Bitcoin inflation prompts El Salvador’s BTC experiment to fail

Crypto market leader Bitcoin (BTC) lost about 10% of its value erasing much of its recent gains. According to CoinMarketCap, BTC’s price dropped to a six-day low of $20,062 after the official announcement of the U.S. Consumer Price Index (CPI) but has recovered to roughly $20,380 as of writing.

‘Due to the announcement that August's inflation rate was 8.3%, rather than 8.1% as had been predicted, BTC has fallen in value. BTC should be live now. Its nature requires an inverse relationship to inflation. The fact that it down indicates exactly how early it is’, co-founder of crypto exchange Gemini, Tyler Winklevoss stated. 

The decline in conventional financial markets mirrored the fall in the stock market as investors braced for higher interest rates in the months ahead. Industries like online cryptocurrency betting sites such as Gamdom are on the edge of their seat wondering if they will be affected by this. Although there are many avid fans of Bitcoin casino games, many are afraid to suffer the effects of crypto inflation. 

At the recent market closing, the Dow Jones Index had dropped 1,276 points (3.94%), while Nasdaq had fallen by more than 5%. Ethereum (ETH), which is less than a day away from the highly awaited merge that will see it switch to a proof-of-stake (PoS) consensus mechanism, is trading hands at just over $1,600 at press time, down by roughly 7% for the day.

Meanwhile, a number of the most prominent coins have experienced double-digit losses, pushing the market capitalization of all coins back down below the $1 trillion barrier.

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The fall of El Salvador's BTC experiment

In 2021, El Salvador was the first country to make BTC a legal tender together with the US dollar that the Central American country adopted in 2002 to replace its currency, the colón. The project was headed by President Nayib Bukele, a crypto enthusiast, who said it would have far-reaching economic benefits.

He argued that recognising BTC as legal cash would encourage foreign investment, create jobs, and push humanity at least a tiny bit in the right direction. Bukele planned to issue US$1 billion in government bonds to finance the construction of a tax-free ‘Bitcoin city’. There was a plan to invest half of the bond proceeds in city projects and the other half in Bitcoin, with the gains going to bondholders.

After a year, it's clear that Bukele, who has bragged about being the world's coolest dictator in response to accusations of his growing blind submission to authority, was completely clueless. As predicted, this risky financial experiment largely failed.

With the rising popularity of BTC sites like Gamdom and the growing interest of people in Bitcoin casino games, many are left wondering if the recent cryptocurrency inflation will also affect the industry. 

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Words: Rica Miranda