It was September 6, 2021, when the Central American nation of El Salvador decided to go ahead and purchase 200 Bitcoin<\/a> (BTC<\/a>), worth about $10.3 million at the time. The day was hailed as momentous in the history of the crypto market and was met with much fanfare. In fact, many proponents claimed that the purchase was just an inkling of what really lay ahead in terms of a global crypto-driven economy.<\/p>\n However, a lot has changed since then, especially with BTC losing 55% off its value after scaling up to its November all-time high of $69,000. And, with Bitcoin\u2019s value seemingly in a downward spiral at the moment, many critics have ramped up their criticism of El Salvadoran President Nayib Bukele and his decision to keep lapping up more BTC<\/a>.<\/p>\n To this point, the country\u2019s coffers now contain a total of 2,301 BTC, which are estimated to be worth a little over $67 million at current prices. In fact, reports suggest<\/a> that Bukele\u2019s gamble on Bitcoin seems to have already resulted in heavy losses equal to the country\u2019s upcoming interest payments.<\/p>\n Estimates suggest that the ongoing crypto downtrend which has caused Bitcoin to lose approximately 40% of its value since late March has deepened El Salvador\u2019s cumulative losses<\/a> and it\u2019s crypto holdings to about $40 million, nearly equal to the country\u2019s next coupon payment of $38.25 million which is due mid-June.<\/p>\n It is worth noting that since September 2021, Bukele and his team have poured in a whopping $105 million toward buying Bitcoin. However, the flagship crypto has dropped 45% since the country\u2019s first purchase, cutting down the value of the nation\u2019s BTC haul to just $66 million.<\/p>\n At press time, El Salvador owes<\/a> bondholders a cumulative total of $382 million in interest, which is to be paid out by the end of this year. To this point, in the month of July alone, the country has a payment worth $183 million due. <\/p>\n El Salvador was reportedly in possession<\/a> of $3.4 billion in its reserves back in April, with Bukele and his team planning on raising another $1 billion using a highly publicized Bitcoin-backed bond. However, the sale of the offering has been postponed multiple times over the past year due to an apparent lack of interest.<\/p>\n Lastly, it is worth noting that since early 2021, El Salvador has been trying to lock in a $1.3 billion loan from the International Monetary Fund, an effort that seems to have lost steam<\/a> following the country\u2019s fierce BTC adoption drive. Regardless, the country needs to bolster its finances since the IMF believes that under its current policies, El Salvador\u2019s public debt will rise to 96% of its GDP within the next 48 months, putting the country on a path of \u201cno return.\u201d<\/p>\n Recent:\u00a0Genomics company explores NFTs in hopes of advancing precision medicine<\/a><\/em><\/strong><\/p>\n Cointelegraph reached out to Ben Caselin, head of research and strategy at cryptocurrency exchange AAX, for his take on whether El Salvador\u2019s move to invest more money into crypto has been successful. He pointed out that the matter should not be looked into too deeply since Bitcoin\u2019s volatility today is not too different from where it stood last year, adding:<\/p>\n \u201cIrrespective of market conditions, El Salvador is still able to benefit from remittances processed on the Lightning Network, which are cheaper than conventional money operators like Western Union and MoneyGram. The legal tender play also continues to make it easier for El Salvador to attract foreign investment and it continues to provide useful infrastructure for unbanked communities.\u201d<\/p><\/blockquote>\n From a purely price-based standpoint, Caselin believes it\u2019s important to provide ample context to investors right now since every country is currently facing some sort of economic pressure. Not only that, but most capital markets including the NYSE, Nasdaq and Dow have also been on the receiving end of a lot of volatility recently. \u201cAt this early stage, it\u2019s too early to tell if it was too soon for El Salvador to hold Bitcoin on its national reserves,\u201d he said.<\/p>\n A somewhat similar sentiment was echoed by Antoni Trenchev, co-founder and managing partner for crypto lending platform Nexo. He told Cointelegraph that short-term volatility is nothing new to the crypto market and was likely factored in by the El Salvador government when they decided to go ahead with their purchase, adding:<\/p>\n \u201cYes, El Salvador is in uncharted waters, but it\u2019s far too early for severe skepticism, there is a lot more potential to uncover in this system and it seems Bukele\u2019s administration has the right idea, namely sailing on ahead so that others can learn and benefit from this experience.