The president of El Salvador yesterday pointed out that Salvadorans who installed the official Chivo wallet in September, receiving $30 in bitcoin, have already earned 35% in case they had not already sold them.
The President of El Salvador is actively explaining how he is providing a deflationary environment for his citizens.
Majority of folks don't understand how incredible this is. pic.twitter.com/wyetLZEM83
— Pomp 🌪 (@APompliano) October 6, 2021
The average price of BTC in September 2021 was just under $46,000, so yesterday’s $55,000 is a price 19% higher than the average for the month.
Pompliano and the situation of Bitcoin in El Salvador
Compared to 15 days ago, when the average price was around $42,000, the price has increased by 31%, while comparing the minimum price in September (below $40,000) and the maximum price in October (above $55,000), the gain would be more than 37%.
But perhaps most interesting is Anthony Pompliano‘s commentary on this news.
El Salvador is in fact a poor country, as it is only 111th in the world in terms of GDP per capita, with just over $4,000 a year. So while $30 is a small amount, it is almost 10% of the monthly GDP per capita.
Although it is highly unlikely that all Salvadorans who received the $30 in BTC as a gift kept it without exchanging it for dollars, those who did have seen a significant increase in the value of this tiny capital, which has a notable impact on their average monthly earnings.
A 35% increase, such as the one highlighted by Bukele, means that $30 has become more than 40%, thus going from almost 10% of monthly per capita GDP to over 12%.
According to Pompliano, this could be a real “lesson” delivered by the president of El Salvador to his citizens on how a “deflationary environment” works.
The well-known crypto influencer points out that most people still don’t really understand how incredible this is, probably because this lesson is not coming from a rich country.
The approach of Salvadorians
The fact is that savings in normal, inflationary fiat currency inevitably lose value over time, so much so that it is not worth holding on to. The fiat currency is better spent or invested in some asset with a deflationary nature.
Bitcoin is a deflationary currency, although nowadays its money supply is still increasing by just under 2% per year. However, every 4 years the rate at which new BTC are created halves, while the outstanding money supply of fiat currencies inevitably continues to increase.
Salvadorans who have not spent or exchanged the BTC they received from Chivo into dollars must be realizing that a currency with a deflationary nature should be held rather than invested.
Savings in bitcoin are risk-on, unlike gold for example, which is risk-off, but bitcoin is not just any asset: it is still a currency, extremely liquid, and now very easy to spend anywhere, especially in El Salvador.
It is possible that the $30 gift from the state to the Salvadorans will turn out to be a gift worth more than $30 in the future for those who decide to keep the gifted BTC. It is extremely unlikely that those $30 in BTC will really change the lives of those who received them as gifts, but at least they may have taught them the difference between inflationary currencies, like the dollar, and those with a deflationary nature, like Bitcoin.