Who would have thought that El Salvador made a splash as the first country to legalize Bitcoin as a legal tender. However, the decision was not profitable.
Because of this policy, the country in Central America is in danger of collapsing its economy.
At first, El Salvador was confident in adopting Bitcoin because they are rich in geothermal energy for mining the virtual currency which is more environmentally friendly. In fact, when the announcement was first made, El Salvador was also planning to build a Bitcoin City.
However, as quoted by us from Futurism, Wednesday (22/6/2022) the government forced banks and shops to accept Bitcoin and the residents were not familiar with it, it actually hampered the economy.
El Salvador appears to be deep in debt and its president, Nayib Bukele, has lobbied the IMF to borrow $1.3 billion, Fortune said, according to reports earlier this year. Then moments after Bitcoin City was announced, the country's international bonds dropped from 75 cents to 63 cents and are currently only 36 cents.
In the five months after El Salvador adopted Bitcoin, it is estimated that the country's sovereign credit is 4 times worse than before. Not to mention the price of Bitcoin has been cut considerably, from USD 60 thousand when El Salvador started adopting it and is now under USD 40 thousand.
“El Salvador is currently the most depressed foreign debt in the world and that is because of the stupidity of Bitcoin. The market thinks El Salvador President Nayib Bukele is crazy and he is,” said Steve Hanke, professor of economics at Johns Hopkins University.
There are several reasons why this happened, for example El Salvador's financial condition was bad before the implementation of Bitcoin. Then, El Salvadorans themselves don't really believe in Bitcoin.
A survey from Central American University last September revealed that 9 out of 10 El Salvadorans do not know what Bitcoin is. Then 8 out of 10 admitted that they only had little faith in digital money, some even said they didn't believe in it at all.