The Crypto Bailout Economy 🆘
Struggling nations are betting everything on Bitcoin?
Hello,
Bitcoin endured its worst weekly performance in months as escalating war concerns spooked investors, though institutional ETF flows remained strong even as retail participation dried up.
Check out Monday’s edition to know more.
Pakistan's Minister of State for Blockchain and Crypto stood up at Bitcoin 2025 in Las Vegas on May 28 and announced they were establishing a strategic Bitcoin reserve.
Here's a country that, just a few years ago, maintained that "crypto would never be legal" suddenly doing a complete 180 and pledging to never sell their Bitcoin holdings. "This wallet, the national bitcoin wallet, is not for speculation or hype," Bilal Bin Saqib declared. "We will be holding these bitcoins and we will never, ever sell them."
Not just Pakistan, Ukraine wants crypto in its national reserves.
Brazil is considering allocating 5% of foreign exchange reserves to Bitcoin.
We're watching the emergence of the strategic Bitcoin economy, where nations are proactively adopting Bitcoin as modern treasury tools.
Is this financial innovation driven by opportunity or necessity?
The pattern is becoming impossible to ignore. Since Trump's administration signalled support for a US Strategic Bitcoin Reserve in March 2025.
Ukraine, still fighting an active war, introduced bill number 13356 to their parliament on June 11, allowing their central bank to add cryptocurrencies to national reserves.
Brazil followed suit with their "RESBit" proposal, potentially allocating up to 5% of their foreign exchange reserves to Bitcoin. Even Panama City's mayor dropped cryptic "Bitcoin Reserve" hints after meeting with El Salvador's Bitcoin evangelists in May.
And then there's El Salvador, the poster child for this movement. Despite signing a $1.4 billion IMF loan agreement in December 2024 that explicitly discouraged further Bitcoin accumulation, they've quietly continued their daily Bitcoin purchases. They've added 240 BTC since the deal was struck, with President Bukele's administration somehow maintaining "technical compliance" through what the IMF calls "flexible interpretation."
They're finding creative ways to keep buying Bitcoin while keeping the IMF money flowing.
The Hail Mary Playbook
These countries are following what I'm calling the "Hail Mary Playbook" — when traditional economic policies plateau, make strategic bets on emerging financial technologies that have shown promise.
Pakistan allocated 2,000 megawatts of electricity for Bitcoin mining and AI data centres, turning their energy grid into a crypto casino. "We want to welcome all miners to come to Pakistan," their minister announced, as if foreign miners consuming electricity will solve economic problems.
The rationale sounds compelling: Bitcoin's finite supply protects against inflation, decentralisation provides independence from traditional finance, recent performance looks like a magic economic bullet.
When Pakistan talks about "100 million unbanked people" and crypto helping them "break economic classes," it represents genuine policy response to financial inclusion challenges traditional banking hasn't solved.
These countries are making Bitcoin central to economic strategy.
The Economic Innovation Index
Why are struggling economies turning to Bitcoin? The answer lies in their fundamental monetary challenges. Traditional currencies in developing nations face three existential threats that Bitcoin theoretically solves:
Between 2020-2024, while US inflation rose 20%, Bitcoin increased over 1,000%. For countries with even higher inflation rates, this math is compelling.
Look at the countries leading this charge and you'll notice a pattern. They're nations facing serious structural challenges.
Pakistan's Reality Check: Pakistan's economy is in a fragile stabilising phase after barely avoiding a crisis. GDP growth limps along at just 2.6-2.8% for fiscal 2025, well below the government's original 3.6% target. The country faces massive structural problems with over 100 million unbanked citizens, widespread financial exclusion, and an economy that recently contracted before this modest recovery. And the per capita income sits at a measly $1,824.
Ukraine's War Economy: Ukraine's economy remains deeply wounded despite managed stability through massive foreign aid. The country's GDP is still below pre-war levels after a nearly 30% contraction in 2022, with growth projections ranging from just 2-3% in 2025. The ongoing conflict has destroyed 70% of energy infrastructure, damaged 13% of housing stock, and displaced millions of workers creating severe labour shortages. With poverty affecting 9 million Ukrainians and reconstruction needs estimated at $524 billion over the next decade, parliament members are exploring Bitcoin reserves as assets immune to traditional financial system disruption that could help "strengthen macroeconomic stability" in an economy entirely dependent on foreign support.
El Salvador's Gamble: The economy remains heavily dependent on remittances accounting for over 20% of GDP, making it vulnerable to external shocks. With moderate growth averaging only 2-3% annually and projections slowing to 2.2-2.5% in 2025, the country faces persistent challenges including fiscal deficits, high public debt peaking at 88.9% of GDP, and low productivity.
Bhutan's Bitcoin Lifeline: Bhutan's economy faces a devastating brain drain with over 10% of skilled workers leaving in 2022 alone, youth unemployment at 19%, and tourism struggling to recover post-COVID. The landlocked kingdom's response? Mining Bitcoin with excess hydroelectric power and using proceeds to double civil servant salaries. With Bitcoin holdings worth over $600 million, representing 30% of the nation's entire GDP according to Arkham Intelligence, Bhutan has essentially transformed from measuring progress through "Gross National Happiness" to betting its economic future on cryptocurrency mining.
