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China Monitors El Salvador’s Economy as Country’s Crypto Market Collapses

Bitcoin's tumbling value has put the Central American country in a financially precarious spot

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UNITED STATES: One account has been noticeably silent on the subject, despite crypto-Twitter being flooded with doomsday memes about the bankruptcy of cryptocurrency exchange FTX and the steep decline in the price of bitcoin.

Nayib Bukele, the president of El Salvador, legalized bitcoin a year ago, but unlike past crashes, he did not advise his supporters to “buy the dip.”

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The traders’ favorite laser eyes, which were once shown on his Twitter page, are no longer there.

He announced that the nation would sign a free trade pact with China the day that FTX declared insolvency.

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As part of the agreement, China had offered to purchase the nation’s $21 billion in foreign debt, according to his vice president, Félix Ulloa.

The 6.5 million-person nation in Central America is in a precarious financial situation. It must pay a €667 million ($688 million) amortization in January.

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Bukele predicted that the price of bitcoin would reach $100,000 at the beginning of the year and pledged that his government would issue bonds in bitcoin to pay off its debt.

However, the alleged “volcano bonds” never materialized, and at this time, the price of one bitcoin is roughly $16,000.

The most accurate observer of the president’s shady trading believes that he has spent more than $107 million on 2,381 bitcoin. That investment is now worth just over $40 million.

The president’s determination to defy IMF advice to reverse his bitcoin policy has alarmed foreign markets, even if the losses from bitcoin are relatively minor compared to the total debt.

Because El Salvador accepted the US dollar as its official currency in 2001, it is unable to activate the printing press in the face of rising inflation, a potential recession, and a deteriorating budgetary situation.

Instead, the government has used reserves to close its budgetary gap. According to Membreo, if the situation worsens, the nation may finally be forced to abandon the dollar.

Based on strict enforcement of law and order and frequent attacks on the previous political class, Bukele maintains his position as the most popular president in Latin America, with a popularity rating of almost 90%.

Many Salvadorans believed they were in the last-chance saloon when they chose him in 2019, following decades of corruption from the main parties and rising gang crime.

However, Bukele does not know when to hold or fold them as a bitcoin gambler. Developing closer ties with China would be another risk.

Also Read: Crypto Exchange FTX Asked To Stop By United States

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