El Salvador wants to ‘hide problems’ with bitcoin, says expert
The Bukele government returns to invest the country’s reserves in bitcoin with a purchase of US$ 15 million, but, for experts, the move does not help the crypto market or the Salvadoran population
Last Monday, the 9th, the president of El Salvador, Nayib Bukele, announced the purchase of another 500 units of bitcoin (BTC), for a value of US$ 15.4 million, further increasing the country’s exposure to the asset. digital. Currently, there are already about $71 million in reserves allocated in the world’s largest cryptocurrency. Analysts heard by EXAME, however, condemned the movement.
Bukele, as usual, took to social media to announce the most recent purchase of bitcoin, the same day the cryptocurrency began to intensify its decline to its lowest levels in more than a year: “El Salvador just bought low ! 500 coins with an approximate average price of $30,744,” he wrote.
According to Vicente Braga, partner at FAS Advogados in the area of banking, payment methods and fintechs, “El Salvador has a very favorable position for crypto-assets in general and bitcoin in particular. In this sense, this buying movement only highlights the country’s bet on having bitcoin as one of its official currencies. It is natural that a country that is adopting the strategy of positioning itself as a great friend of crypto assets seeks to have some reserves in bitcoin.”
However, the COO of crypto exchange Brasil Bitcoin, Vinicius Bitzer, believes that the most recent acquisition of bitcoin by the Salvadoran government has negative effects: “It only serves to mask a much bigger domestic economic problem, as although adoption has attracted a lot of visibility to the country, when analyzing the real impact of the adoption of bitcoin [em El Salvador]we see that the strategy taken by Bukele was clearly wrong”.
“The State should have invested first in the education and financial stability of citizens, after all, as promising as bitcoin is, its day-to-day usability is still low and making it a legal tender makes it just as — if not more — harmful than fiat currencies, due to their high volatility, which can further harm the most vulnerable classes”, added the executive.
El Salvador became known after being the first country to adopt bitcoin as a legal tender, in September 2021. However, the president is the target of harsh criticism by experts who claim that it is a high-risk operation, in which who will pay the cost of the experiment will be the population.
The government has already made successive purchases after its first of 400 coins, bought at the time for $21 million. On December 21, 2021, the country played with numerology and bought 21 units of the currency, marking the 21st of the last year at number 21 of the 21st century, helping to bring it up to its current stock of over 2,300 units.
About the last purchase of 500 BTCs, Felipe Medeiros, analyst and partner at Quantzed Cryptos, explains why the move had little impact on the market: “It is a small amount, close to the high volume seen in recent days. Furthermore, it is not a new fact, which would bring optimism to the market”, he commented.
Although Bukele is proud to buy the currency in low moments, the analyst also points out that the country, like most investors, still loses money with its operations. “The average price purchased by El Salvador is US$43,865, which represents a loss of more than 30% of the amount invested,” explained Felipe.
Despite the negative points, the adoption of cryptocurrency by the population has been seen as a success. According to a study by the National Bureau of Economic Research (NBER), 20% of companies in the country already accept crypto as a form of payment. For comparison, 25% of these establishments accept credit and debit cards.