heh.. it seems the small rise after their first few purchases really made them confident - not to mention, everyone around the world talking about them might be a factor why they 'stayed in character' and kept buying
Looking at the size of this loss compared to government spending, it actually doesn't seem like that big of a deal. Definitely stupid and embarrassing, but doesn't seem likely to have a big fiscal impact.
A government is not a household. Government spending, when domestic, doesn't mean that money goes away. It means that the money flows into other parts of the economy. Say, the government gives money to a doctor or civil servant who then spends it, i.e. they give it to someone else in the country, who can then spend it. Often it will relatively quickly flow back through the government again via taxes. Government spending is economic activity, and in many (most?) countries the state is one of the biggest employers and investors in things like infrastructure.
In this case, it appears that instead of, say, giving money to a construction company who would than give money to workers and suppliers of materials (who could then spend that money in other parts of the Salvadorian economy) and getting a nice road for the people of El Salvador to boot, the government has instead given money to foreign investors in exchange for Bitcoin, and now those investors, because the magic line has gone down, are saying that the Salvadorian government can't have all the money back for the number of Bitcoin they have. I.e., they've lost out.
Of course, there's no way to know which way the line's going to go next, that's part of the excitement of gambling on Dunning-Krugerrands, but it seems rather obvious that there's a very fundamental difference between a government being an economic actor in its country, and a government being an unproductive speculator sending (tax) money abroad.
The only logic I have heard is that El Salvador receives a large amount of remittances from the USA, from which banks and Western Union take a big cut.
But Nayib Bukele is an autocratic president, which is making El Salvador less democratic by the day. In this case I think it's fair to blame the Bitcoin stuff to incompetence and/or corruption.
He fell for the 1% fallacy, he spoke at a cryptocurrency conference a while back and said “BTC is worth X, imagine if we can get just 1% of that in inward investment!”
I'm pretty sure I've read somewhere about a significant rise in tourism after they've announced bitcoin as legal tender and there are also the possibilities to attract revenue from miners using geothermal energy - which understand to be clean. So I guess they this Bitcoin thing could still be positive.
If tourism has gone up, does it not seem more likely correlated with the end of the pandemic?
Investing in clean power sources and then using that power for mining seems a poor economic idea in a country with no fossil fuel reserves and which still relies on imports for its existing power needs.
> If tourism has gone up, does it not seem more likely correlated with the end of the pandemic?
I find unlikely that people with cabin fever are itching to visit a country with such a violent reputation as El Salvador. We might find more clues if we compare revenue from before the pandemic and bitcoin adoption.
> Investing in clean power sources and then using that power for mining seems a poor economic idea in a country with no fossil fuel reserves and which still relies on imports for its existing power needs.
I think its quite the opposite. They have lots of untapped power from volcano but no actual demand for that energy that justifies investment. Its just there. With bitcoin mining comes incentives from deploying infrastructure and strengthening their grid. Its not coal or gas so everyone should be happy with the results right?
> Valdez noted that El Salvador’s Bitcoin adoption has also impacted the flow of tourist visits, increasing the number of tourists coming from the United States. Prior to the Bitcoin law enactment, the majority of visitors was coming from neighboring countries in the Central American isthmus. Now, as many as 60% of tourists come from the United States...
Worth pointing out that El Salvador's tourism was double its "post Bitcoin" level in 2019, and the majority of 2020 visitors came from neighbouring countries in Central America because international flights were banned for half the year. Almost like Bitcoin isn't a major driver in recent tourism trends
I don't doubt that some tourism is a result of Bitcoin (and that shouting about Bitcoin could definitely be net positive in the short run for a smaller country competing for tax-exile dollars), but we have much better data on the 1/500 of the government budget lost on a speculative investment and El Salvador's increased borrowing cost, and whilst those aren't El Salvador's only problems they're quite big numbers to make up from people seeking the novelty of paying for their cheap beers and beach huts with apps linked to their Bitcoin wallet.
