Salvadorans are increasingly investing in Bitcoin as a hedge against inflation. Bitcoins purchased with U.S. dollars are reportedly outpacing withdrawals, at Chivo ATMs.
Bitcoin vs. U.S. dollar: Salvadorans seek refuge from greenback inflation
Salvadorans are turning to Bitcoin as a hedging asset. They are increasingly converting their U.S. dollars to Bitcoin as a hedge against inflation. In fact, El Salvador’s president, Nayib Bukele, emphasized the importance of Bitcoin deposits over withdrawals from Chivo ATMs:
“People are spending more U.S. dollars (to buy BTC) than they are withdrawing from Chivo ATMs.”
Bukele also mentioned the high amount of daily transactions processed by Chivo: 24,076 money transfer requests on the day of his tweet alone, or “a total of $3,069,761.05 (in one day).”
Race to adopt Bitcoin in El Salvador: Chivo ATM, trade discounts, and volcanic mining
These numbers seem to show a positive shift in the sentiment of Salvadoran citizens in Bitcoin. The legalization of Bitcoin was initially met with strong opposition from some Salvadorans. A Bitcoin ATM was even burned during a protest.
However, the authorities have continued their efforts to encourage the adoption of Bitcoin by its citizens, despite this internal opposition, as well as threats from credit rating agencies and warnings from the UN and IMF.
Bitcoin is thus “physically” covering the whole territory. El Salvador has become the third country in the world with the most Bitcoin ATMs, overtaking the UK. The country has even gone so far as to install 50 Chivo ATMs for the Salvadoran diaspora in 10 cities in the US. El Salvador’s leaders are also offering discounts of 20 cents of U.S. dollars on every gallon of fuel paid for in Bitcoin to encourage citizens to adopt Bitcoin.
In this race for adoption, El Salvador’s president had additionally unveiled in late September 2021, images of what appeared to be a Bitcoin mining farm powered by electricity generated from geothermal energy.
The Salvadoran government is now among the major investors buying the troughs to fill up on Bitcoin at lower prices. If more and more Salvadoran citizens now seem inclined to hold Bitcoins, how will they react to the next major retracement of the Bitcoin price after the next bullish wave?