The small Central American nation of El Salvador jumped into the global spotlight when in September last year it became the first country in the world to accept bitcoins as legal tender.
The experiment was welcomed enthusiastically by some but skeptically by others, who today seem to see their criticisms confirmed.
Inflationary pressures, exacerbated by problems in global supply chains that caused the war in Ukraine and the resurgence of the pandemic in China, are fueling fears that the US Federal Reserve will not be able to contain price rises without pushing the world’s largest economy into a recession.
This led the S&P 500 to complete its fifth consecutive week of declines on Friday and this Monday global stocks suffered their biggest drop since June 2020. And like stocks, fear is hitting other risk assets, such as cryptocurrencies. .
The price of bitcoins have fallen more than 50% from their all-time highs and with it has also collapsed the value of El Salvador’s government bonds, which are now trading at 40% of its original value. The drop reflects the investors doubt that the country will be able to meet the next payment of its debtas your reserves invested in the crypto asset depreciate.
The rating agencies had already warned in the past that the volatility of the virtual currency would impact the already fragile finances of the country, which is dollarized.
up the ante
However, President Nayib Bukele, who has led the play for bitcoins, is not willing to give in and on Monday instead decided to up his ante.
Taking advantage of the fact that the currency was located below the floor of US$ 31 thousand for the first time since July, the government today purchased 500 units, its largest purchase to dateat an average price of US$30,744, the president said through his Twitter account.
Since it was declared legal tender, El Salvador has bought 23,301 units of the cryptocurrency according to data from Bloomberg.