Home CryptocurrencyAltcoin Follow-up admission one year later

Follow-up admission one year later

by SuperiorInvest

El Salvador, a small Central American nation that made history more than a year ago when it produced Bitcoin (BTC), recently marked its first year of BTC acceptance.

The Salvadoran government promoted BTC as a tool to attract foreign investment, create new jobs, and reduce dependence on the US dollar in the country’s economy at the time of adoption. Many BTC advocates and the libertarian community have rallied behind the small nation despite growing pressure from global organizations such as the World Bank and the International Monetary Fund (IMF) to remove BTC as legal tender.

A lot has changed in the last year since El Salvador became the first “bitcoin nation”. Immediately following BTC’s recognition, public excitement and interest grew, with the price rising to new highs.

Salvadoran President Nayib Bukele has joined the growing league of Bitcoin advocates to buy several market dips and even benefit from buying BTC in the country’s early days. he built schools and hospitals from his profits.

However, as market conditions turned bearish, the frequency of BTC purchases slowed, and the president, who was often seen interacting with the crypto community on Twitter and sharing future bitcoin endeavors, significantly scaled back his social media interactions.

El Salvador has bought 2,301 BTC for around $103.9 million since last September. This bitcoin is currently worth roughly $45 million. The last purchase was made in mid-2022, when the nation bought 80 BTC at $19,000 a piece.

As the price of BTC fell, critics who had long warned of a crypto bubble felt vindicated, with several “I told you so” comments. However, market experts believe that Salvador’s experiment with BTC is far from a failure.

El Salvador’s Bitcoin Volcano Bond, a project that aims to raise $1 billion from investors to build a Bitcoin city, has already been shelved on multiple occasions, and skepticism is growing not only around the project, but also over the adoption of BTC itself.

Samson Mow, a Bitcoin entrepreneur who played a key role in designing the Bitcoin Volcano Bond – also called the Volcano Token – told Cointelegraph that contrary to common external perception, El Salvador is building through a bear market. He noted that the volcanic bond was delayed for several reasons and is currently awaiting approval of the Digital Securities Act. He explained:

“We are still waiting for the new digital securities laws to go to congress, and once they are passed, El Salvador can start raising capital for bitcoin bonds. I hope it will happen before the end of this year. Similar to Bitcoin companies, Salvador is focused on building through a bear market. I can’t see President Bukele not stacking up more for these prices.”

The price of BTC hit a new all-time high of $68,789 just a month after El Salvador’s adoption on November 10. However, since then, the price has fallen by more than 70% and is currently trading around $19,000. Many critics believe that the future of Volcanic Bond and its native token is highly dependent on the crypto market, and thus it could only gain traction during bull markets.

Paolo Ardoino, CTO of Bitfinex, told Cointelegraph that Volcanic tokens will generate investor interest regardless of market conditions, explaining:

“The volcanic token will be the first of its kind. While investor appetite for new offerings is usually greater during a bull market, we are confident that the unique offering this token represents will generate significant interest regardless of market conditions. The Volcanic token has widespread support in the Bitcoin community and there is clearly a lot of interest in the offering regardless of whether we are in a bear or bull market.

Bitfinex is the key infrastructure partner of the Salvadoran government responsible for processing Volcanic token sale transactions.

Bitcoin adoption boosted money transfer and tourism

While critics have called Salvador’s bitcoin experiment a failure from the start, supporters see it as a revolution of sorts and believe that El Salvador’s adoption could create a ripple effect for other nations with similar financial problems, such as high numbers of unbanked citizens and significant remittances . volumes.

Bukele previously mentioned that the primary goal of BTC recognition was to offer banking services to the more than 80% of unbanked Salvodrans. Within six months of the law’s passage, the country’s national bitcoin wallet managed to onboard four million users, ensuring that 70% of the unbanked population have gained access to payment and transfer services without having to go to the bank.

Recent: Metaverse graphics are focused on community and accessibility – not realism

Aarti Dhapte, Principal Research Analyst at Market Research Future, told Cointelegraph that the adoption of BTC in El Salvador has proven to be successful on several fronts, whether it’s banking without a bank account or promoting tourism:

“We should accept that the digital currency has helped the Central American nation of El Salvador rebuild its tourism industry, despite the fact that the country is still struggling to endure a long crypto winter. According to information from the Ministry of Tourism, El Salvador’s travel spending has increased by 81% in the post-pandemic period. In 2021, the nation welcomed 1.2 million visitors and 1.1 million during the first half of 2022.

Statistics show that more than 9% of El Salvador’s GDP is the tourism industry, so almost doubling tourism is a significant benefit to the country.

The share of tourism in El Salvador’s GDP. Source: Extra

In addition to tourism and offering financial services to non-bank entities, the adoption of BTC has also proven to be beneficial in terms of cross-border transfers, which significantly reduces transaction costs.

El Salvador’s Central Reserve Bank estimates that from January to May 2022, remittances from citizens living abroad totaled more than $50 million. The adoption of Bitcoin and the Chivo wallet, an initiative supported by the government of El Salvador, helped to increase Lightning Network transactions by 400% in 2022.

Disadvantages of accepting Bitcoin

The biggest downside to Bitcoin adoption in El Salvador has been the macroeconomic factors that have driven the price of BTC down, along with the amount of pushback it has received from around the world. In a bull market, this rebound would be fine, but as a small nation state with financial problems, the country cannot afford to be on bad terms with international monetary organizations.

Right now, the vast majority of Salvadoran bitcoins have been bought at a higher value than they currently enjoy. Bitcoin closely tracks traditional assets like the stock market – especially tech stocks. They, too, have taken a beating this year as the world struggles to cope with the fallout from pandemic-related government handouts.

Beyond the price of Bitcoin, El Salvador’s bigger concern is how the international financial world views the move.

The country’s shift towards Bitcoin has limited the country’s access to traditional financial markets, causing Bukele some real problems in financing the repayment of its bond obligations. Earlier this year, Moody’s credited disagreements over bitcoin as the reason why El Salvador was struggling to settle with the IMF.

Recent: Post-Merge Ethereum Hard Forks Are Here: Now What?

Richard Gardner, CEO of institutional infrastructure services provider Modulus, told Cointelegraph that maybe five years from now, Bukele’s decision won’t look so bad, but it’s currently controversial:

“Bukele’s move to Bitcoin does not look wise. Even with high USD inflation, Bitcoin ultimately failed as an inflation hedge, given its decline. However, we are looking at a one-year snapshot during the recession. For a country like El Salvador, access to financing through organizations like the IMF is essential. This makes Bukele’s bitcoin gambit difficult to defend.”

El Salvador’s future depends heavily on the success of the delayed volcano bonds, which could bring in billions in revenue and set a precedent for others to follow. Until the bond launches, the outside world will continue to measure its success based on its BTC purchases.

Source Link

Related Posts

%d bloggers like this: