As Bitcoin and other cryptocurrencies crash, losses could hit stock markets and real economies

Contrary to popular belief, Nayib Bukele is not completely wrong.

The young, handsome and hipster president of El Salvador — who has a short beard and wears backward-facing baseball caps — has been heavily criticized by global monetary authorities and has even raised concerns among his neighbors.

As the first country in the world to legitimize bitcoin after it was adopted as legal tender last September, El Salvador’s timing was unfortunate, to say the least.

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This was compounded by Mr Bukele, who is sometimes described as the “coolest dictator in the world”, and his decision last year not only to buy a large amount of digital currencies, but to continue to throw the nation’s finances impoverished. , even if the price fell. †

But his plan to build a bitcoin city, shaped like a coin and with the coin’s emblem scalloped in the main square, was not without foresight.

Salvadoran President Nayib Bukele decided to buy a large stack of bitcoins last year.PA: Salvador Melendez

Located under a volcano, the city would be powered by geothermal energy and would become a “haven of freedom from a world of tyranny”.

Instead, the plans — which were engulfed in a firestorm when digital currencies crashed and El Salvador’s $100 million stake was more than halved — have become emblematic of the fast-paced fantasy underpinning the crypto world.

It is a shock of reality that will likely have much broader and more serious implications for the global economy than many realize.

Millions of mostly inexperienced investors have been tricked into pumping billions of dollars into what mostly appears to be a hoax, in many cases overseen by anonymous, some criminal entities in a totally unregulated environment.

It was a breathtaking sight to see.

This is not to say that the technology behind digital currencies is worthless. Not all digital currencies are fake either. But many are and exist for no other underlying purpose than to extort innocent bystanders from their money.

Of the more than 19,000 cryptocurrencies in existence, a handful offer every type of purpose, utility, or business plan. And meanwhile, bitcoin continues to dig a hole in the heart of Antarctica.

Brave new world or slave to the past?

The irony is breathtaking.

Supposedly founded by the mythical Satoshi Nakamoto, or anyone using that alias, Bitcoin was designed to make traditional currencies obsolete, to create a bold new world free from government and central bank control.

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