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El Salvador made history by officially becoming the first nation to recognize Bitcoin as a legal tender for its citizens. Since this bold move, the country has steadily increased its Bitcoin holdings over the past three years. This decision showcases El Salvador’s strong commitment to integrating Bitcoin into its economic framework.
Under President Nayib Bukele’s leadership, the government now owns 5,871 BTC, valued at over US$342 million. This initiative reinforces El Salvador’s role as a trailblazer in cryptocurrency adoption. It signals the country’s long-term confidence in Bitcoin’s global market potential.
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Long-Term Bitcoin Buying Strategy
According to a post by SpotOnChain on X, the 3,046 BTC owned by El Salvador has an average price of $43,888 per coin. The daily accumulation strategy they have been implementing started in 2023, and they have not paid attention to market volatility up to this point.
This move is considered bold and unusual in cryptocurrency, especially for developing countries. Usually, countries prefer a more cautious approach in setting monetary policy.
However, El Salvador has demonstrated its readiness to take more significant risks for potential gains in the future. By continuously increasing its Bitcoin reserves, the country is also trying to protect itself from the threat of inflation that often affects the value of fiat currencies, such as the U.S. dollar.
Cryptocurrency-Based Trade Proposal
El Salvador’s next steps seem increasingly ambitious. This country is drafting a proposal to introduce a cryptocurrency-based trading system to facilitate transactions between El Salvador and Russia.
Alexander Ilyukhin, the First Secretary of the Russian Embassy in Nicaragua, stated that El Salvador has followed Russia’s policy regarding the use of cryptocurrency, particularly for international trade.
With this initiative, both countries hope to reduce their dependence on the U.S. dollar while speeding up cross-border transactions.
This proposal indicates that El Salvador sees great potential in using crypto for international trade. It could create a new, more efficient, secure, and decentralized way to conduct trade transactions if successfully implemented.
This policy could also open opportunities for other countries to consider cryptocurrency in their international trade, especially amid global economic uncertainty and increasing sanctions against certain nations.
Obstacles and Possible Advantages
Although El Salvador has been a pioneer in using Bitcoin, this move has been challenging.
On one hand, many societies and global communities are providing support, but on the other hand, criticism has also emerged regarding the high risks associated with dependence on cryptocurrencies, especially given Bitcoin’s widely known volatility.
However, Bukele’s government seems optimistic that, in the long run, the benefits of adopting Bitcoin will outweigh the existing risks. In addition, El Salvador needs to consider international regulations and the impact of this policy on its relationships with other countries, particularly the United States.
Cooperation with Russia in crypto-based trade may also raise concerns among various parties observing Russia’s influence in the Latin American region.