El Salvador has done what many might think, and what others thought was crazy, but what no one has yet dared to do. This country became the first in the world to offer legal tender for Bitcoin.
While Bitcoin was approved as legal tender in El Salvador, the major cryptocurrency started to experience a quiet rally that subsequently peaked at a new all-time high. At the time, it seemed that the president’s action was not as bad as what was commented by his opposition, but as is the regular case in the cryptocurrency market thanks to the volatility, everything that happens should go down and since the beginning of 2022, Bitcoin and the market in general have been through hard times.
It should be noted that when it was announced the intention of El Salvador to adopt the law, no one else implemented a similar project, which explains the surprise of the whole world. Some supported the decision and others considered it complete insanity. The truth is that the head of state continues to bet on cryptocurrency as he recently announced that he has plans to use volcanoes and geothermal resources to mine cryptocurrency and plans to build “Bitcoin City“Which will be a tourist site where only cryptocurrency is used.
The recession has left El Salvador on edge
A drop was expected in the cryptocurrency market and more specifically in bitcoin, the most important and most set the tone for the cryptocurrency. That is why it is not excluded that the President of El Salvador has already considered this possibility and is waiting for a rebound in Bitcoin, the fact is that it may take much longer than expected or never will.
What we do know is that since the beginning of 2022, things have not been going well with Bitcoin. The cryptocurrency suffered severely and the declines were larger than market analysts had expected. The market has suffered so much that the major cryptocurrency has put itself below $30K with downward volatility and if we look at the El Salvador data and losses during this period, it is estimated that the countries’ crypto-assets are down more than 30%.
Last year, El Salvador owned about $105 million worth of bitcoins. Et selon des données récentes, ces avoirs atteignent à peine 68 millions de dollars, ce qui représente une perte de près de 37,5% en un laps de temps assez court et qui a fait s’évaporer une grande partie de l’argent invest The last year.
El Salvador is in crisis
In recent weeks, the situation in El Salvador and the economic crisis it is going through has been the subject of much speculation. According to Ricardo Castaneda, an economist at the Central American Institute of Fiscal Studies, he said that bitcoin in and of itself did not cause the financial crisis that El Salvador is facing. In fact, Bitcoin has made the situation much worse.
To understand this, we must bear in mind that the project to legalize Bitcoin in the country was primarily aimed at helping the country’s economy. In 2020, El Salvador was heavily dependent on remittances from Salvadorans abroad. Therefore, Bitcoin was adopted to reduce the value of transactions and thus bring more funds into the country. Also, it was believed that using bitcoin would speed up transactions. It is clear that the project was presented as a solution for the country, but now it has become one of the problems to be solved due to the high volume of losses.
And if we add to this the fact that the International Monetary Fund has repeatedly asked El Salvador to remove the bitcoin law so that the country can operate on a regular basis, it is clear that El Salvador does not receive the support of international opinion.
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