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More pressure on El Salvador as Bitcoin hovers between $29K and $30K

 


El Salvador has been on the radar of leading financial and business institutions ever since it adopted bitcoin as legal tender. It has largely become a spectacle as cryptocurrency supporters and non-supporters alike are watching as the whole thing unfolds. El Salvador, which had made good on its Bitcoin promise, had made several BTC purchases last year and this year when the market was near its peak.


The country now owns at least 2,300 BTC since making its first bitcoin purchase in September 2021 . Now that the bitcoin price has dropped significantly, how will that play out going forward?


El Salvador and its bitcoin

El Salvador had bought another 500 BTC in May after the market plummeted to $1.68 trillion. With these bitcoins purchased at an average price of $30,774, the country's holdings so far totaled 2,301 BTC. This is the lowest price at which El Salvador was able to purchase the digital asset, and since that purchase represented only a small portion of the holdings, El Salvador is still posting a loss.


When El Salvador first bought BTC in September, it was trading above $44,000. That means the digital asset is down over 30% since then. The entire stash is now worth about $70 million at current prices. Even applying the Dollar Cost Averaging method, where the country bought BTC at different prices, the value is still 28% below the total value of the purchase.


The move to accept BTC has not only proved controversial, but also impacted the country's ability to receive international aid in the form of loans. Last year it was revealed that El Salvador had solicited $1.3 billion from the IMF. However, this seems unlikely as the IMF has expressed contempt for the adoption of Bitcoin as legal tender.


The IMF has advised El Salvator to stop using the digital asset as the country's official currency as it could cause problems for the economy in the long run. It has revealed that the current account deficit for El Salvador's economy, which relies on remittances and external financing, is estimated to widen by $2 billion over the next three years. But President Nayib Bukele has turned a deaf ear to this.


El Salvador is a country that relies heavily on remittances from citizens abroad to send money home to their loved ones. Because of this, the President has said that BTC will make these transfers easier and cheaper for the country's residents.


As for the price, the President isn't too bothered by the recent drop either. He has said in the past that he expects the price of the digital asset to reach $100,000 sometime in 2022. Should this be the case, El Salvador will reap a significant profit from its BTC holdings.

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