The cryptocurrency market is currently facing a lot of turmoil as the prices of stablecoins (USDT, UST) and altcoins (XRP, SOL, and others). However, this doesn’t leave major cryptocurrencies like Bitcoin and Ethereum aside. BTC faced a massive slump in price and is currently holding its candle at $30,000. This reduction hasn’t been received too well by countries like El Salvador, but is this a time to hold more?
How it All Started
The first country to make cryptocurrency a legal tender is the Central American nation, El Salvador. They decided to commit to their resolve despite the various warnings from the IMF and other nations. El Salvador purchased $10.3 million worth of Bitcoin, which amounted to 200 BTC, on September 6, 2021.
However, this move was embraced by several enthusiasts and investors like CZ and others, and it’s rather hard not to see this as a serious gamble.
The crypto market is very volatile, and Bitcoin proves that point. Recently, a 55% loss was recorded when Bitcoin slumped from its $69,000 ATH in November. Since then, another all-time high hasn’t been recorded for cryptocurrency.
However, President Bukele still considers Bitcoin a worthwhile investment and currently has over 2,30l BTC in the nation’s coffers. With the continuous fluctuations of cryptocurrency prices, its present worth is estimated at $67 million.
El Salvador holds a large amount of Bitcoin in its coffers. That said, the current bearish cycle is expected to also affect the country’s wallets, with a loss of over 40% of its initial holdings. El Salvador is currently in debt, as the president and his team have continued to pour more money into Bitcoin this present cycle (with the recent amount being $105 million).
The country is expected to also reimburse its investors a sum of $382 million in interest by the end of the year, with $183 million scheduled for payment by this month’s end.
With the present bearish cycle, it doesn’t seem as though any efforts made by El Salvador to trade Bitcoin would result in profit for the country. Recently, a report showed that the country is in talks with the International Monetary Fund (IMF). The reports state that they are trying to acquire a large sum of $1.3 billion as a loan for further investment.
However, the IMF has projected that the country could fall further into debt within the next two years if it doesn’t stabilize its economy.
It would be good to recall that the current bearish cycle is something that happens periodically. However, that doesn’t deny that El Salvador’s tactlessness could cause them to go into debt above 96% of their GDP. But if BTC were to exceed expectations, as usual, we could see an El Salvador with the world’s largest bitcoin reserve.
Hence, if the IMF provided them with the proposed loan, it would benefit the country and the organization.
However, do not expect a price increase very soon, as such is a big gamble and not financial advice.