters demanding earlier payment [2].

San Salvador has less than three months' imports in reserves [3][4][5]. Their Bitcoin experiment has scared off crisis lenders [6]. There is no good ending for them right now.

[1] https://www.reuters.com/markets/europe/crypto-crash-leaves-e...

[2] https://fred.stlouisfed.org/series/SLVBCAGDPBP6

[3] https://tradingeconomics.com/el-salvador/imports

[4] https://tradingeconomics.com/el-salvador/foreign-exchange-re...

[5] https://data.worldbank.org/indicator/BN.CAB.XOKA.CD?location...

[6] https://www.imf.org/en/News/Articles/2022/02/15/cf-el-salvad...

[aardvarkr]

Thanks for the sources to read further in the topic! I was always curious to know how their “experiment” was going to turn out and it seems like the results so far aren’t good

[JumpCrisscross]

> was always curious to know how their “experiment” was going to turn out and it seems like the results so far aren’t good

They were in a bad position to start with. There was no happy ending even if they'd done everything right.

But had they spent the boom years borrowing cheaply where possible, renegotiating and paying off expensive debt where necessary, moderating fiscal expansion and fighting violence around their tourist centers, they would have had better options. Instead, they voted in a magician.

San Salvador is between a rock (currency crisis prompting food and fuel shortages) and a hard place (austerity and an IMF loan).

[tsimionescu]

Minor note: it's El Salvador (The Savior), not San Salvador (Holy/Saint Savior).

[elros]

https://en.m.wikipedia.org/wiki/Metonymy

San Salvador is the capital, like saying Moscow to refer to Russia.

[JumpCrisscross]

Thanks! I was trying to remember the term.

[function_seven]

El Salvador is the country, "San Salvador" is standing in for "The Government of El Salvador". Or the leadership, executive, etc.

Like when news articles say, "U.S. trade deficits are widening. Washington appears to be pursuing domestic development efforts rather than the protectionist measures floated by many".

[davidgerard]

it's been 100% an utter disaster

[lawn]

They're not trying to use Bitcoin as a medium of exchange.

They're trying to funnel people into their own centralized crypto app, where people may (or may not) be allowed to send Bitcoin via the Lightning Netowrk.

[pirate787]

The president of El Salvador is buying Bitcoin on his cellphone. There is no governance over these millions and it isn't going to end well.

[stingraycharles]

Maybe the larger point is that bitcoin is too volatile a currency to be used as a medium of exchange? Surely they must be holding on to a decent amount of BTC and as such lost value, if not the government itself, then at least the country as a whole.

[rmbyrro]

Currently, Bitcoin adds zero value, even if it was used for every single transaction in the country.

Currencies are not money because they don't store value. Bitcoin was a promise to be money in the full sense.

It's ability to store value is questionable, since it became a highly speculative and fraud facilitation asset. And the other aspects of being money are worse than currencies.

[surement]

El Salvador has a trade deficit and can't print USDs; part of the point of adopting BTC was to allow Salvadorans abroad to send money into the country without paying wire fees.

[toomuchtodo]

I bet they could’ve put together an agreement with TransferWise or OFX to issue digital wallets to citizens and expats for facilitating more efficient remittance at scale for less money than what they’ve wasted on crypto losses.

[Alex7845]

the same argument can be said about literally every non-crypto currency. A US dollar doesn't have any "value" other than the small amount of heat you get if you burn your paper bills.

[imtringued]

Actually there are many reasons.

You pay taxes in USD, USD is legal tender for debts, you are incentivized to borrow in USD and finally because the dollar is widely accepted even beyond the borders of the US.

Money is really only meant to be a relationship between people which tracks how much they owe each other, the value isn't derived from money itself but from the network effects of many humans engaging in economic activity.

5% inflation obviously ruins the store of value aspect but it hasn't stopped anyone from sending or accepting inflating money. The idea that a merchant would refuse USD because it lost 95% of its value compared to eighty years ago or whatever is unheard of and doesn't seem to bother merchants as long as they can re-adjust prices quickly enough.

The last one is the most important. If everyone in El Salvador accepts Bitcoin then Bitcoin will act as money just like any other currency.

[JumpCrisscross]

> same argument can be said about literally every non-crypto currency. A US dollar doesn't have any "value" other than the small amount of heat you get if you burn your paper bills.

Or the food and fuel one can import with it, which one can't with Bitcoin.

[notch656a]

If you offer high enough margins and volume I guarantee someone will import food or fuel for you in exchange for bitcoin.

[Tao3300]

Hey, at least you didn't say "fiat". That's the magic word for "stop reading this comment".

[CrazyStat]

Once a month or so I search Twitter for the phrase "fiat maximalist" to find the dumbest cryptobro takes.

[audessuscest]

How Bitcoin really facilitate anything ?