With the ongoing market crash, El Salvador has significant losses on its Bitcoin investments.
El Salvador’s “Bitcoin experiment” was hailed by some as pioneering insofar as it paved the way for other nation-states to follow.
But the losses highlight the risks involved with crypto investing. Even more so given the amounts involved and the public way in which El Salvador has conducted its business.
But has any of this put off other countries from adopting Bitcoin as legal tender?
When the dip keeps dipping
El Salvador made history on September 7 by being the first sovereign nation to adopt Bitcoin as legal tender.
In the run-up to the “going live,” and ever since, the move has been vehemently opposed by some quarters. Including international organizations, such as the IMF, who warned that it would interfere with financing negotiations. Y private companies, including S&P Global and Moody’s, which spoke of negative implications for its credit rating.
The initial problems with Chivo Wallet do not help this. Some users report identity fraud and others mysteriously talk about their Bitcoin balance disappearing.
Despite all of the above, President Bukele remains firm in his support for the Bitcoin experiment.
However, at current prices, the value of the holdings stands at $59 million, which represents a loss of $14 million, above previous estimates due to Bitcoin’s continued decline.
Last week, Finance Minister Alejandro Zelaya said that El Salvador had sold Bitcoin, but when and how much is unknown.
Before the current recession, President Bukele said that Bitcoin would hit $100,000 this year. He also said that two other nation-states will adopt BTC as legal tender in 2022. But he kept quiet about which countries those will be.
Will this deter sovereign nations from investing in Bitcoin?
Last week, investment managers Fidelity published a report about future trends. In it, they mentioned El Salvador’s approach to Bitcoin, which they say represents an opportunity for wealth and prosperity.
Based on game theory, Fidelity said, if Bitcoin continues to perform well, other countries will be forced to join El Salvador, even if they don’t subscribe to its ideology. Asset managers describe this as buying a “form of insurance.”
“So we wouldn’t be surprised to see other sovereign nation states acquire bitcoin in 2022 and perhaps even see a central bank make an acquisition.”
This being the case, the opposite must also be true. So poor performance will deter nations from participating.
Now it’s a waiting game.
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