El Salvador, A Country That Is Almost Bankrupt Because Of Bitcoin, Debt Is Mounting and Difficult To Recover

El Salvador, A Country That Is Almost Bankrupt Because Of Bitcoin, Debt Is Mounting and Difficult To Recover

El Salvador, a country that is almost bankrupt because of Bitcoin, debt is mounting and difficult to recover. In the midst of the world’s uncertain economic currents, El Salvador, a small country in Central America squeezed between the ocean and majestic volcanoes, stands full of hope on the threshold of a bright and glorious economic dawn. With overflowing self-confidence, El Salvador stepped forward on a path that had never been traveled before. In September 2021, this country made history as the first country in the world to make Bitcoin a valid and legal means of payment, side by side with the already established dollar currency.

President Nayib Bukele, who was elected in 2019, with his chest puffed out with confidence, took a controversial decision that was derided by many as too bold. However, the President did not pay attention to this sneer, but was very confident that his country would one day become the world’s financial center through Bitcoin, as the king who controls digital currency. In the midst of world doubts and worries, this small country dares to break boundaries, challenge the old order and open a new path towards a future full of hope. However, El Salvador’s steps to become a pioneer in the Bitcoin era actually backfired for the country. Several months after the ambitious policy was inaugurated, El Salvador actually had to bite the bullet as this country was on the verge of a haunting economic collapse.

A report from Fortune describes how El Salvador is now trapped in the grip of suffocating debt. The IMF predicts that the country’s public debt will swell to 96% of gross domestic product in 2026. A debt proportion of this size can be compared to someone who has 7 US dollars in his pocket but he has to pay a debt of 6.9 US dollars. Which means almost all of his income must be sucked up, because it is used to pay off the debt.

This situation becomes even more ironic because it turns out that 90% of all El Salvadorans don’t even understand what Bitcoin is, and their trust in digital money is still very low. This is because the people of El Salvador carry out conventional buying and selling transactions using paper money, like people in many other countries. Apart from that, the value of Bitcoin, which had reached 60 thousand dollars at the time of the announcement, actually fell to only 40 thousand dollars when El Salvador’s economy began to falter.

As a result, many Bitcoin lovers are panicking and flocking to exchange Bitcoin for cash. Where they need to make a trip to the ATM and need to cut admin fees by quite a large percentage. Bitcoin lovers and activists in that country, who hoped to make big profits by buying Bitcoin at very expensive prices, actually experienced sudden losses due to the value of Bitcoin suddenly dropping sharply.

This extreme and wild volatility in the value of Bitcoin has caused the foundations of El Salvador’s economy to shake in horror and reminds us all that the path to prosperity is not as easy as turning the palm of the hand. The result of a policy that many people consider a stupid step. President Naib Bukele finally bowed in front of the IMF crying and begging for a loan of 1.3 billion dollars to save his country from bankruptcy. Amid increasing pressure the IMF advised the country to withdraw from the Bitcoin experiment urging that the digital currency no longer be used as legal tender. However, amidst the IMF’s clamor to abandon Bitcoin, El Salvador remains firm in its stance. El Salvador’s Finance Minister Alejandro Zelaya acted like a wounded lion. Who is ready to record anyone who dares to threaten the sovereignty of his country.

He stated to a local television station that no international organization could force El Salvador to abandon Bitcoin. Even President Naib Bukele bravely or perhaps a little crazy took a surprising step for the world on November 16, 2022. El Salvador routinely carries out an unusual daily ritual in which the country commits to buying one Bitcoin every day. This move is not just an ordinary strategy but a manifestation of a deep belief that Bitcoin is the key that will unlock a glorious future. And now when cryptocurrencies move up and down unexpectedly, the total value of Bitcoin owned by El Salvador has reached more than 400 million dollars with a total of 5,700 Bitcoin. And in the midst of merciless market turmoil, the value of Bitcoin has reached 70 thousand dollars per piece.

A seasoned capitalist named Tim Draper even predicts that if the price of Bitcoin reaches 100 thousand dollars, El Salvador is guaranteed to be able to pay off all their mounting debts to the IMF. Even though Bitcoin has brought New Hope to El Salvador’s economy the shadow of doubt is starting to haunt them. That this digital currency is like a double-edged sword, which can secretly undermine the foundation of the country’s economy. The erratic rise and fall of Bitcoin’s value is an illicit gambling practice that has the potential to pose major unpredictable risks. If the value of Bitcoin falls drastically then the country’s reserves could be eroded greatly and trigger very severe financial instability.

The year 2022 is a silent witness to the ferocity of Bitcoin where around 40% of its shareholders feel the bitter pill of loss. And El Salvador, with its large investments, did not escape the raging storm of losses. And amidst the roar of El Salvador’s ambition to elevate Bitcoin to the main stage of the economy, this country is plunged into a very dark whirlpool of humanitarian crisis. Behind the veil of financial progress. Forgotten are the cries of the hearts of the people who were suffocated by the grip of an authoritarian regime. President Naib Bukele, who is touted as a visionary leader, has been widely criticized for his authoritarian regime which curbs freedom. The unending violence, carried out by the notorious criminal gang Begundal, forced the President to declare a state of emergency.

However, this emergency situation provides an opening for horrific human rights violations. The security forces who are supposed to protect them are instead involved in arbitrary actions. Changed face to become an executioner of brutality. Human rights institutions document mass arbitrary detention. Unspeakable torture, as well as violations of the legal process that tarnish the principles of justice.

Since March 2002 more than 68,000 people have been behind bars. A very large number for a country with a population of only around 6 million people. El Salvador with its bitcoin ambitions is under the shadow of human rights violations. This country, which is passionately trying to weave its future on the foundation of cryptocurrencies, is now faced with a painful dilemma, namely between the shine of innovation and moral responsibility towards its people. The middle is hurting and in the end only time will tell whether El Salvador will rise as a Pioneer or fall under the weight of neglected responsibilities.