1. El Salvator did not loose money. Those are unrealized “losses”,
2. market cycles are normal and expected, if you thought “crypto will only go up from here”, you are delusional,
3. Bukele just needs to be patient, the fundamentals did not change.
They still own 2301 BTC, and there still won’t ever be more than 21 Million. Adoption, hashrate, use cases, etc. all improved, and continue to do so. There will be another market cycle.
Artificial scarcity does not imply value, I can create a token from thin air, make the supply only 3 tokens, and start saying it will gain value because there will only ever be three tokens. Also it's arbitrarily divisible to a lot of decimal points so that argument makes even less sense.
After what we have observed with assets flying to astronomical levels when a worldwide pandemic hit against all common sense, it is amazing that this mantra still exists.
My observation is that many people do not respect history, and they only think in terms of how markets behaved during their small lifetime. For example, the Fed dominating markets with a foolish policy of bailing out the poor performers and flooding the market with cheap money and waterfalls of debt has been done by governments in history with catastrophic results.
Your argument defeats itself because there obviously is a demand for Bitcoin that is large enough to prompt entire countries to adopt it as legal tender. As such it obviously has value. What traders disagree about is how high that value should be compared to other things.
Notice for instance how fewer and fewer people are interested in selling Bitcoin the lower it goes. But I bet you'd love to get people to believe it's worthless so you can get it at a discount. Again, this proves that Bitcoin indeed has value.
As for artificial scarcity; well, artificial or not, at least Bitcoin has scarcity. Obviously artificial trinkets in the form of worthless metal coins, paper notes, or numbers in a bank's database, does not have any meaningful scarcity compared to Bitcoin.
Btw, whatever scarcity there is for fiat is also just as artificial, except its rulers and influencers can make as much of it as they like depending on their mood that day. Not so with Bitcoin. Artificial or not, its supply is hard capped at 21 million coins.
The US currently has $30,395,962,543,534.33 in debt and a GDP of ~$20,953,030,000,000.00 coupled with rising interest rates and record inflation. I think that's the "leader's gamble" to be really concerned about.
By this reasoning, it's irresponsible for a leader of a country that is not the US, to pin its economy on this "funny money" that it cannot print, but that others can.
Which is what El Salvador did untill recently. They still do, but no longer exclusively.
> By this reasoning, it's irresponsible for a leader of a country that is not the US, to pin its economy on this "funny money" that it cannot print, but that others can.
Yes, yes indeed. That is a terrible idea. Though there are circumstances when it might not be the most terrible of terrible ideas and the alternative is worse. But no sane country that is not already in dire straits should do that.
Oh it's another case of Libertarians deceptively portraying national "debt" as the same as personal debt.
There are plenty of countries with a higher national "debt" ratio that provide much better quality of life to the bottom 95% of the population than the US.
I'm exclusively talking about sovereign debt, I am not talking about personal debt at all.
The problem the US has is that it is one of the largest creditors of its own liabilities. The US prints its own money to issue itself debt with it. History's biggest ponzi.
National "debt" is not debt at all and doesn't work like a person going to the bank and loaning money. There are plenty of countries with higher national debt / GDP ratio than the US and doing better than the US in terms of quality of life.
The fundamental difference is that the US is the currency issuer of the USD, and that the USD is still overwhelmingly a reserve and trade currency for other states.
Neither of these are true for El Salvador and BTC.
Is it? The US/IMF will bail El Salvador out like always and dictators retire with their wealth. Just look at the Marcos clan in the Philippines.
These leaders give zero fucks.
While I wouldn't bet against it, there is a high likelihood that BTC was a product of the same funny money it was meant to counter. Whether it can sustain its value in the absence of massive QE remains to be seen,
You're right, I did downvote you because that's an awful take.
1/ In the same way that as long as I don't sell my GME share it's an unrealized loss. It's something I can afford to do as an individual because I can throw a hundred bucks away for the lulz. It's another thing to be a country and to make Bitcoin a mandatorily accepted currency and gamble your people's money away for the lulz.
