[HN Gopher] El Salvador Is Now over 31% Down on Its Bitcoin Bet
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El Salvador Is Now over 31% Down on Its Bitcoin Bet
Author : ushakov
Score : 41 points
Date : 2022-01-24 19:18 UTC (4 hours ago)
(HTM) web link (cryptobriefing.com)
(TXT) w3m dump (cryptobriefing.com)
| jinpa_zangpo wrote:
| President Bukele is betting that the bitcoin community will lend
| him money on less onerous terms than the IMF and invest their
| profits from bitcoin in El Salvador. He is buying goodwill from
| the bitcoin community, whether he also makes a profit on his
| bitcoin is secondary.
| gowld wrote:
| More likely he's planning to embezzle the BTC since it is hard
| to control.
| alisonkisk wrote:
| muzika wrote:
| For context: * El Salvador has 2 legal tenders, most of their
| reserves is still in USD that is know to go down in value over
| long term. More likely their bitcoin holdings will be worth more
| than their USD holdings some day. * They own a bit over 1,000
| bitcoins, while MSTR owns over 140,000 bitcoins. Apples to
| oranges, but still.
| avrionov wrote:
| According to this article [1], they have about $3B in dollars
| and gold.
|
| Bitcoin needs increase 100x or they need to buy why more.
|
| [1] https://tradingeconomics.com/el-salvador/total-reserves-
| incl...
| thehappypm wrote:
| More likely their Bitcoin goes to $0.
|
| I'm surprised nobody has ever considered that Bitcoin is
| vulnerable to attacks. It hasn't happened yet, but imagine if
| someone finds a way to do fraudulent transactions. Then it's
| all over.
| radu_floricica wrote:
| Yup, nobody ever considered Bitcoin is vulnerable to attack.
| Thank you for the insight!
|
| Snark aside, all risk is relative. Your bank account is also
| vulnerable to attack, and also a lot more vulnerable to human
| error and a bunch of other risks. Various instruments are
| good for various goals - as it happens, BTC is a pretty good
| value store. Not what anybody expected in the beginning, but
| there you go.
| zydex wrote:
| I think a key point is that traditional finance/banking has
| far more buffer and dampening built into the system than
| crypto. Crypto seems incredibly rigid and brittle - so it
| works well until it doesn't. Crypto seems to work well for
| people that know what they're doing but it's no surprise
| that the majority of people don't. Far from a new insight
| but worth pointing out.
| [deleted]
| baobabKoodaa wrote:
| "If" someone finds a way to do fraudulent transactions? That
| already happened about 10 years ago when someone exploited an
| overflow bug to create billions of Bitcoin for the hacker
| within a single transaction. The bug was fixed and Bitcoin
| hard forked over it. Everybody moved onto the new chain.
| Kranar wrote:
| >I'm surprised nobody has ever considered that Bitcoin is
| vulnerable to attacks.
|
| It's hard to know sometimes if one is being sarcastic on HN,
| but at any rate, Bitcoin is quite possibly the most
| scrutinized piece of technology ever developed and there is
| an enormous amount of research, both academic, corporate, and
| even just random independent individuals looking for any kind
| of fault with it whatsoever.
|
| Does that mean Bitcoin is infallible? Absolutely not, but to
| claim that nobody has considered that Bitcoin is vulnerable
| to attacks is just one of the most ridiculous claims I've
| read on HN, once again assuming you're not being sarcastic.
| joemazerino wrote:
| This won't happen. USD rotting away to inflation? Happening
| right now.
| thehappypm wrote:
| How certain are you that there will never be an exploit in
| the protocol?
| joemazerino wrote:
| I never said that. I said Bitcoin won't go down to $0.
| Bugs have and will be found and squashed.
| emteycz wrote:
| Hundreds of billions of dollars are staked on the
| security of Bitcoin protocol. Bitcoin is not some hyper-
| complex enterprise software suite with thousands of
| hidden micro-bugs just waiting to be noticed and
| exploited. It is lightweight, straight-forward and
| provable by mathematics while being _the single most
| financially exposed and the most audited piece of code
| ever_.
|
| Don't you think somebody would notice something by now?
|
| Anyways. Do you really think the network wouldn't do
| anything about it? Even quantum-proofing Bitcoin is a
| possibility, so why not fixing a bug?
|
| I bet that the humans running the machines that run the
| Bitcoin network would simply update their Bitcoin-core
| and go on from the point just before the transaction that
| stole everyone's Bitcoin. A significant nuisance, but
| hardly a catastrophe.
| djenendik wrote:
| Both comments can be correct.
