Can Bitcoin work as a currency despite its volatility?

El Salvador’s decision to make Bitcoin legal tender begs the all-important question: Can the crypto thrive as a national currency despite its volatility?

The Central American nation became the first country in the world to adopt the cryptocurrency as official currency – a decision that triggered both positive and negative reactions.

While President Nayib Bukele and the El Salvadoran government say the commitment to adopt Bitcoin will help the country’s struggling economy, many citizens claimed the innate volatility of cryptocurrency has already negatively impacted the nation’s financial standing.

A solution to navigating the volatility of Bitcoin – and one that’s widely used – is to make sure Bitcoin is immediately liquidated into fiat currency as soon as a purchase is made.

The Lightning Network, Bitcoin’s layer 2 instant payment protocol, enables instant blockchain payments and Arcane’s The State of Lightning report suggests a list of nations that are likely to adopt Bitcoin as legal tender and what that would mean for the use of the Lightning Network.

“These countries have a combined population of 850 million, with 650 of those currently unbanked,” the report states

“In a scenario where countries equivalent to 10% of that population adopt Bitcoin before 2030, we look at another 50 million Lightning users by the end of the 2020s. By 2030, these users will be behind $17 billion in annualised Lightning payment volume and more than 1.2 billion.”

According to Félix Ulloa, the vice president of El Salvador, an unnamed Swiss company offered to buy the country’s Bitcoin stash at $50,000 a unit, regardless of the daily market value, which avoids the issue of volatility as a whole.





Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.


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