2/ You've seen how cryptocurrency has behaved in the past ten years, and you think "market cycles" are a thing, in this domain ? There is nothing cyclic about cryptocurrency prices. There is nothing rational about these prices. It'll go back up the next time there's a successful scam managing to raise enough money to buy 2 minutes of Matt Damon telling you you're a limp dick for not putting it all in $LUNA, but it'll still be propped by nothing.
3/ "The fundamentals are here" is peak crypto apologist in denial speak. There are no fundamentals to bitcoin's current price, aside from "funny computer money goes up". All of Bitcoin's current value is propped up by speculation, lies (mmmh delicious unbacked Tether being a massive cause for the rise of its value).
It's amazing to see people on both sides of this debate speak with such intense and unapologetic certainty. In 10 years or so one side will be found correct and say things like "I told you so, this was obvious from the beginning. People were just sheep!".
I think the obvious counter to this is that El Salvador has an $800m bond maturing in Jan '23. It's all well and good to say that El Salvador hasn't lost money yet, but it has to pay debts that are denominated in dollars. Currently, the implied probability of default on that bond is 65% according to Reuters.
Now, what is El Salvador's plan to pay that debt? They're going to issue a new billion dollar Bitcoin backed bond. What do they say the yeild of this bond will be? According to the developer of the financial instrument - 146% Yield. The attempts to issue the bond have continually stalled. Who do you think is going to pour money into that with the crypto market in it's current state?
It doesn't matter if you think Bitcoin is going to eventually change the world, because El Salvador can't stay solvent long enough to see that happen. They're going to default on their debts and there's no fucking way the IMF is going to step in whilst El Salvador is doing this ridiculous stuff. So the actual citizens of El Salvador are about to face a massive economic problem.
The important thing to note about El Salvador's Bitcoin buying strategy is that it is not a "Buy and Hodl" strategy. Bitcoin in El Salvador is used as a currency, and just in the same way the Salvadorian government needs to procure dollars for their citizens to use in the country, they do the same for Bitcoin.
The Bitcoin that El Salvador is buying is used as liquidity and is interchanged to and from dollars with it citizens on a daily basis. They are constantly making BTC/USD trades with their citizens, so it's not quite as straight-forward as "Bought at price X, today's price is Y, therefore loss is X-Y".
Bukele is dictator and the way he is doing this (literally buying from his phone and bragging about it like a degen trader) is shameful. Yet it is a bet that very likely will turn out positively for the country (if he doesnt steal the money).
Bitcoin is already well recognized global asset that gives person or country clear monetary rules, ease of storage and transfer and access to all future advancements of the ecosystem.
I dont see any fundamental difference between putting gold into country reserves vs Bitcoin. Yes, gold has history but fundamentally it is inferior to digital bearer asset. Bitcoin is writing history right now.
> I dont see any fundamental difference between putting gold into country reserves vs Bitcoin
Stability? The fact that the IMF, US, EU and whoever will accept gold as collateral but wouldn't come anywhere close to a volatile imaginary "asset" like Bitcoin?
Volatility is short term change in offer and demand. The fact the asset is held as reserve asset by many makes it less volatile over time. Monetary properties of gold and Bitcoin are very similar therefor makes it sound reserve asset.
Gold non-imaginery properties (aka. physical substance) is irrelevant from monetary point of view.
it's just so refreshing to see people come to realization that their shiny tokens are worth nothing, it gives you hope that in the end, all the scams, lies and tricks are finally revealed
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[ 3.1 ms ] story [ 177 ms ] threadIf the president had his personal wallet stuffed at all-time lows, you could argue that the timing was perfect for him at least.
https://youtu.be/JnX-D4kkPOQ
A government is not a household. Government spending, when domestic, doesn't mean that money goes away. It means that the money flows into other parts of the economy. Say, the government gives money to a doctor or civil servant who then spends it, i.e. they give it to someone else in the country, who can then spend it. Often it will relatively quickly flow back through the government again via taxes. Government spending is economic activity, and in many (most?) countries the state is one of the biggest employers and investors in things like infrastructure.
