El Salvador, the first country in the world to make bitcoin an official currency, was able to fully pay off a massive debt owed on January 24, 2023. Last year, the fall in the price of bitcoin cast doubt on this possibility.
2022 has not been a good year for cryptocurrencies, especially bitcoin. Due to the global bear market in which prices fell very sharply, bitcoin fell in early 2022 from almost $47,300 to $16,500 on December 31, 2022 by 65% of the currency’s price, with many consequences. and caused damage to the entire cryptocurrency industry.
This decline affected not only companies in the industry. El Salvador, the first country in the world to make bitcoin an official currency alongside the US dollar, has come under the scrutiny of many international observers. According to them, the country’s “betting on bitcoin” will no longer be able to last between the decline in the value of the digital currency and the increase in the country’s debt. However, as President Nayib Bukele of El Salvador stated on January 24, 2023, there is no shortage in the country.
Bitcoin is the official currency of El Salvador // Canva
Debt repayment of $800 million
In a lengthy Twitter thread, the rather exasperated president explained that in 2022, “almost all the international press has reported that because of our ‘bitcoin bet’, El Salvador will default on its debt. In fact, the country had a debt of $800 million plus interest. ” They are [les journaux] said that if we do not make a new agreement with the IMF, we will not be able to repay our obligations due to our losses in bitcoins,” he continues.
As evidence, he points to the large number of articles published on the subject in newspapers such as The New York Times, The Washington Post, and numerous Spanish-language publications. The New York newspaper reported that the “poor country” is getting closer and closer to a cryptocurrency default.
Numerama, a month before the New York Times article referenced by Nayib Bukele, also echoed the country’s troubles over the price of bitcoin. Thus, we explained that El Salvador, which “dipped into its reserves to buy bitcoins, now gone,” would have “less funds at its disposal,” which could have led to a default. Other media such as El Pais took fewer chopsticks and simply wrote that “El Salvador was expected to fail”.
Naib Bukele tweeted today that the country was able to pay off its $800 million debt in full, including interest, which is encouraging news for the country. If the media were right in their skepticism and the bankruptcy hypothesis, then today we must admit that El Salvador got out of it without needing help. However, it is important to point out that, according to Bloomberg, “the Central American state will be able to pay its debts thanks to a last-minute loan and after redeeming two bonds.”
What will it change? Now absolutely nothing. The political and economic life of the country will remain the same, and this should not affect the price of bitcoin. But El Salvador’s experience, which is going reasonably well so far despite bitcoin’s still fairly low adoption rate, may encourage other countries to do the same. After El Salvador and the Central African Republic, perhaps in 2023 more countries will make bitcoin their official currency.
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