Moody’s rating agency believes that the Salvadoran authorities have made a big mistake by legalizing bitcoin. Analyst Jaime Reusch expects the investment appeal of this Latin American state to decline.
Cryptocurrency is a volatile instrument. El Salvador has recognized BTC and started investing its reserves in this asset, thus worsening its position.
The president of the country, Nayib Buquele, periodically reports on Twitter about the acquisition of another batch of cryptocurrency. Moreover, the authorities become more active in periods of falling value of BTC.
El Salvador currently has 1,391 bitcoins under its control. Bloomberg estimates that the country has already suffered losses. It has spent about $71 million on the cryptocurrency, giving up an average of $51,056 for each coin.
That amount of bitcoins is now valued at $59 million.
Jaime Reusch stressed that El Salvador is already experiencing liquidity problems. Its financial capacity is weakening, and investing in BTC only worsens the country’s economic situation.
I think time will tell how right this decision was for El Salvador. We have the opportunity to see how a small country is trying to rebuild an obsolete financial system through new technology, and what will come of it.
I myself am very pessimistic about this situation, and I do not believe that El Salvador will be able to fix its domestic problems with Bitcoin. Cryptocurrencies and blockchain are undeniably the future, but not for this purpose. Ultimately, we do not know what drives Nayib Buquele and what surprises he has in store for us, and we can only watch.