Some El Salvadorans protest against Bitcoin. Bitcoin still has a long way to go before it can become a legal currency.

Recently, the highly-watched Bitcoin "kingdom" of El Salvador has experienced a change. On July 22, some people held a protest in front of the local legislative assembly to protest the country's use of Bitcoin as legal tender. For a time, this matter attracted a lot of media attention, and whether Bitcoin is suitable for legal tender has once again attracted the attention of many people.

The decline in coin prices has become a focus of attention

Prior to this, on June 9, El Salvador officially announced that it would use Bitcoin as one of the country's legal tender. As the first country in the world to use Bitcoin as a legal tender, the news from El Salvador immediately attracted a lot of attention. At this time, China is still cracking down on cryptocurrency mining. Domestic financial experts have spoken out to emphasize that virtual currencies (cryptocurrencies) have no sovereign state endorsement and legal tender, and this phenomenon is quite funny.

According to local regulations, although El Salvador announced that Bitcoin would be used as legal tender, this announcement did not remove the US dollar, which was previously used as legal tender. In other words, Bitcoin is only one of the legal tenders in El Salvador, and the US dollar still has a relatively strong market share. Another thing to note is that although the Bitcoin bill came into effect on June 9, it still has a 90-day validity period, which means that in September, El Salvador must accept Bitcoin as legal tender.

Of course, after Bitcoin was passed, some media outlets conducted public opinion polls, but the results were quite opposite. Some media outlets showed that most people in the country recognize Bitcoin as legal tender, but some survey agencies showed completely opposite results, that is, most people do not recognize Bitcoin as legal tender.

Since the passage of the Bitcoin Act, the price of Bitcoin has not actually seen a significant increase, but has continued to fall. From June 9th to now, the price of the currency has risen to 41330 and then fell to a minimum of 28805. As of the time of writing, the price is 31895. It can be said that the price fluctuation is still relatively large. This is also the main reason why most people in the country oppose the Bitcoin Act.

Apparently, some Salvadorans have yet to fully adjust to using Bitcoin as legal tender.

But everything has two sides. The main reason why El Salvador values ​​​​Bitcoin is actually the overflow of U.S. dollar liquidity. Since the outbreak of the new crown epidemic, the United States has over-issued a large amount of U.S. dollars. It is a tried and tested operation to reap the world through the U.S. dollar. The currencies of many small countries have depreciated sharply due to short-term economic problems. As a result, they eventually either accept the currencies of other countries or accept the U.S. dollar as legal tender. Before this, El Salvador included the U.S. dollar in its legal tender, and the currency issued by its own country was basically regarded as waste paper. This was the case with Zimbabwe, Venezuela and other countries before.

Protests should be viewed rationally

For people in the cryptocurrency world, we should view the protest rationally, mainly due to the following factors:

1. The scale of the protest was not reported in most media, which means that there were not many people participating in the protest and it would not cause much negative impact.

2. The results of previous opinion polls by different survey organizations were completely opposite, which means that some groups may need to deliberately create results that are supported or opposed by the public in order to create a certain public opinion.

3. There is no evidence to show whether this protest is supported by certain interest groups or is carried out spontaneously by the public, because there have been similar cases in the financial history. For example, some international financial giants funded the strike of iron ore miners in South America or oil workers in the Middle East, and then used the international iron ore market or crude oil market to make profits by opening short or long futures transactions. Such cases are everywhere in the world before, and it is difficult to guard against them.

Comments:

As a country in the Americas with underdeveloped economy, El Salvador's monetary policy is destined to be subject to the influence of major powers, especially the United States. At the same time, the country's crime rate is also very high, especially drug-related crimes. Social stability and public security are not good in themselves. The domestic policies of such small countries are generally not very stable. Therefore, Bitcoin as a legal currency still has great policy uncertainty, and it also threatens the global hegemony of the US dollar.

In addition, El Salvador's adoption of Bitcoin as legal tender is more like a bold monetary experiment, because even if El Salvador issues its own local currency, it is likely to be subject to inflation, and the price relative to the US dollar may fluctuate like Bitcoin. In fact, from its own point of view, although El Salvador's adoption of Bitcoin as legal tender does have certain disadvantages in terms of the impact of currency price fluctuations on people's lives, in the long run, if it can be sustained, it can be regarded as a way to keep wealth in the hands of the people, and short-term pessimism is basically a short-sighted behavior.