\u201d<\/p><\/blockquote>\n Lior Yaffe, co-founder of blockchain software development firm Jelurida, explained to Cointelegraph that in 2001, the government of El Salvador gave up control of its monetary policy by making the United States dollar legal tender, thus effectively putting the country\u2019s monetary policy in the hands of the U.S. Federal Reserve Bank. Yaffe added:<\/p>\n \u201cThe transition to Bitcoin has been a strategic move to position El Salvador as a local tech hub and lift it out of poverty. As such, it should be viewed as a long term play and should not be judged based on short term price fluctuations.\u201d<\/p><\/blockquote>\n With talk of Bitcoin\u2019s volatility taking center stage in recent weeks, it is worth delving into the question of whether El Salvador\u2019s aforementioned losses may dissuade other countries from adopting crypto as legal tender in the future. Trenchev believes that with the right mindset, every country can benefit from one of Bitcoin\u2019s main features: to be a store of value in the face of severe inflation.<\/p>\n He added that while the current bear market is bad, its effects can be seen across numerous sectors including stocks, exchange-traded funds, commodities and indexes \u2014 not just crypto. <\/p>\n Not only that, in his view, the adoption of BTC is not just a profit-taking measure but rather an acceptance of the digital currency\u2019s core underlying qualities.<\/p>\n \u201cEl Salvador\u2019s example is an indication that the market tumult is, for the time being, not putting off BTC\u2019s adoption as legal tender. Rather, it\u2019s a stress test and if El Salvador pulls through it, crypto adoption as legal tender could be in for its heyday,\u201d Trenchev said. <\/p>\n Adam Boalt, CEO of EarthFundDAO \u2014 a decentralizing crowdfunding platform \u2014 told Cointelegraph that despite the recent dip and bad press, we\u2019re on course for mass adoption. In his view, once crypto establishes its use beyond just an improved version of fiat, we will continue to see widespread adoption and look back on El Salvador as being \u201cahead of the curve.\u201d<\/p>\n Jessie Chan, chief of staff at ParallelChain Lab \u2014 the firm behind public\/private blockchain ecosystem ParallelChain \u2014 believes that at this point in time, Bitcoin has become an unstoppable force that no country can afford to ignore, adding:<\/p>\n \u201cEl Salvador has shown us what life could be like with the mass adoption of crypto. Buying a cup of coffee, paying your phone bill, it is from the most trivial events that we discover a real transformation.\u201d<\/p><\/blockquote>\n Providing a holistic overview of the matter, Chris Trew, CEO of blockchain-as-a-service platform Stratis, told Cointelegraph that, in the long run, El Salvador\u2019s move to acquire more BTC will greatly benefit countries looking to legalize the asset since its adoption has really grown over the last 10 years. \u201cBitcoin has experienced a bear market before but not a global recession which may be on the horizon. Bear markets are where products are built.\u201d<\/p>\n Yaffe believes that any entity that supports Bitcoin adoption \u2014 be it a national government or an institutional player \u2014 has already factored price volatility into the decision process. And, while seeing the price of Bitcoin plummet is not encouraging in the short term, he is confident that in the grander scheme of things, a decentralized currency offers great benefits for small and poor countries that may be struggling to support their local fiat.<\/p>\n Recent:\u00a0Crypto inheritance: Are HODLers doomed to rely on centralized options?<\/a><\/em><\/strong><\/p>\n Similarly, in Chan\u2019s opinion, the willingness to accept Bitcoin as legal tender is bound to accelerate regardless of the bear market. He noted that the increasingly centralized and politicalized global financial status quo has left people, especially those living in smaller economies, with no choice in the face of losing their autonomy. <\/p>\n Just last week, El Salvador hosted a slew of central bankers<\/a> and financial authorities from 44 countries in an effort to educate them about Bitcoin and crypto\/blockchain-tech in general. To highlight the power of digital currencies, each participating member was given a wallet containing BTC and shown how to use them to facilitate a wide array of everyday purchases.<\/p>\n It will be interesting to see how things shape out for Bitcoin<\/a> from here on out, especially with inflation levels soaring all over the globe and most experts predicting a bleak future for the global economy. In that regard, if Bitcoin is truly able to transform into an inflation hedge, as many have envisioned it to be, more and more countries may look to adopt the asset in the near-to-mid term.<\/p>\n<\/div>\nA rundown of El Salvador\u2019s finances<\/h2>\n
Experts weigh in on El Salvador\u2019s crypto \u201cexperiment\u201d<\/h2>\n
More apprehension<\/h2>\n
![](\"https:\/\/s3.cointelegraph.com\/uploads\/2022-05\/2438e6f2-03d8-4116-865a-79ace5df38b1.jpeg\")
Bitcoin seems primed to grow<\/h2>\n