Moody's criticized El Salvador for legalizing bitcoin

Moody’s criticized El Salvador for legalizing bitcoin

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.

The yield on El Salvador’s government bonds has soared above 35% p.a. and the country’s obligations are due in January 2023. The record high rate suggests that financial markets do not believe that the Latin American country’s authorities will ever be able to pay their investors.


My opinion

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.

DYOR!

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Written by Kannnaf Mysterious
I am a very innovation-dependent form of life. I'm smart, but I don't wear glasses. I solve the Rubik's Cube in less than a minute. Probably the best beggy cryptomaniac in the world and my hobby is to start the day thinking that bitcoin will rise to $100k. To The Moon!
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