The IMF cites price volatility for their strong stance against El Salvador's embrace of Bitcoin, but are they more concerned that the experiment will succeed?
“It is possible that if Bitcoin becomes a strong worldwide reserve currency, the IMF may be deemed a lot less effective and necessary.”
“El Salvador’s experiment hasn’t gone very well,” acknowledged Tawil. Technical problems have emerged, and Bitcoin’s recent market price drop hasn’t helped. “El Salvador is not a poster child for a strong and thriving economy. So, it was never likely that there was going to be a long line of followers behind El Salvador.”
Nor has there been any surge in foreign investment in El Salvador since September when BTC became legal tender, continued Hawkins. “President Bukele promised it would add 25% to El Salvador’s GDP.” That hasn’t happened.issued in late January recounted that crypto adoption had soared in the country. “An estimated 3.8 million people use El Salvador’s Bitcoin wallet, Chivo, suggesting 84% adoption among eligible citizens.
Ark Investment also noted that Chivo was settling $2 million in remittances daily as of October 2021, “accounting for roughly 12% of El Salvador’s $6 billion in annual remittances and more than 2% of its GDP.” The nation’s Bitcoin play has given its citizens unprecedented financial opportunities,“El Salvador will hopefully continue with its experiment,” Tawil told Cointelegraph, predicting that it would “achieve slow but important success. And, the price of Bitcoin will rise again.
The IMF has been taking a “rather aggressive approach” to cryptocurrency-related products, commented Rahman, but current volatility is affecting all markets, not just cryptocurrencies. “It is also worth noting that El Salvador’s relations with the United States have deteriorated, and it could be inferred this is a contributing factor.”
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