As Bitcoin and other cryptocurrencies plunge, losses can occur in stock markets and real economies

Contrary to popular belief, Nayib Bukele is not completely out of the mark.

The young, handsome and hipster president of El Salvador – who has a short beard and walks around in a back-facing baseball cap – has been harshly criticized by global monetary authorities and has caused concern, even among his neighbors.

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

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This was reinforced by Mr Bukele, sometimes described as the “coolest dictator in the world”, and his decision to not only buy a large amount of digital currency last year, but to continue to upset the nation’s finances, even though the price fell. .

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

Salvadora’s president, Nayib Bukele, decided to buy a large pile of bitcoins last year.(PA: Salvador Melendez)

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

Instead, the plans – which were engulfed by a firestorm when digital currencies crashed and El Salvador’s $ 100 million effort was more than halved – have become emblematic of the fast-paced imagination that supports the crypto world.

It is a reality shock that is likely to have much broader and more serious consequences for the global economy than many are aware of.

Millions of mostly unsophisticated investors have been tricked into pouring billions of dollars into what appears to be a hoax, monitored in many cases 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. Also, not all digital currencies are counterfeit. But many are and exist for no other purpose than to cheat innocent spectators out of their money.

Of the over 19,000 existing cryptocurrencies, a handful offer any kind of purpose, tool or business plan. And meanwhile, bitcoin continues to dig a hole in the heart of Antarctica.

Brave new world or slave of the past?

The irony is breathtaking.

Bitcoin, allegedly founded by the mythical Satoshi Nakamoto, or anyone who goes by that alias, was designed to make traditional currencies redundant, to create a brave new world free of government and central bank control.

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