Read: Thunder Dragon's $1B Bitcoin Stack 🇧🇹
Brazil's Hedge: Brazil presents a more complex picture with an economy that's decelerating but not in crisis. After robust 3.4% growth in 2024, GDP growth is projected to slow significantly to 2.1-2.3% in 2025 due to tighter monetary policy and reduced fiscal stimulus. The central bank's benchmark rate remains high at 14.75% to combat inflation still above the 3% target, while fiscal risks persist from rising social spending and structural problems. Brazil's consideration of allocating 5% of foreign reserves to Bitcoin through PL 4501/2023 reflects concerns about fiat currency dependence and a desire for portfolio diversification.
You call it desperation? I look at it this way: These are countries recognising Bitcoin's potential as a strategic asset class, using it as an innovative component of their monetary policies.
When you're dealing with chronic inflation, currency devaluation, and limited access to traditional safe haven assets, Bitcoin starts looking less like speculation and more like pragmatic hedging.
The academic research backs this up. As James Butterfill's analysis shows, Bitcoin's annualised inflation rate has dropped to just 0.83% post-2024 halving and it will drop after every halving, while global fiat currencies average 2-5% annually. For countries watching their purchasing power erode year after year, that mathematical certainty is compelling.
The corporate side of this story? We've seen 240 public companies add Bitcoin to their balance sheets, up from just 124 firms weeks ago. That's institutional recognition of a changing monetary landscape.
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What Developing Nations Already Know
While Pakistan and Ukraine's Bitcoin reserve announcements might seem sudden, they're actually following a playbook that's been quietly validated across the developing world for years. The motivations are rooted in economic realities that these countries face daily.
When your national currency consistently loses purchasing power, Bitcoin's fixed supply becomes more than a technical feature, it becomes a lifeline. Countries experiencing chronic inflation have watched their citizens naturally gravitate toward Bitcoin as a store of value because their local currency fails to preserve wealth over time. Because traditional monetary systems haven't provided the stability they need.
Nigeria, Kenya, Vietnam, and other developing nations have seen their populations embrace Bitcoin. When governments can print unlimited amounts of local currency, an asset with a hard cap of 21 million units starts looking like sound money policy.
Traditional banking systems in developing countries often exclude vast portions of the population due to documentation requirements, minimum balance thresholds, or simple lack of infrastructure. Bitcoin doesn't ask for your credit score or require you to maintain a minimum balance. You just need internet access and a phone.
People who were locked out of traditional financial services found they could participate in global commerce, receive remittances, and build savings through cryptocurrency platforms. Bitcoin is providing financial services to people underserved by traditional banking.
Many developing nations impose strict capital controls that limit citizens' ability to access foreign currencies or move money internationally. Bitcoin operates outside these restrictions, providing a pathway to global financial markets that traditional systems can't offer.
Let’s say if El Salvador receives roughly $10 billion annually in remittances, and traditional services charge an average of 10% in fees, that's $1 billion per year flowing to Western Union, MoneyGram, and other intermediaries instead of reaching Salvadoran families.
With Bitcoin and stablecoin transfers reducing these costs to around 2-3%, the same remittances would only cost $200-300 million in fees — potentially saving $700-800 million annually that could go directly into the local economy. For a country with a GDP of around $32 billion, that represents more than 2% of total economic output being retained rather than lost to transaction costs.
Bitcoin-based transfers can reduce these costs dramatically, meaning more money actually reaches families who need it.
The corporate treasury trend we're seeing now is essentially institutional recognition of what individual users in developing economies figured out years ago: when your traditional options are limited or expensive, Bitcoin is a practical financial infrastructure, not “speculation.”
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The risks are worth watching.
Of course, this strategy isn't without risks, and it's worth acknowledging what could go wrong.
As James Butterfill noted Bitcoin's 165% annual returns since 2009 make it attractive. That performance came during a period of unprecedented monetary expansion and risk appetite. What happens when that environment changes?
If Bitcoin's correlation with traditional markets increases during a major economic downturn as it has in the past, these reserves might not provide the diversification benefits countries are expecting. The asset that's supposed to hedge against system risk could end up amplifying it.
There's also the concentration risk factor. If every struggling economy follows the same playbook, we might see a situation where the countries most in need of stability are also the most exposed to crypto volatility.
But, the first countries adopting Bitcoin reserves are positioning themselves at the forefront of a monetary transition that could define the next decade. If this trend continues and Bitcoin proves its resilience during economic stress tests, early adopters like El Salvador, Pakistan, and Ukraine will have established strategic advantages in both digital asset holdings and blockchain infrastructure.
The regulatory environment appears increasingly supportive, with the US committed to its Strategic Bitcoin Reserve and other major economies exploring similar frameworks. Rather than creating systemic risk, widespread institutional adoption would validate Bitcoin as a legitimate reserve asset and create the network effects that make these early strategic decisions look prescient.
See ya, again. Until then … stay curious,
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