Due to the recent sharp decline of bitcoin, the Central American country El Salvador is in a financial crisis. The market value of the country's $105 million bitcoin has shrunk by more than one-third, with a floating loss of about $40 million Experts pointed out that the sharp decline of bitcoin will greatly increase the risk of debt default in El Salvador.
On September 7, 2021, El Salvador became the first country in the world to use bitcoin as legal tender. However, according to the survey, the people of the country hold a negative view of bitcoin, and most businesses are unwilling to accept bitcoin payment.
Since the official adoption of bitcoin in El Salvador, bitcoin has fallen by 45%. The losses caused by bitcoin have made this heavily indebted country even worse. As of December 2021, El Salvador's debt reached US $24.4 billion, up from US $19.8 billion at the end of 2019. The country must repay interest on its international bonds of $329 million this year and $800 million of bonds due in January next year.
Polina kurdyavko, head of emerging markets at BlueBay asset management, said El Salvador's debt restructuring was "inevitable" if El Salvador continued to adopt the "current policy mix". "Through the right [IMF] plan, El Salvador's debt may be sustainable. But El Salvador must act now," he said
The Executive Board of the International Monetary Fund has urged El Salvador to abolish bitcoin's legal tender status, but the country still shows no sign of stopping. President bucker of El Salvador recently sent twitter Said the country bought 500 bitcoins on bargain hunting.