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El Salvador President Nayib Bukele made bitcoin legal in 2021 tender and kept buying it with public money. Now, according to the website, El Salvador has spent US$107-million buying 2,381 bitcoin tokens.JOSE CABEZAS/Reuters

Quick question: If I take $100-million of your money and then turn it into $50-million, would you like me more or less?

That’s the query that El Salvador’s President Nayib Bukele might be posing to himself on what must be the many nights he has trouble sleeping.

In 2021, Mr. Bukele made bitcoin legal tender and kept buying it with public money. Now, according to the website, El Salvador has spent US$107-million buying 2,381 bitcoin tokens.

There is little news on what the country has done with all those coins. But the fact that Mr. Bukele tweeted as recently as this month that El Salvador has bought more bitcoin tokens suggests that the country hasn’t been selling. And with the recent crypto crash, those 2,381 tokens are now worth only some US$50-million.

Market cycles do come and go, and there could come a day when a bold bet like that pays off.

But voters have short time horizons. Every day that Mr. Bukele’s bitcoin investment is so deeply underwater is a little chip at the patience that Salvadorans have for what is at best the man’s adventurism and at worst his clown show.

And then, because El Salvador now holds so many bitcoins under Mr. Bukele, what ends up happening with that stash has a great influence on the wider market.

In other words, the price of a bitcoin is tied, even if loosely, to Salvadoran politics and the rule of Mr. Bukele. And that is bad because anything can happen in El Salvador.

Mr. Bukele once brought soldiers into the legislature to pressure lawmakers. Under him, the government has replaced Supreme Court judges with loyalists and arrested suspected gang members in what Human Rights Watch has called an “arbitrary” manner.

While Western leaders have clutched their pearls at that, Mr. Bukele’s approval ratings remained sky high domestically. But El Salvador’s bitcoin adoption had sparked the largest-ever protest against Mr. Bukele.

And the No. 1 rule in politics is that nothing lasts forever. That is especially so when, like Mr. Bukele, you once called yourself a “dictator,” and people couldn’t tell if you were joking or not.

Dan Restrepo, a former adviser to U.S. President Barack Obama, has linked Mr. Bukele’s current political dominance to future instability, saying, “Unchecked power seldom ends well in the region.”

It also seldom ends well outside the region. Look at Sri Lanka. Ex-president Gotabaya Rajapaksa used to be a war hero. But once he started expanding his powers and appointing relatives to official positions, this month’s events seem almost predestined – when a mob stormed his palace and he scurried into exile like a beaten dog.

And the spark that incited that mob? The same problems the impoverished El Salvador is currently on the verge of: economic collapse and debt default.

Mr. Bukele doesn’t even need to be outright ousted for anything to happen to El Salvador’s bitcoin stash.

To Mr. Bukele, bitcoin is but the current shiny object that he waves as he dances at his gong show. Its importance will diminish if problems in other areas grow.

Another rule in politics is that policies pursued through toil and tears, as with achieving consensus in a divided legislature to pass laws, tend to last. Policies pursued through the stroke of a pen, as with U.S. presidential executive orders, do not, as they are easily undone.

As Mr. Bukele has completely subverted the democratic process in El Salvador, everything he does is with the stroke of a pen.

A Salvadoran journalist recently remarked that he was watching a soccer match when an editor sent him to the legislature to cover the introduction of his country’s bitcoin bill. By the time the bill became law, the soccer match was still ongoing.

There could come a day when Mr. Bukele, faced with other problems, decides to sell all 2,381 bitcoin tokens as easily as he had decided to buy them.

Let’s not forget that, amid the turmoil of the contested election in Venezuela of 2018, the country’s much-hyped “petro” digital currency somehow seems to have just disappeared.

A sale of El Salvador’s 2,381 units could be up to 4 per cent of bitcoin’s 24-hour trade volume, depending on the day. It’s not an amount that would matter all that much in a normal market. But this is no normal market.

Bitcoin has crashed some two-thirds from its high of nearly US$70,000 last year. The wider crypto market has been rife with the falling dominos of overleveraged, interdependent firms.

Against that backdrop, 4 per cent can matter a lot and investors, even if they don’t want to, should keep an eye on what happens in El Salvador.

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