Bitcoin? cryptocurrencies? NFT? Plummeting economies? It is difficult to understand how these currencies work and how they are affected by the world economy and political decisions. Just a few months ago, Bitcoin seemed not to find a limit and, although with constant ups and downs, it remained at an encouraging average, both that countries and El Salvador adopted it as the national currencybut this decision is costing dearly, leading the nation to bankruptcy.
Bitcoin has been falling by leaps and bounds for several months, a blow to El Salvador, which has adopted the cryptocurrency as a regular currency, forcing all merchants to accept it. However, with a collapse of more than 40 percent since President Nayib Bukele’s plans were launched, the situation has put the country at risk, leading to the fall in the prices of its sovereign debt.
Wow, El Salvador had gone to work so that the bitcoin to work, it was not only to implement it as a currency, but to use the energy of the heat of a volcano to avoid the energy cost of mining the cryptocurrency. In the same way, as socialization, the Salvadoran government promoted bonuses for citizens to acquire an electronic wallet through the Chivo Wallet application.
A study of the non-profit organization National Bureau of Economic Research indicates that only a fifth of Salvadorans downloaded the application and took advantage of the $30 government bonus. The use of bitcoin for daily transactions it is low and, according to the cited study, “it is concentrated among the banked, educated, young and male population”.
The volatility of the currency has caused the financial corporation Fitch Rating assign a new rating to Salvador’s debt, going from B- to CCC, the lowest rating before being considered mere speculation. This measurement is designed to help investors in the case of credit risk. At this time, with Ukraine in a war over the Russian invasion, El Salvador is the only country that has overcome the sinking of its bonds and this translates into high-risk debt.
institutional back
On the one hand, the International Monetary Fund (IMF) suggested to the Central American country to reverse the decision to nationalize the bitcoin, something that suits their interests as a central currency stabilizing body. Although he warned that if they did not do so, El Salvador would incur in non-compliance with the conditions for countries to request loans, one of them being to overcome the problems that led to this situation, in order to guarantee the repayment of what was borrowed. For its part, the World Bank (WB) refused to assist the country in deploying the bitcoin.
El Salvador wanted… to save this losing streak by investing in more coins, so Nayib Bukele announced through his Twitter account, on September 6, 2021, that he had bought 200 BTC and pointed out that his “investors are going to buy much more. ”.
Salvadorans and the bitcoin
There are not a few Salvadorans who complained from the beginning about the nationalization of the bitcoinFirst, because of the Internet access itself, since in most rural areas there is none. In the same way, the protests were inclined to indicate a possible money laundering, since neither of the two national currencies are issued in El Salvador.