| grey-area wrote:
| MSTR, like his last fraud in the dot com bubble, is busy
| imploding and will probably be investigated for fraud again at
| some point. Those bitcoins were bought with borrowed money from
| insane bond issues at much higher share prices.
|
| https://doomberg.substack.com/p/a-drunken-saylor
| mvdwoord wrote:
| Doing better than Argentina...
|
| https://tradingeconomics.com/argentina/inflation-cpi
| varunprasad wrote:
| CPI is a completely different measure that includes a lot more
| than currency value vs other currencies (usually the dollar).
|
| I'm curious why you wouldn't compare it to the direct measure,
| which is the value of the Argentine Peso.
|
| Because if El Salvador had bought Argentine Peso instead and
| let's assume they bought them in September, when they first
| started buying Bitcoin (if I assume they bought the Peso
| gradually over the past 4 months like they did Bitcoin the Peso
| would look better since its value has only dropped over that
| period), they would have bought $88mm USD of Peso on September
| 1 at a price of 97.71 Peso per dollar, giving them a 8.598
| billion Peso holding.
|
| At today's price of 104.50 Peso per USD, that holding would now
| be worth $82.28mm USD.
|
| Compare that to their BTC holdings of $60mm spending the same
| amount of USD to buy Bitcoin. Clearly $82.28 > ~$60mm, so they
| would have done a lot better with the Argentine Peso instead.
|
| Of course, BTC is highly volatile and for all you know it may
| rise by 50% making their holdings more valuable than the Peso.
| However, what it does show is that BTC appears to be a poor
| currency, that specifically does not protect from inflation or
| currency risks.
|
| It might be a great investment, as a lot of people appear to be
| treating it, but that in fact makes it a poor currency. An
| investment should appreciate over time. Whereas a good currency
| should depreciate over time (although slowly) because if it
| appreciates over time then that greatly reduces the incentive
| to spend/invest the resources that currency represents in
| actual productive endeavors, which damages the real economy,
| and means a country does not build as much infrastructure, grow
| as much food, or employ as many people, as it would with a
| slowly but consistently depreciating currency.
| conanbatt wrote:
| The Argentine peso is at 220~. Without snark, I think talking
| about argentinian peso is reserved only for argentinians. It
| is just impossible for non-argentinians to understand a
| multi-currency multi-denomination monetary economy.
| thebradbain wrote:
| Cubans had (have?) a multi-currency multi-denomination
| monetary economy (CUP and CUC/USD) until January 1 2022.
| [deleted]
| StanislavPetrov wrote:
| If Bitcoin had instead surged 31% since the "bitcoin bet", the
| same people pointing to this decline as proof of failure would be
| (rightfully) dismissing the surge as insignificant due to the
| intrinsic volatility of bitcoin. The truth is that its impossible
| to know how El Salvador's bitcoin gamble will ultimately play
| out, and most of the criticism being leveled at El Salvador right
| now is due to the pre-existing bias that many have against
| Bitcoin and crypto in general. This bias is also closely linked
| to the unfounded faith that crypto naysayers hold in the solvency
| of the US federal reserve and legacy financial system as a whole
| (which is similar to the unfounded faith that Bitcoin zealots
| have in crypto).
| viraptor wrote:
| This is not really newsworthy. Anyone remotely familiar with BTC
| trends will know this happens every once in a while and so far we
| got back higher after every single crash. It was likely to happen
| at some point and it will happen again unless something major
| changes about the crypto market. Otherwise it's "the thing that
| happens once a year or so without long term effects happened last
| week (again)".
| grey-area wrote:
| In a real currency that _thing that happens every once in a
| while_ (i.e. massive volatility) has very real impacts on food
| prices and salaries and is highly undesirable.
| jatone wrote:
| fundementally this is due to bitcoin's lack of adoption as an
| actual currency. the larger the user pool the less it would
| fluctuate.
| viraptor wrote:
| Yes, the impact on people, salaries, etc. would be a very
| interesting topic indeed. I'm very curious if anyone is being
| paid BTC salary already and if it was adjusted, or is
| everyone expecting a quick recovery, or is the reliance on
| BTC is high enough that the crash changes the fiat prices as
| well. But that's not what the article is about, or I wouldn't
| criticize it for being shallow.
| vmception wrote:
| El Salvador uses oracle pricing of goods in USD when paying
| in BTC. Which solves over half of the equation. The other
| half, of course, is people that choose to continue holding
| BTC would have wildly fluctuating purchasing power ether way.
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(page generated 2022-01-24 23:20 UTC)