In this case, it appears that instead of, say, giving money to a construction company who would than give money to workers and suppliers of materials (who could then spend that money in other parts of the Salvadorian economy) and getting a nice road for the people of El Salvador to boot, the government has instead given money to foreign investors in exchange for Bitcoin, and now those investors, because the magic line has gone down, are saying that the Salvadorian government can't have all the money back for the number of Bitcoin they have. I.e., they've lost out.
Of course, there's no way to know which way the line's going to go next, that's part of the excitement of gambling on Dunning-Krugerrands, but it seems rather obvious that there's a very fundamental difference between a government being an economic actor in its country, and a government being an unproductive speculator sending (tax) money abroad.
But Nayib Bukele is an autocratic president, which is making El Salvador less democratic by the day. In this case I think it's fair to blame the Bitcoin stuff to incompetence and/or corruption.
He fell for the 1% fallacy, he spoke at a cryptocurrency conference a while back and said “BTC is worth X, imagine if we can get just 1% of that in inward investment!”
Nah, I'm pretty sure it was part of a speech he gave in Miami at the same conference he announced El Salvador was going to make it legal currency.
Could be wrong of course, memory is a tricky thing.
Let me introduce you to tech stocks
Investing in clean power sources and then using that power for mining seems a poor economic idea in a country with no fossil fuel reserves and which still relies on imports for its existing power needs.
I find unlikely that people with cabin fever are itching to visit a country with such a violent reputation as El Salvador. We might find more clues if we compare revenue from before the pandemic and bitcoin adoption.
> Investing in clean power sources and then using that power for mining seems a poor economic idea in a country with no fossil fuel reserves and which still relies on imports for its existing power needs.
I think its quite the opposite. They have lots of untapped power from volcano but no actual demand for that energy that justifies investment. Its just there. With bitcoin mining comes incentives from deploying infrastructure and strengthening their grid. Its not coal or gas so everyone should be happy with the results right?
> With bitcoin mining comes incentives from deploying infrastructure and strengthening their grid
Not really, just stick miners next to the generators, job done.
> Valdez noted that El Salvador’s Bitcoin adoption has also impacted the flow of tourist visits, increasing the number of tourists coming from the United States. Prior to the Bitcoin law enactment, the majority of visitors was coming from neighboring countries in the Central American isthmus. Now, as many as 60% of tourists come from the United States...
I don't doubt that some tourism is a result of Bitcoin (and that shouting about Bitcoin could definitely be net positive in the short run for a smaller country competing for tax-exile dollars), but we have much better data on the 1/500 of the government budget lost on a speculative investment and El Salvador's increased borrowing cost, and whilst those aren't El Salvador's only problems they're quite big numbers to make up from people seeking the novelty of paying for their cheap beers and beach huts with apps linked to their Bitcoin wallet.
Quoting an article where someone's confounding causation and correlation does not absolve you from the sin of committing the same.
1. El Salvator did not loose money. Those are unrealized “losses”, 2. market cycles are normal and expected, if you thought “crypto will only go up from here”, you are delusional, 3. Bukele just needs to be patient, the fundamentals did not change.
They still own 2301 BTC, and there still won’t ever be more than 21 Million. Adoption, hashrate, use cases, etc. all improved, and continue to do so. There will be another market cycle.
That risk is real, and I'm not sure El Salvador can just hodl forever
Artificial scarcity does not imply value, I can create a token from thin air, make the supply only 3 tokens, and start saying it will gain value because there will only ever be three tokens. Also it's arbitrarily divisible to a lot of decimal points so that argument makes even less sense.
https://en.m.wikipedia.org/wiki/Poe%27s_law
My observation is that many people do not respect history, and they only think in terms of how markets behaved during their small lifetime. For example, the Fed dominating markets with a foolish policy of bailing out the poor performers and flooding the market with cheap money and waterfalls of debt has been done by governments in history with catastrophic results.
But a new ERC-20 token has so many downsides compared to Bitcoin.
To name just one, lets start with the distribution. How would you get your token in as many hands as there are currently Bitcoin holders?
