Photo: MARVIN RECINOS/ / AFP / Getty Images
The value of Bitcoin in recent weeks has not brought good omens for El Salvador, a country that declared that crypto as legal tender in September of 2021. With the abrupt collapse of the cryptocurrency, it is believed that the Nayib Bukele government will not be able to pay its debt.
For January 2023 El Salvador must comply with the payment of a bond for $800 million dollars. We must remember that the sovereign debt of the Central American country sank in April by 13.one%. Consequence, in part, of basing its economic system on cryptocurrencies.
Cryptocurrencies have been in constant movement, both positive and negative, since the armed conflict between Russia began and Ukraine. Just as the first day of war, cryptocurrencies plummeted by up to 13% , days later they gained momentum and some recovered considerably.
But since then, Bitcoin has lost the 50% of its value, taking into account its historical maximums.
Meanwhile, El Salvador’s bonds have lost 40% of their worth. Since the beginning of the year, faced with a threat of “default” for El Salvador, the International Monetary Fund recommended that the government of the Central American country eliminate Bitcoin as legal tender . But Bukele remains firm before his decision and the negotiation with the IMF has become difficult.
Even Bukele today affirms that if he sells his Bitcoins would have the same profit:
But the fact that the cryptocurrency is volatile is not news. Both those who supported Bukele in this decision to give Bitcoin legal tender, as well as his detractors, knew that Bitcoin gained and lost its value in a matter of seconds.
But these ups and downs in the Bitcoin market, has particularly led El Salvador to a credit rating at its lowest level, according to Fitch, last February. What he spoke of a negative future for the Central American country.
Likewise, Moody’s warned, more recently, about the financing pressures that El Salvador will face due to the upcoming expiration of 2023 bonds. Mainly, because there are still no details of how the debt will be paid.
The risks involved for El Salvador to give legal tender to Bitcoin, have appeared on several occasions, even from the beginning. Experts spoke of an “enormous risk” when the government converted $05 million dollars of the country’s reserve in cryptocurrencies.
Then, another example that proved Bukele’s detractors right was in December 2021, when talking about fraud and lack of funds in the Chivo digital wallet. Likewise, a group of financiers expressed their doubts about Bukele’s decision to issue the first bond associated with Bitcoin
But Bukele continues to demonstrate that he He has faith in the cryptocurrency market. For his part, the president of the central bank of El Salvador, insists that there is “zero risk” that the country stops paying its debt to creditors.