San Salvador, El Salvador stands at a significant juncture as bitcoin's historic highs and subsequent falls have left an indelible mark. President Nayib Bukele's bold move to adopt bitcoin as legal tender in 2021 has been a topic of intense debate and observation.

Unraveling El Salvador's Bitcoin Journey

Bitcoin's Historic Surge

Bitcoin reached unprecedented heights, surging past $100,000 for the first time. This remarkable achievement brought President Nayib Bukele great pride. The cryptocurrency's meteoric rise since Donald Trump's election victory last month was nothing short of astonishing. Just two years ago, bitcoin's value was below $17,000, highlighting its extreme volatility. On Wednesday night, it exceeded the $100,000 mark, only to fall back below it by Thursday afternoon, sitting just above $99,000 by 3 p.m. ET. This rapid fluctuation has captured the attention of both investors and the general public.

Bukele attributed the missed opportunity for many Salvadorans to the actions of his beleaguered political opposition. Street protests erupted when the Congress made bitcoin legal tender in June 2021, although there were other underlying factors driving the protests.

The tiny Central American country has long relied on the dollar, but Bukele saw bitcoin as a means to provide new opportunities for the unbanked and cut out money transfer services from remittances sent home by Salvadorans abroad. The government offered $30 in bitcoin to those who signed up for digital wallets, and many took advantage of this offer but quickly cashed out.

Bitcoin's Impact on El Salvador

Esteban Escamilla, a worker in a clothing store in Santa Tecla outside San Salvador, cashed out the original $30 of bitcoin offered in 2021. He explained, "I don't use bitcoin because I don't have (money) to invest and speculate with, but I know it has gone up a lot. I would have more money now if I had kept it." Josefa Torres, 45, also didn't have any bitcoin as she was doing her grocery shopping and had used the money for household expenses.

At the conclusion of meetings between the International Monetary Fund and El Salvador's government in August, the IMF issued a statement highlighting the country's bitcoin holdings. It mentioned that while many risks have not yet materialized, further efforts are needed to enhance transparency and mitigate potential fiscal and financial stability risks.

El Salvador's former Central Bank President Carlos Acevedo pointed out that although there has been a gain, it remains unrealized until the government's bitcoin is sold. He credited Bukele's administration for their efforts on the bitcoin move, especially in light of Trump's election. Acevedo said the markets' optimism about a Trump administration being friendly with the markets and bitcoin explained its sustained rally over the past month. However, he also emphasized the cryptocurrency's persistent volatility.

The average Salvadoran may not be directly using bitcoin, but there are Salvadorans with economic resources who have already invested in it. It is a small group that has been affected by bitcoin's ups and downs.