Bitcoin collapses: some already see El Salvador defaulting

Bitcoin collapses: some already see El Salvador defaulting

And another lawsuit against Bitcoin – Salvadoran President, Nayib Bukeleoften takes advantage of strong Bitcoin (BTC) declines to increase the country’s stock. Critics of cryptocurrency are taking advantage of these falls to sue legal Bitcoin in El Salvador.

Bros, You’re Guilty: The Absurdity of Legal Bitcoin in El Salvador

The May 10, 2022 article by Robin Wigglesworth, published on the Financial Times, makes a trial against cagainst El Salvador’s decision to make Bitcoin legal tender. He criticizes the Salvadoran president for having built up a large stock of cryptocurrency.

The first sentences of the paper set the tone. the “laser-eyed crypto bro president” would “Trafficking a country already in difficulty”. The President of El Salvador, Nayib Bukelewould thus risk plunging the country into a “even deeper shortage”.

The author then evokes a purchase sum of 2,280 BTC by El Salvador, by analyzing the publications related to these acquisitions on the Twitter account of Nayib Bukele. He estimates that El Salvador has spent – ​​or invested, it depends – $101.5 million to constitute this stock of bitcoins.

The article did not fail to cite some economic indicators of the country to better highlight theirrationality of the race to accumulate BTC in which El Salvador is engaged:

  • GDP per capita is $3,799;
  • Reserves of less than $4 billion can cover ” only ” 3 months of import;
  • The proportion of public debt is around 85% of GDP.

However, El Salvador would have registered a loss of $28.9 million on his purchases of BTC during the last 6 months.

The paper also reserved a few words for the country’s bitcoin bonds – the vulcano bonds – which seem “to have disappeared”. It is obviously necessary to put this information in background color. The $800 million in El Salvador bonds that matured in January 2023 are currently trading at 76.9 cents on the dollar.

This lawsuit in due form anticipates the arguments of the defense, these “Bitcoin bros” who will claim that these bitcoin purchases will turn out to be:

“(…) good business when cryptocurrency eclipses gold, and even the US dollar. »

The points mentioned above, without being exhaustive, take up most of the arguments that would demonstrate the absurdity of this accumulation of bitcoins by El Salvador.

Bitcoin as legal tender in El Salvador, is this relevant?

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The floor for the defense: we repeat ourselves, but are no worse deaf…

This article from the Financial Times obviously falls on the good time for bitcoin haters. It was released as Bitcoin and the entire crypto markets were rocked by a UST stablecoin that lost parity with the dollar and the LUNA value that has fallen to zero.

The price of Bitcoin then fell under $30,000. Based on this assumption of 2,280 BTC purchased for $101.5 million, El Salvador therefore acquired its bitcoins at an average unit price of just over $44,500.

Bitcoin is currently trading at $29,776. The reviews pointing to the losses on these purchases are therefore valid for the moment.

But will they remain so when the price of Bitcoin eventually rises above $44,500? Moreover, the price of Bitcoin does not need to reach 6 figures or totally eclipse the greenback. Unless the author of this prosecution article has data showing that the price of Bitcoin has not no chance to go above these 44,500 dollars.

The price of Bitcoin managed to rise above the $46,000 in 2022. However, it has so far been unable to get close enough to $50,000. The cryptocurrency is undergoing strong downward pressures. They are linked to periodic announcements by the US Federal Reserve (Fed) on reducing its balance sheet and raising interest rates.

The context is therefore conducive to attack Bitcoin which could experience a bear market until the end of 2022.

As for the crashes in the BTC markets, the assets of the traditional finance have they ever seen their price crash in the past – collapses due to specific or structural causes?

What long-term vision for the growth of cryptocurrencies?

The current lawsuit against Bitcoin and the “bros” defending it seems above all to convey a message. He is absurd to take a long-term view of the growth potential of cryptocurrency. Each drop in its price over a few days, weeks or months is a golden opportunity for his critics to recall the danger of acquiring such a volatile cryptocurrency.

At the risk of repeating ourselves, Bitcoin also has several arguments who plead in favour its long-term sustainability and growth:

  • Behind the cryptocurrency ” hidden ” a decentralized networkstar which allows to perform lower cost transactions and which has so far proven its solidity;
  • Bitcoin is a deflationary currency – fixed supply, periodic halving, upward trend in mining difficulty. Can the greenback and all fiat currencies claim this quality – or as long as governments decree that fiats have a value, regardless of the excesses in the management of their issuance? ;
  • bitcoin is decentralized. Its operating rules cannot therefore be modified by one or a limited number of people. Are fiat currencies managed by their holders or by democratically elected people?

Lin El Salvador dared to take the plunge by giving Bitcoin legal tender. But the country must now resist the different attackslike this prosecution case, but also against the IMF which wants to impose its law.

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