El Salvador's Bitcoin Strategy: A Contrarian Play in a Bear Market

In September 2021, El Salvador made history by becoming the first country to adopt Bitcoin as legal tender. President Nayib Bukele's bold move was framed as a revolutionary step toward financial inclusion, remittance efficiency, and economic sovereignty. Yet, by 2025, the experiment had unraveled. Bitcoin was rescinded as legal tender, and the government faced mounting criticism for its volatility, environmental costs, and fiscal opacity according to reports. Amid this collapse, however, a quieter narrative emerged: El Salvador's continued use of dollar-cost averaging (DCA) to accumulate Bitcoin, even as global markets plunged into a bear cycle. This article examines how the country's geopolitical ambitions and DCA strategy intersect in a volatile crypto landscape-and whether this approach could yet yield long-term value.

The Geopolitical Gambit: Challenging the Dollar's Hegemony

El Salvador's Bitcoin adoption was never just about technology. It was a geopolitical maneuver to disrupt the U.S. dollar's dominance in global finance. By positioning Bitcoin as a second legal tender, Bukele sought to reduce reliance on remittances (which accounted for 24% of GDP in 2024) and assert economic independence in a region historically shaped by U.S. influence as research shows. The strategy also aimed to leverage Bitcoin's decentralized nature to bypass traditional financial intermediaries, a move that resonated with anti-establishment narratives in Latin America.

However, the experiment exposed the limits of cryptocurrencies in economies with weak productive capacity and high informality. As Tobias Boos and Juan Grigera note, El Salvador's reliance on remittances and structural adjustment programs "deepened dependent development patterns," undermining the transformative potential of Bitcoin according to analysis. By 2025, the IMF's $1.4 billion loan deal forced the government to halt public-sector Bitcoin purchases, signaling a retreat from its original vision according to financial reports.

Dollar-Cost Averaging: A Contrarian Strategy in a Bear Market

Despite these setbacks, El Salvador's government persisted with a DCA strategy, buying 1 BTC daily since November 2022. This approach, which involves consistent, small investments to mitigate price volatility, became a lifeline during the 2023–2025 bear market. In March 2025, the country executed its largest single-day purchase-$100 million for 1,090 BTC-highlighting its commitment to DCA despite IMF restrictions as financial data shows.

DCA's appeal lies in its ability to smooth out market fluctuations. In a bear market, where panic selling and FOMO-driven buying often dominate, DCA reduces emotional decision-making by enforcing discipline. For instance, a $10-per-week investment in Bitcoin over five years could grow to nearly $7,913, demonstrating the long-term power of compounding according to market analysis. El Salvador's strategy mirrors this logic, albeit on a national scale. By consistently accumulating Bitcoin at lower prices, the government aims to build a reserve asset that could stabilize its economy in the future.

Geopolitical Risks and the Limits of DCA

Yet, DCA is not a panacea. In upward-trending markets, it can underperform lump-sum investing, and its effectiveness hinges on long-term price appreciation. For El Salvador, geopolitical risks further complicate the equation. The Russia-Ukraine war, for example, underscored how geopolitical events can destabilize crypto markets. During the conflict, Bitcoin prices plummeted as liquidity dried up, and investors fled to safer assets according to financial data. Such volatility raises questions about whether DCA can protect against systemic shocks, particularly in economies already vulnerable to external shocks.

Moreover, El Salvador's DCA strategy operates in a geopolitical vacuum. While the government's purchases signal contrarian confidence, they also risk alienating international lenders. The IMF's loan conditions explicitly prohibit public-sector Bitcoin investments, creating a tension between El Salvador's sovereignty and its need for financial support as financial reports indicate. This tension reflects a broader clash between decentralized financial ideals and the realities of global economic governance.

The Contrarian Case for El Salvador's Strategy

Despite the setbacks, El Salvador's Bitcoin strategy offers a compelling case study for contrarian investors. By embracing DCA, the government has positioned itself to benefit from Bitcoin's long-term potential, even as short-term volatility and geopolitical risks persist. This approach aligns with broader trends in crypto adoption, where patience and discipline often outperform speculative frenzies.

For investors, the lesson is clear: in a bear market, DCA can transform volatility into an advantage. El Salvador's experience underscores the importance of aligning investment strategies with geopolitical realities. While the country's Bitcoin experiment may not have delivered immediate economic gains, its DCA-driven accumulation could yet prove prescient-if Bitcoin's value rebounds and its role in global finance evolves.

Conclusion

El Salvador's Bitcoin strategy is a cautionary tale and a contrarian experiment rolled into one. The failure of Bitcoin as legal tender highlights the challenges of integrating cryptocurrencies into traditional economies. Yet, the government's DCA approach-rooted in geopolitical ambition and market pragmatism-offers a blueprint for navigating bear markets. As the world grapples with the repoliticization of global finance, El Salvador's journey serves as a reminder that the intersection of geopolitics and crypto remains one of the most unpredictable-and potentially rewarding-frontiers in investment.