Bitcoin Losses Add to Mounting Fears of Debt Default in El Salvador

According to a recent report published by The Wall Street Journal, the market value of El Salvador’s holdings has plunged by about a third.

The recent cryptocurrency crash has drastically increased the odds of El Salvador defaulting on its debt.  

El Salvador shelled out more than $100 million to build its Bitcoin fortune, which has now dwindled to just $38 million. The largest cryptocurrency plunged to $25,401, the lowest since December 2020, earlier this week.    

The poverty-stricken country adopted Bitcoin as legal tender last September. Despite coercive measures that require mandatory acceptance, the largest cryptocurrency has so far failed to gain any traction in El Salvador.

As reported by U.Today, a recent study conducted by the National Bureau of Economic Research (NBER) found that 80% of companies had never touched Bitcoin.

Because of its Bitcoin gamble, El Salvador will likely fail to secure financing from the International Monetary Fund (IMF). The country is supposed to make its $800 million bond payment in January. Earlier this month, Moody’s downgraded El Salvador’s debt rating to “junk.”

El Salvador had to postpone its much-hyped Bitcoin bonds due to the price rout.

President Nayib Bukele, who calls himself the “the world’s coolest dictator,” hasn’t soured on Bitcoin despite being ridiculed for making the impoverished nation even poorer with his ill-timed buys. Earlier this week, he announced yet another purchase of 500 coins.  

Fernando Mejía, a graphic designer from San Salvador, told the Wall Street Journal that Bitcoin was actually causing more harm.