El Salvador’s response in Crypto winter

2022-02-17, 07:47

[TL, DR]

-in September 2021, El Salvador became the first nation to adopt bitcoin as a legal tender
- El Salvador buys 410 BTC at $15 million as the market continues to crash.
-The country now holds over 1,801 BTC, now valued at $66 million.

El Salvador’s adoption of bitcoin

In September 2021, El Salvador began to accept BTC as a legal tender alongside the U.S. dollar. Apart from the president's interest in the digital asset, his administration saw this as a means to recover from the high inflation in the nation. Hence, El Salvador is the only and first country to adopt bitcoin as a legal tender. Since then, the president had always sought opportunities to accumulate more BTC into the country reserve. El Salvador started buying at $50,000 per BTC, and now the country owns a total of 1801 BTC.

The country has also seen various initiatives around bitcoin mining and adoption. – The bitcoin city, initially funded by a 1 billion bitcoin bond, state-issued wallets, and some other plans are already in place to ground the use of bitcoin in the nation. The government has also been investing the bitcoin returns into various infrastructural development projects such as hospitals and schools. Bukele has also promised to build a tax-free bitcoin City with the sole aim of making the country attractive to blockchain investors, and a bitcoin mining hotspot in Central America.

Although the news of El Salvador’s adoption of bitcoin was very fascinating to crypto enthusiasts, the action has been criticized by the International Monetary Fund(IMF), whom they have approached for loans. The institution highlighted bitcoin’s risk to fiscal contingent liabilities, ” and financial integrity, financial stability, and consumer protection”, urging the government to strip bitcoin of its legal tender status.

The news of bitcoin's adoption by El Salvador also fired up a widespread protest in the country in September 2021. The protesters claimed that the new development had only made things worse for common Salvadorans while big investors got the big fish.

bitcoin Market Trend

November marked bitcoin’s all-time-high of 69k, but has consistently dropped and worsened when the US Federal Reserve announced the possibility of boosting interest rates, and withdrawing stimulus out of the market. As of Saturday, January 22, the largest digital asset by market value, was consolidating around $35, 000 and it has lost more than 40% from its peak in November 2021.

El Salvador bought more bitcoin in crypto winter

Bukele has again confirmed his confidence in the cryptocurrency's long-term prospects. Even in the face of the brutal nosedive of bitcoin, the El Salvador government has added 410 bitcoin to its treasury. This was made known when the president, Nayib Bukele, announced on Twitter that 410 BTC was purchased for $15 million.

At an average price of $36, 585 per BTC, the latest accumulation is the cheapest BTC acquisition since the country adopted bitcoin as a legal tender. Although the market has shown impressive correction, the fear of a retest of the $28, 000 floor still looks very possible. According to co-founder of BitMEX, Arthur Hayes, the true bitcoin bottom will be formed until the $28, 000 zones are retested. And if this level is broken, there will result in massive liquidation and bitcoin might fall back to the $20k level.
With this in mind, El Savaldor’s Economy is yet to face its most trying times if experts’ speculations are found to be correct. Nevertheless, their adoption of bitcoin could change their narrative if volatility eases up, and the price peaks again.

Author: Gate.io Observer：M. Olatunji
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