The first country to adopt bitcoin as legal tender, El Salvador continues to expose its economy to cryptocurrency. The country has just invested 15 million dollars to buy 410 additional bitcoins under the leadership of its president Nayib Bukele. The latter proceeded to announce the news himself on Twitter last Friday as bitcoin hit its lowest level in more than six months. Details in the following.
A cheap investment
This new investment brings El Salvador’s total holdings to more than 1,800 bitcoins according to Bloomberg, or approximately $66 million at the time of the events. President Bukele notably bragged in his tweet about allowing the country to buy the cryptocurrency at a cheap price. The value of bitcoin continued to fall after this announcement, reaching a low of $35,422 before rebounding slightly to $36,653.56 on Friday evening. She then displayed a 46.72% drop from its high of $68,789.63 in November.
Four months prior, El Salvador had already made a major purchase of bitcoin as the cryptocurrency suffered a plunge. At the time, the country distinguished itself by becoming the first to adopt bitcoin as legal tender. President Bukele then pledged to build a city dedicated to cryptocurrency and to accelerate citizenship for certain investors ready to invest locally in the cryptocurrency. mining bitcoin. Its main objective is to make El Salvador a hot spot world of this activity now that it is banned in China.
A policy that is struggling to bear fruit
In July, Moody’s downgraded the country’s credit rating to Caa1, which means very high credit risk. According to Moody’s, bitcoin transactions from El Salvador increase the country’s credit risk. However, President Bukele decided to issue bonds denominated in bitcoin for an amount of one billion dollars. His government recently announced that it would submit a bill to give legal support to this decision.
Pending the formalization of this, the situation of bonds denominated in El Salvador dollars has become catastrophic. Despite the adoption of bitcoin, the country’s national debt has notably climbed to more than 50% of its GDP. The situation had notably prompted economics professor Steve Hanke to issue a warning to President Bukele. In particular, he invited the latter to stop exposing the country’s economy to bitcoin or risk seeing it collapse for good.
The current bitcoin debacle therefore does not seem to worry President Bukele unduly. He remains convinced that the salvation of El Salvador depends on greater exposure to cryptocurrency. However, this is a risky bet that could permanently damage the country’s economy.
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Luc Jose Adjinacou
Far from having dampened my enthusiasm, an unsuccessful investment in 2017 on a few cryptos only increased my enthusiasm. I therefore resolved to study and understand the blockchain and its many uses and to relay with my pen information relating to this ecosystem.