The economy of El Salvador is directly proportional to the price fluctuation of Bitcoin
The cryptocurrency market has started disappointing crypto investors across the world with the constant fluctuation of popular cryptocurrencies. Terra, Cardano, and many more are experiencing major drops in cryptocurrency prices. Meanwhile, crypto investors are getting concerned with the new Bitcoin paradise, El Salvador, and its investment in Bitcoin. The emerging fear is that if Bitcoin collapses then what will be the drastic effect on El Salvador. These two are directly proportional to each other in the highly volatile cryptocurrency market.
El Salvador as the Bitcoin Paradise
Investing millions of dollars in Bitcoin can boost the economy of the Bitcoin paradise. But there are some cons to investing such huge amounts in a highly volatile venture. El Salvador is focused on bringing new projects if at any time Bitcoin collapses. The El Salvador President, Nayib Bukele, has failed and brought controversies in transforming the top-most cryptocurrency into the official national currency with the US dollar.
The Bitcoin paradise tends to pay for with the issuance of US$1 billion in the volcano bonds from the middle of 2022. These ten-year volcano bonds will pay 6.5% annual interest with the use of US$500 million of the revenue will be used to purchase Bitcoin in El Salvador.
The concern regarding Bitcoin price drops is related to cryptocurrency mining. It does not make any economic profit as the average price for Bitcoin mining is 5 cents per kilowatt-hour while El Salvador produces 13-15% per kilowatt-hour. Crypto investors consider that if the President pushes any Bitcoin-related project, it will be a disaster for El Salvador.
Being one of the first countries to adopt the top-most cryptocurrency, the Bitcoin paradise is focused on promoting the adoption of cryptocurrency in the city. The citizens are not so keen to adopt Bitcoin as a legal tender because they are used to the traditional financial system and not so keen on tech-savvy and internet-based transactions. Additionally, the US dollar is stable, unlike Bitcoin which can drop or hit its price at any point in time.
The current price of Bitcoin is US$29,811.34 with a market cap of US$568.56 billion. El Salvador grabbed the opportunity of low price and purchased 500 BTC at an average price of US$30,744. But the real concern is if Bitcoin drops more and more, whether the first country t hold more than 2,300 BTC can stop the serious consequence in the nearby future. It needs to plan for more strategies to prevent any disaster from happening to the Bitcoin paradise.
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