El Salvador is a prominent financial and economic country that has kept Bitcoin legal. The event has become mostly a spectacle, as supporters of cryptocurrency and others alike follow the unfolding events. El Salvador had fulfilled its promises to bitcoin and had bought multiple BTC at near the market peak last year, as well this year.
From September 2021 when it first purchased Bitcoin, the country has now acquired at least 2,300 BTC. What does this mean for North America?
El Salvador And Its Bitcoin
El Salvador bought 500 BTC from another company in May as the market declined to $1.68 Trillion. These bitcoins which were purchased at an average price of $30,774 had brought the country’s holdings to 2,301 BTC so far. This was the lowest price at which the country has been able buy digital assets. Given that it is only a part of larger holdings, there are still losses for the country from multiple purchase.
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El Salvador purchased bitcoin in September for $44,000. This means that digital assets have fallen by around 45% in the past year. At current prices, its entire bitcoin stash now stands at $70 million. The country’s entire BTC stash is now worth about $70 million, despite the dollars cost-averaging system that allowed it to purchase BTC at different price points. However, this still leaves 28% of its total buy value.
BTC declines to $28,000| Source: BTCUSD on TradingView.com
The move to accept BTC has not only proved controversial on just the bitcoin price side, but it has also affected the country’s ability to receive international aid in the form of loans.
The country was reportedly looking for $1.3 million from the IMF last year. The IMF, however, has condemned the use of bitcoin as legal currency.
It has advised the country to remove the digital asset as an official national currency, citing that this could cause problems for the economy in the long-term, revealing that the current account deficit for El Salvador’s remittance and the external financing-reliant economy is estimated to drift around $2 billion for the next three years. This has been ignored by President Nayib Bukele.
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El Salvador’s economy is dependent on money sent home by citizens overseas. The president stated that BTC would greatly facilitate and reduce the cost of these remittances for El Salvadorans.
The president doesn’t seem to be too bothered about the recent price decline. In the past, he has stated that the bitcoin asset will be worth $100,000 by 2022. The country would make a significant profit on its BTC holdings if this occurs.
Featured Image from Coingape. Chart by TradingView.com
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