The president of El Salvador, Nayib Bukele, is all over the news again following his recent purchase of 410 Bitcoin at the price of about $15 million, which he regarded as being ‘cheap’. This transaction has gathered a lot of reactions as it is happening in a time when in the last 48 hours, Bitcoin has suffered a loss of nearly 12%, its deepest plunge in nearly 6 months. The recent purchase brings the country’s cumulative BTC holding to an estimated 1,801 BTC, which, according to Bloomberg, is currently worth approximately $66 million.
El Salvador’s Crypto History
This nation has a rich crypto history. Late in September 2021, the country bagged the crown for being the first country to endorse Bitcoin as a legal currency. The country further constructed many Bitcoin ATMs in different locations in order to facilitate the total acceptance of cryptocurrency among businesses.
It is also the first nation to AirDrop Bitcoin to its citizens. Bukele, the president, had also further stated his intentions to establish a ‘Bitcoin City’, where the currency wouldn’t be subject to taxes. This development is aimed at attracting Bitcoin miners in a bid to transform the country into a universal crypto hub. Aside from Bitcoin, the United States Dollar is also recognized as the country’s second accepted legal tender.
Was This Purchase A Good Idea?
Despite the certainty of the fact that the recent implementation of crypto-favorable decisions made the president a sort of ‘superman’ among crypto enthusiasts, it didn’t seem to go down well with the citizens, and there have been widespread protests regarding the situation. The IMF doesn’t seem pleased with these decisions too, as they have heavily criticized the president for even adopting Bitcoin as a legal tender.
Moody’s Investment Services has also shown concern regarding the decision and has highlighted the threats posed by this decision to the overall financial stability of the country. He believes that buying more Bitcoin would not help the economy, especially for a country that has found it difficult to maintain liquidity in the past.
However, Bukele doesn’t seem to share Moody’s thoughts as he posted on his Twitter handle that if holding BTC would boost the nation’s economic status, it is finally over for fiat.
It should be noted that the national debt owed by El Salvador has risen to roughly 50% of its Gross Domestic Product. In mid-2021, Moody reduced the nation’s credit mark, which signifies a massive credit threat. This threat, explained by Moody, is further aggravated by the recent Bitcoin transactions.
In the latest news, El Salvador’s administrator of finance recently proposed 20 bills containing the legal breakdown of the country’s soon-to-come Bitcoin bonds to the parliament. It is proposed that half of the generated proceeds would be used to purchase more BTC, and the other half to sponsor Bitcoin mining.
What do you think are the likely effects of this decision on the country’s economy? Let us know in the comments below.