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Bitcoin poses “extremely low fiscal risk” for El Salvador

 


El Salvador made Bitcoin legal tender and accumulated large amounts of BTC. Could the Current Crypto Bear Market Become a Problem for the Country?


"When I'm told that the fiscal risk for El Salvador is really high because of Bitcoin , I can only smile," said Finance Minister Alejandro Zelaya. “The fiscal risk is extremely low.”


According to an earlier estimate by German broadcaster Deutsche Welle, the country's Bitcoin portfolio is reported to have lost around $40 million in value. This value was not an issue for Zelaya. "$40 million is not even 0.5% of our national budget," he stressed.


El Salvador buys bitcoin in bear market

Last year, El Salvador became the first country in the world to introduce bitcoin as legal tender, accepting bitcoin alongside the US dollar. Although this plan drew criticism from international organizations such as the International Monetary Fund , President Nayib Bukele chose to include Bitcoin in the treasury.


Despite the current crypto bear market, El Salvador continued to invest in Bitcoin . The government last bought 500 BTC in May 2022 , at which point the country's 2,301 BTC were worth around $73.7 million.

Since then, however, the Bitcoin price has continued to fall. Earlier this week, BTC price fell to its lowest level since December 2020. Since El Salvador made the cryptocurrency legal tender, the BTC price has fallen by around 50%.


On Monday, over $1 billion worth of positions were liquidated by more than 250,000 crypto traders. The majority of the positions were BTC and ETH positions.


The “ crypto winter ” that Bitcoin and the larger cryptocurrency markets have experienced over the past six months can be largely attributed to monetary policy by the US Federal Reserve (Fed) , according to the latest CoinShares report . The rate hikes and announcements by the Fed that it wants to curb inflation led to about $102 million of capital being withdrawn from digital asset investment products in the last week.

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