In 2021 ago, El Salvador made a surprise because it became the first country to legalize Bitcoin as a legal tender. But now, the country's economy is in disarray, even in danger of collapsing.
The President of El Salvador, Nayib Bukule, is indeed confident in adopting Bitcoin. Moreover, El Salvador is rich in geothermal energy to mine it more environmentally friendly. It was even announced plans to build a Bitcoin City.
However, as quoted by detikINET from Futurism, forcing banks and shops to accept Bitcoin and the residents are also unfamiliar, it actually hampers the economy.
El Salvador appears to be deep in debt and the president has lobbied the IMF for a $1.3 billion loan, according to Fortune. 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's because of the stupidity of Bitcoin. The market thinks Bukele is crazy and rightly so," 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.