Originally published 2021-10-28.
On 27 October 2021 President Nayib Bukele announced on Twitter that El Salvador had bought another 420 bitcoin after a fall in the price, which he described as buying the dip. The purchase cost roughly $25 million at the time and, according to a Reuters estimate cited by CoinDesk, brought the government's holdings to about 1,120 bitcoin. It came seven weeks after El Salvador became the first country to make Bitcoin legal tender.
The number 420 was no accident; it is a well-known internet joke, and Bukele enjoyed the attention. Behind the joke was a serious and controversial national experiment. This article explains the purchase, the reasons the government gave for its Bitcoin policy, what critics said, and how the experiment had changed by 2025.
The purchase and Bukele's announcement
Bitcoin had touched a record of around $67,000 a week earlier and then slipped. CoinDesk reported that it dipped to about $58,000 on 27 October before rebounding above $60,000. Bukele posted the news in a short tweet, then added in follow-up posts that the government was already making a profit on the coins it had just bought.
It was a long wait, but worth it.
— Nayib Bukele 🇸🇻 (@nayibbukele) October 27, 2021
We just bought the dip!
420 new #Bitcoin🇸🇻
He also explained how the purchases were accounted for: the government trust fund behind the programme was denominated in US dollars but held both dollars and bitcoin, so it could release dollars when the bitcoin side gained value. Officials did not publish detailed records, so outside estimates of the total holdings relied largely on the president's own announcements.
The October buy was part of a series. The government announced 400 bitcoin on the eve of the law taking effect in September 2021, more during that month's price drops, and further "dip" purchases in the months that followed. Wikipedia's summary of the policy puts total spending between September 2021 and January 2022 at about $85.5 million.
Why El Salvador made Bitcoin legal tender
El Salvador has used the US dollar as its currency since 2001. In June 2021 the Legislative Assembly, dominated by Bukele's party, passed the Bitcoin Law by 62 votes out of 84, and it came into force on 7 September 2021. Businesses were required to accept bitcoin where they could, and the government launched a state wallet app, Chivo, offering every adult who signed up $30 in bitcoin.
The government gave three main reasons:
- Remittances. Money sent home by Salvadorans abroad, mostly in the United States, was equal to about 23% of the country's GDP in 2020. Officials argued that Bitcoin could make these transfers cheaper. Some early coverage claimed banks and transfer firms took as much as 20%; that figure is not supported by typical fees on the US–El Salvador route, which are reportedly much lower, and appears to confuse the fee with the share of GDP.
- Banking access. Most Salvadorans had no bank account, and a phone wallet could reach them.
- Investment and attention. Bukele hoped to attract crypto businesses, tourism and foreign capital.
Mining bitcoin with volcano power
One of the most eye-catching parts of the plan was to mine bitcoin using geothermal energy from El Salvador's volcanoes. The state geothermal company began a small mining pilot at its plant in Berlín, Usulután, in autumn 2021, and Bukele promoted it with videos online. In November 2021 he went further, announcing a planned "Bitcoin City" at the foot of the Conchagua volcano, to be funded with $1 billion in so-called volcano bonds.
Geothermal energy is low in carbon, so it answers one common objection to Bitcoin mining. But the operation was tiny compared with the global network, and critics raised concerns about electronic waste and water use. The bond issue was postponed in 2022 and Bitcoin City remained largely on paper.
What critics and the IMF said
From the start, many Salvadorans were sceptical. Thousands protested in San Salvador on the day the law took effect. Polls found that most people preferred the dollar, and a University of Central America survey found that while more than half of respondents had downloaded Chivo, only around a third used bitcoin at least once a month. Many people collected the $30 bonus and stopped. The app also suffered glitches and identity-theft problems at launch.
The practical objections were the ones critics had predicted: Bitcoin's price is extremely volatile, which is a problem for wages and shop prices; small everyday payments can be awkward; and remittances largely kept flowing through traditional channels. Studies cited by Wikipedia found bitcoin accounted for only around 1–2% of remittances in the following years.
The International Monetary Fund repeatedly warned about risks to financial stability, consumer protection and public finances. In January 2022 it urged El Salvador to drop Bitcoin's legal-tender status. The government refused at the time.
The price risk soon became visible. Within months of the October 2021 purchase, Bitcoin fell sharply, and by mid-2022 the government's coins were worth far less than it had paid. Prices recovered strongly from 2024, which Bukele presented as vindication. Whether the gamble paid off depends heavily on when you measure it, which is precisely the volatility critics warned about. None of this is investment advice; anyone considering crypto should treat it as high risk.
What changed in 2025
In December 2024 El Salvador reached a $1.4 billion loan agreement with the IMF. As part of it, the Legislative Assembly amended the Bitcoin Law in early 2025. Accepting bitcoin became voluntary for businesses, taxes and government fees could no longer be paid in it, and the state was no longer obliged to facilitate bitcoin transactions, opening the way to wind down Chivo. Analysts described Bitcoin's status afterwards as voluntary, or effectively no longer legal tender in the original sense.
The government continued to say it was adding to its reserves, which reportedly led to public disagreement with the IMF over whether those additions counted as new purchases.
The experiment in hindsight
The 420-coin purchase is best seen as a snapshot of the experiment's most confident phase. It showed a government willing to act like a retail trader, announcing purchases on social media and using internet humour to build a brand. It also showed the limits of that approach: day-to-day adoption stayed low, and the policy was reversed in part when the country needed IMF money.
For anyone following crypto policy, El Salvador offers a clear lesson. Making a currency legal is not the same as making people use it, and the value of a national holding rises and falls with a market no government controls.
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Sources: CoinDesk, 28 October 2021; Wikipedia: Bitcoin in El Salvador; Cointelegraph, January 2025. Announcement: Nayib Bukele on Twitter.
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