Based on a report released earlier this week, it seems like El Salvador would not be able to pay up its debts after losing one-third of its investment in Bitcoin investments and legalizing Bitcoin as a legal tender.
El Salvador’s President Began Investing in BTC, But It Failed
The Wall Street Journal has reported that El Salvador’s holdings have lost approximately one-third of their value. There are enormous stakes in El Salvador, a heavily indebted Central American nation whose leader has spent huge amounts of government dollars purchasing BTC and using it as a legal tender.
As a result, El Salvador’s $100M in BTC holdings have lost approximately a third of their market price, putting even more pressure on the country’s already strained finances and increasing its chances of defaulting on its over $24B in national debt, economists say.
El Salvador’s chances of defaulting on its debt have grown dramatically due to the latest cryptocurrency crisis. El Salvador spent over $100M building its BTC wealth, which currently stands at roughly $38M. Earlier this week, the biggest cryptocurrency fell to $25,401, its lowest level since December 2020.
In September last year, the impoverished country made BTC legal tender. Notwithstanding aggressive measures that need compulsory acceptance, El Salvador’s major cryptocurrency has been unable to acquire momentum.
Research Proves El Salvador’s BTC Experiment Has Failed Miserably
A U.S. nonprofit research firm, the NBER, recently completed a study that found that BTC adoption in El Salvador has stalled. After receiving the $30 prize, over 60% of responders abandoned the government’s Chivo wallet.
Remittances aren’t being sent to 89% of Salvadorans through the app; only three percent receive them in BTC. A whopping 99% of those polled said they’d never used BTC to pay their taxes before. Although most citizens have smartphones with an internet connection, just 60% of them have downloaded Chivo.
Only a small percentage of Salvadorans have ever utilized Chivo ATMs that have been installed across the country. After downloading Chivo, most consumers continued to utilize cash, debit, and credit cards. Over 80% of businesses in El Salvador still refuse to take BTC despite the country’s infamous BTC Law, which mandates adoption. Of the companies that did record BTC sales converted the currency into USD.
El Salvador is unlikely to receive money from the IMF due to its BTC risk. The $800M bond payment due in January is scheduled to be made by El Salvador. El Salvador’s credit rating was lowered to “junk” earlier in May by Moody’s. Because of the sharp decline in the value of BTC, El Salvador needed to delay the issuance of its much-anticipated government bonds.
President Nayib Bukele hasn’t given up on BTC despite being mocked for his ill-advised purchases, which have worsened the impoverished nation. A few days ago, he reported that he had purchased another 500 coins.
According to Fernando Meja, a San Salvador-based graphic designer, BTC does more harm than good.
