El Salvador Adopts Bitcoin Amid Price Slump to $36,000

Bitcoin Becomes Legal Tender in El Salvador, Market Unmoved

On June 10, 2021, a sovereign nation made bitcoin legal tender. The price then was $36,000. The market's reaction was lukewarm: weeks later, it was still experiencing drops of 7% in an hour and debating where the bottom lay. State adoption had begun. Enthusiasm, however, had not.

El Salvador, Taproot, and the Technicalities Few Discuss

While politics dominated headlines, the technical calendar marched on. Taproot was days away from lock-in, the upgrade improving transaction privacy and efficiency. This detail—an architecture that functions without anyone's permission—underpins the fundamental thesis: an asset that no central bank can issue and whose supply is capped at 21 million units.

The promise isn't new. What's new is that a state has bought into it. The immediate discussion was legal: if bitcoin is legal tender in a sovereign country, does it cease to be a foreign currency for accounting purposes, or does it become something no legislation had contemplated? Nobody had the answer. The prevailing idea was this: the first state to put its bitcoin reserves into a public, real-time auditable address would force others to reveal their hand. Gold, they said, had never withstood such scrutiny.

$60,000 to $40,000: The Chart That Undermines the Narrative

The market didn't reward the milestone. The price levels painted an uncomfortable descent: someone admitted buying at $60,000 and seeking solace; critical support was at $53,500, with a bearish target of $49,500. The most pessimistic estimates dropped to $31,500-$32,000. With bitcoin around $40,000, 0.01 BTC—one million satoshis—cost less than 500 euros.

This was the anchor for the other half of the argument: buying and holding bitcoin has been a financially winning strategy since its inception. The retort was swift and sarcastic: hoarding tulips, Miró paintings, or any bubble chosen in hindsight would have been too. The disagreement wasn't about price, but about what was being measured.

The CPI That Doesn't Match the Shopping Basket

The recurring comparison is simple: against a price index considered manipulated, a calculation circulating in the thread placed real inflation above 30% since 2020 and close to 40% in many cases. The underlying argument isn't statistical; it's political: if the official CPI is used to negotiate salaries, a downward measurement is equivalent to a silent pay cut. Hence the conclusion, more emotional than mathematical, that the only way out is to save in something that cannot be printed. And hence, too, the discomfort with any model promising future prices: the much-cited stock-to-flow was dismissed in the conversation itself as what it is, a theoretical calculation.

Hacienda and Form 172: The Spanish Tax Net Tightens

While El Salvador legislated, Spain was sharpening its surveillance. The obligation to report virtual currency balances via Form 172 left a doubt no one could resolve: does the requirement apply to those holding others' keys, or also to those holding their own? The rule, it was noted, defines "cryptocurrency located abroad" by exclusion, a formula that can lead to defenselessness.

The most repeated response from the optimistic side was that if no data is provided, there's nothing to claim: the exchange account remains zero, and the coins reside in an address not registered to anyone. The counter-attack has a date: the day one million euros are cashed out, someone will demand explanations. With KYC in place, Hacienda knows or can know what was bought and where it went. And it doesn't help that, as discussed in the thread, some platforms like Bitstamp were blocking withdrawals for those who couldn't document the origin of their funds.

Paper Bitcoin: Exchanges and Proof of Reserves

Distrust in centralized platforms is the other common thread. A widely shared message spoke of 70,000 "paper" bitcoins circulating without real backing, implicitly recommending withdrawing coins from exchanges. The lingering question: how long does it take to publish proof of reserves?

Also left hanging was an unflattering prediction about which major platform would be next to falter. The rates offered by some—up to 1.5% for staking, in Binance's case—fueled suspicion that the money wasn't coming from any verifiable source. By the end of the period, doubts shifted to Binance itself and its token, with the feeling that bitcoins were being sold to stem the decline.

Institutional Adoption Advances Outside El Salvador

There were moves that went undisputed. Grayscale won its lawsuit against the SEC, seen as paving the way for spot bitcoin ETFs. BlackRock appeared as the second-largest shareholder in the four largest bitcoin miners, a fact commented on ironically: those who had spent years dismissing the asset were securing its infrastructure.

Switzerland allowed administrative fees to be paid with bitcoin. And El Salvador, it was pointed out, had become the world's leading mining power.

Ethereum and 72% of Blocks Under Treasury Criteria

One of the most uncomfortable data points affects the main rival. 72% of Ethereum blocks were already operating under the US Treasury Department's compliance criteria (OFAC), which in practice means censorship of certain transactions. As argued in the thread, the shift from proof-of-work to proof-of-stake had, within weeks, placed the network in the hands of validators that the United States can pressure.

The uncomfortable conclusion drawn was this: the SEC's favor towards proof-of-work isn't about decentralization, but about entire sectors—from hardware manufacturing to mining—profiting from it.

The Digital Euro and Top-Down Adoption

In parallel, the ECB completed the pilot of its digital euro: five prototypes visibly, with the central bank's own settlement system behind the scenes—the detail few were watching. The underlying reading is that the coming adoption is not state-level, but supranational. The counter-argument: any central bank digital currency would take years to deploy without errors, and when it arrived, it would be indistinguishable from paying by card or instant transfer.

Running Your Own Node, Peer-to-Peer Markets, and Keys: The Self-Defense Manual

For those who distrust platforms, the recipe is the same: set up your own node. Wallets that query third-party servers reveal IP addresses, account details, and balances to the first party managing them, and that server could belong to a manufacturer, a company, or an agency. From there, trading is done on decentralized markets like Bisq or Hodl Hodl, which connect parties without a central intermediary, using TOR. The price for this privacy is inconvenience: no customer support and no reversibility.

What's the Value of Something Unbacked?

The fundamental question surfaced in a broadcast economic discussion: if bitcoin is a marvelous technology but has nothing behind it, where does its value come from? The sharpest answer is that assets are divided into financial and real, and a financial asset is always the liability of another: a stock, a deposit, a euro banknote. Backing isn't a good hidden in a safe; it's the promise that someone will pay.

From this perspective, gold isn't "backed" either, and no one demands explanations for it. What can be demanded of a central bank is that it show its reserves in real-time. That's where bitcoin and gold diverge.

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After nearly two years of wondering if El Salvador's announcement was the beginning or the peak, the conversation remains unanswered. One country adopted it, a court peine the door to exchange-traded funds, a central bank tests its own digital currency, and the price remains in the zone it was in before all this. If state adoption was going to change everything, at what exact moment is it supposed to start being noticeable?