In September 2021, El Salvador became the first country to permit consumers to use cryptocurrency in all transactions alongside the US dollar.
At that time, the executive board of the International Monetary Fund (IMF) had urged El Salvador to reconsider and change its decision to make Bitcoin a legal tender due to the inherent financial risks and liabilities involved with cryptocurrencies.
Now, with market conditions massively driving down the price of Bitcoin, El Salvador’s reserves have plunged to a low of $52 million. Since making the announcement accepting Bitcoin, the world’s largest cryptocurrency, as a legal tender a year ago, El Salvador had acquired an estimated 2,301 Bitcoins.
In the past few months, El Salvador President Nayib Bukele had made it a habit to “buy the dip”, often taking to Twitter to brag about locking in at lower prices. The country’s bitcoin reserves were around $71.4 million at the time of Bukele’s last Twitter update.
Incidentally, El Salvador continues to postpone the issuance of its much-anticipated “volcano bonds,” prompting the sell-off, which was initially slated to launch in March 2022. The country opted to postpone the planned $1 billion offerings, which is supposed to fund El Salvador’s “Bitcoin City,” following turbulence in the markets, El Salvador Finance Minister Alejandro Zelaya said, according to Blockworks.com.
The bonds are often regarded as one of El Salvador’s last financial options. However, when the country’s bitcoin adoption intentions were first unveiled in June 2021, the World Bank refused to assist it.
El Salvador has a bond maturing in January 2023 worth $800 million. Moody’s reduced the country’s debt rating to CAA1 in July 2021, indicating that it is at risk of defaulting on loans.
In a press conference on Monday, Zelaya said: “When they tell me that the fiscal risk for El Salvador because of Bitcoin is really high, the only thing I can do is smile. The fiscal risk is extremely minimal.”
Interestingly, ever since El Salvador made Bitcoin a legal tender, its value has dropped by some 50 per cent in the country.
Meanwhile, the bloodbath continued in the cryptocurrency market on Tuesday, as well, and major coins recorded huge losses. Both Bitcoin (BTC) and Ethereum (ETH) fell by 15 per cent each.
Meanwhile, the overall crypto market cap has also tanked below the $1 trillion mark.
The current price of Bitcoin is around $21,000 and continues to fall. This means that as of now, every purchase is a loss. There wasn’t a single purchase made below the current value.