Bitcoin now barely used as payment method in El Salvador

In El Salvador, the country that introduced Bitcoin as legal tender in 2021, the currency is now hardly used for everyday payments. A restaurant in El Zonte, better known as “Bitcoin Beach”, told a visitor that his lunch was the only Bitcoin transaction of the whole month. Staff say card payments have taken over from BTC. Analysts point to two causes: the HODL mentality and Bitcoin’s high price volatility.

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In brief:

• A restaurant in El Zonte processed only one Bitcoin payment in an entire month.
• Analysts cite the HODL mentality and price volatility as the main causes.
• El Salvador made accepting Bitcoin voluntary after changes to the IMF loan agreement.

One Bitcoin payment per month at “Bitcoin Beach”

Jon Atack, a Bitcoin Core contributor who lives in El Salvador, brought the story to the world. He paid for his lunch at a restaurant in El Zonte with Bitcoin, whereupon the staff told him that this was their first and only Bitcoin transaction of the past month.

For years, El Zonte was presented worldwide as the prime example of Bitcoin as a functional means of payment in everyday life. The current situation is far removed from that. Card payments have now become the norm, even in this symbolic area for the Bitcoin economy.

HODL mentality and volatility hamper use

Analysts point to two factors that stand in the way of daily Bitcoin use as a means of payment. First, many holders prefer to hold on to their Bitcoin in the expectation that its value will rise over time. Those who see Bitcoin as a long-term savings vehicle are less inclined to spend it on a meal.

Second, high price volatility plays a role. Bitcoin fluctuates strongly in value, making it impractical for both consumers and merchants to express fixed prices in BTC. At the time of writing, Bitcoin stands at $79K, a decline of 1.2% in the past 24 hours.

IMF deal made Bitcoin acceptance voluntary

An additional factor is the policy change that El Salvador implemented as part of a loan agreement with the International Monetary Fund. While merchants were initially required to accept Bitcoin, that requirement has now been dropped. Acceptance is now entirely voluntary.

That step has lowered the threshold for merchants to offer Bitcoin as a means of payment, but at the same time reduced the incentive to keep using it actively. The experiment once seen as a blueprint for Bitcoin adoption appears to be stagnating in practice.