History In the Making
Crypto is a new form of currency, but not in the way you’re thinking. Cryptos like Bitcoin are digital currencies that are available all over the world, and they can be used for transactions in certain cases. For example, Tesla once allowed for their cars to be bought by Bitcoin, and apps like PayPal have incorporated it into their platforms so that you can use it to buy goods. However, we’ve never seen Bitcoin be the national currency of a country, except for one small nation in Central America.
In about 2 weeks, El Salvador will become the first country in the world to adopt Bitcoin as a national currency along with the dollar. This puts the economy at a massive risk due to Bitcoin’s volatility, and if a downturn like we saw a couple of months ago occurs, the already struggling government could dig themselves into a deeper hole. Their millennial president, Nayib Bukele, believes it will attract foreign investment and hold other benefits, but it also allows for more illicit transactions in the poverty-stricken nation. People believe that it could send the prices of goods up and down rapidly while also affecting tax revenues heavily, and Moody’s downgraded El Salvador’s debt into “junk” territory due to this policy and their struggles with the IMF to receive aid. If their Bitcoin experiment fails, it won’t be hard to see Bitcoin’s value dropping in response as it downgrades the likelihood of other countries adopting cryptocurrencies. El Salvador is making history with this move, but let’s hope that it doesn’t become an infamous one. What do you think about cryptocurrency adoption?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.