Internal pressure and external controversies
El Salvador's latest Bitcoin purchase has once again attracted global attention. According to data from the country's national Bitcoin office, El Salvador's treasury now holds a total of 6,000.77 Bitcoins, with an estimated market value of $561 million. Despite strong pressure from the International Monetary Fund (IMF), the country shows no signs of backing off and continues to push forward with its crypto asset policies.
Image source: Bitcoin Office
The El Salvador government announced a plan to 'buy one Bitcoin daily' in 2022, and now holds the sixth-largest government Bitcoin reserves in the world, following the United States, China, the United Kingdom, Ukraine, and Bhutan. Although the IMF and some traditional financial institutions continue to express concerns that Bitcoin's volatility may pose risks to the country's financial stability, President Bukele clearly has no intention of letting these doubts shake his position.
IMF warns about the $1.4 billion loan case
In fact, El Salvador has been negotiating a $1.4 billion loan with the IMF in recent years, caught in fiscal pressure. However, the IMF has asked the country to "moderately converge" its Bitcoin policy in the contract draft, proposing to enforce a reduction in the national purchasing strategy and limit purchases to official use only. But El Salvador seems to have not budged so far, continuing to actively buy Bitcoin on the open market. Critics argue that this risky move could trigger fiscal risks, and if the value of Bitcoin experiences a significant drop, the country may bear a heavy burden of public debt.
In response, the Bukele government stated that the plan is a "long-term strategy," focusing on Bitcoin's potential as a hedge against inflation in an inflationary environment and its possibility as a global emerging reserve asset. Government officials emphasized that Bitcoin's legal status in the country will greatly promote tourism, trade, and investment, bringing long-term benefits that outweigh the drawbacks. Recently, the head of the national Bitcoin office, Stacy Herbert, also hinted that there may be an acceleration in purchasing Bitcoin in the future and stated that the government has no intention of reducing its holdings.
Impact on the global crypto market
Market observers point out that El Salvador's substantial holding of over 6,000 Bitcoins is symbolically more significant than the actual trading volume, equivalent to playing the role of a "public institution bullish" on the international stage. Especially after the bear market, Bukele's "DCA" strategy has received high-profile promotion, attracting follow-up effects from other countries, with some U.S. states and politicians also beginning discussions on whether to include Bitcoin in official reserves.
However, investment banking analysts also remind: 'If global financial conditions worsen, or Bitcoin encounters significant negative news, El Salvador may face severe fiscal volatility risks.'
Even at a high point, there is a determination to buy, but if the future does not meet expectations, the stability of the national finances may come into question. Conversely, if Bitcoin continues to strengthen and repeatedly hits new highs, El Salvador may also reap huge profits and showcase the investment potential brought by emerging markets.
Although traditional international financial organizations such as the IMF and the World Bank remain highly skeptical of El Salvador's Bitcoin initiatives, the Bukele government seems to have no intention of backing down, repeatedly emphasizing the determination to "buy one more Bitcoin." As global attention returns to the stalemate in negotiations between the country and the IMF, El Salvador has demonstrated its stance by continuously expanding its Bitcoin holdings. Whether this "Bitcoin grand experiment" can succeed under multiple pressures remains to be seen.
'Born rebellious? El Salvador is unafraid of IMF pressure and has already held over 6,000 Bitcoins!' This article was first published in 'Crypto City'.
