As bitcoin and other cryptocurrencies crash, losses could be felt in stock markets and real economies

Contrary to popular belief, Nayib Bukele isn’t completely off the pace.

The youthful, handsome and hipster president of El Salvador — who sports a close-cropped beard and gets about in baseball caps turned backwards — has copped a great deal of flak from global monetary authorities and raised eyebrows even amongst his neighbours.

As the first country in the world to legitimise bitcoin after adopting it as legal tender last September, El Salvador’s timing was, to put it delicately, unfortunate.

That was made worse by Mr Bukele, sometimes described as the “world’s coolest dictator”, and his decision not only to buy a large pile of the digital currency last year, but to continue throwing the impoverished nation’s finances at it even as the price tanked.

But his plans to build a bitcoin city, in the shape of a coin and with the currency’s emblem festooned in the central square, was not without foresight.


El Salvador’s President Nayib Bukele decided to buy a large pile of bitcoin last year.(AP: Salvador Melendez)

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

Instead, the plans — which have been engulfed in a firestorm as digital currencies have cratered and El Salvador’s $100 million bet has more than halved — have become emblematic of the rapidly unwinding fantasy that underpins the crypto world.

It is a reality shock likely to have much broader and more serious repercussions on the global economy than many believe.

Millions of investors, most of them unsophisticated, have been lured into pouring trillions of dollars into what primarily appears a hoax, overseen in many instances by anonymous entities, some criminal, in a completely unregulated environment.

It has been a breathtaking sight to behold.

That’s not to say that the technology underpinning digital currencies is without merit. Nor are all digital currencies bogus. But many are and exist with no underlying purpose other than to fleece innocent bystanders of their cash.

Of the more than 19,000 cryptocurrencies in existence, a mere handful offer any kind of purpose, utility or business plan. And in the meantime, bitcoin continues to burn a hole right through the heart of Antarctica.

Brave new world or slave to the past?

The irony is breathtaking.

Bitcoin, supposedly founded by the mythical Satoshi Nakamoto, or someone posing under that pseudonym, was designed to make traditional currencies redundant, to create a bold new world free from government and central bank control.