There will only be one "digital gold" just like there was just one analog gold. And so far, there is no contender to Bitcoin to be seen anywhere.
Notice for instance how fewer and fewer people are interested in selling Bitcoin the lower it goes. But I bet you'd love to get people to believe it's worthless so you can get it at a discount. Again, this proves that Bitcoin indeed has value.
As for artificial scarcity; well, artificial or not, at least Bitcoin has scarcity. Obviously artificial trinkets in the form of worthless metal coins, paper notes, or numbers in a bank's database, does not have any meaningful scarcity compared to Bitcoin.
Btw, whatever scarcity there is for fiat is also just as artificial, except its rulers and influencers can make as much of it as they like depending on their mood that day. Not so with Bitcoin. Artificial or not, its supply is hard capped at 21 million coins.
It’s massively irresponsible for a leader to gamble with his people’s money like this.
Yes there are things that happen when they do that, but it is functionally impossible for the US to run out of dollars.
Which is what El Salvador did untill recently. They still do, but no longer exclusively.
Yes, yes indeed. That is a terrible idea. Though there are circumstances when it might not be the most terrible of terrible ideas and the alternative is worse. But no sane country that is not already in dire straits should do that.
There are plenty of countries with a higher national "debt" ratio that provide much better quality of life to the bottom 95% of the population than the US.
The problem the US has is that it is one of the largest creditors of its own liabilities. The US prints its own money to issue itself debt with it. History's biggest ponzi.
Of those with Debt:GDP higher than the US, who exactly are you aspiring to in terms of quality of life? https://worldpopulationreview.com/country-rankings/debt-to-g...
Neither of these are true for El Salvador and BTC.
The US & IMF don't bail out people out of poverty, they only acquire countries but economically.
When you are against them, you're just a Cuba, a Venezuela, or an Iraq.
While I wouldn't bet against it, there is a high likelihood that BTC was a product of the same funny money it was meant to counter. Whether it can sustain its value in the absence of massive QE remains to be seen,
1/ In the same way that as long as I don't sell my GME share it's an unrealized loss. It's something I can afford to do as an individual because I can throw a hundred bucks away for the lulz. It's another thing to be a country and to make Bitcoin a mandatorily accepted currency and gamble your people's money away for the lulz.
2/ You've seen how cryptocurrency has behaved in the past ten years, and you think "market cycles" are a thing, in this domain ? There is nothing cyclic about cryptocurrency prices. There is nothing rational about these prices. It'll go back up the next time there's a successful scam managing to raise enough money to buy 2 minutes of Matt Damon telling you you're a limp dick for not putting it all in $LUNA, but it'll still be propped by nothing.
3/ "The fundamentals are here" is peak crypto apologist in denial speak. There are no fundamentals to bitcoin's current price, aside from "funny computer money goes up". All of Bitcoin's current value is propped up by speculation, lies (mmmh delicious unbacked Tether being a massive cause for the rise of its value).
Now, what is El Salvador's plan to pay that debt? They're going to issue a new billion dollar Bitcoin backed bond. What do they say the yeild of this bond will be? According to the developer of the financial instrument - 146% Yield. The attempts to issue the bond have continually stalled. Who do you think is going to pour money into that with the crypto market in it's current state?
It doesn't matter if you think Bitcoin is going to eventually change the world, because El Salvador can't stay solvent long enough to see that happen. They're going to default on their debts and there's no fucking way the IMF is going to step in whilst El Salvador is doing this ridiculous stuff. So the actual citizens of El Salvador are about to face a massive economic problem.
The Bitcoin that El Salvador is buying is used as liquidity and is interchanged to and from dollars with it citizens on a daily basis. They are constantly making BTC/USD trades with their citizens, so it's not quite as straight-forward as "Bought at price X, today's price is Y, therefore loss is X-Y".
I think to imply that it's just "might not be close" to the use of the dollar is more dishonest than saying it's not being used
Stability? The fact that the IMF, US, EU and whoever will accept gold as collateral but wouldn't come anywhere close to a volatile imaginary "asset" like Bitcoin?