El Salvador, a small country in Central America, declared bitcoin as one of its legal tenders in the middle of this year. Supposedly, this should be an explosive news, but because Salvador is too small and too weak to influence, it has hardly attracted everyone's attention.
However, after a few months, El Salvador finally attracted everyone's attention. Because, it has encountered a Bitcoin crisis, the current national economy is facing collapse, if it is serious, it will face a stage of retreating to primitive society and bartering.
El Salvador, not big, if not very small, has a land area of just over 20,000 square kilometers and a population of 6.7 million.
El Salvador, also known as the Republic of El Salvador, is a coastal country located in northern Central America, although the population is only 6.7 million people, but it is the country with the largest population density in Central America.
Because its land area is too small, only more than 20,000 square kilometers, but it has to accommodate 6.7 million people.
El Salvador, with almost no industry, the domestic economy is dominated by agriculture, mainly rich in coffee beans and cotton, is designated by the United Nations as a "low- and middle-income country".
El Salvador also established diplomatic relations with us relatively late, and only had formal diplomatic relations with us in 2018.
Just on June 9 this year, the Salvadoran Congress announced that Bitcoin, one of the country's legal tenders, has a three-month buffer period, and officially began to circulate on September 7.
There are two key points in this passage, one is the day of June 9th, and the other is one of the legal tender.
Let's first talk about the time node of June 9th. Because just a week ago, on June 2, the global bitcoin market just experienced a plunge, from the previous $52,000 a bitcoin, fell to $46,000 a piece, a drop of as much as 11%.
The reason why El Salvador chose to declare Bitcoin as its national currency at this time is actually a gambling and speculation mentality.
Because he announced that Bitcoin has become the national legal tender, so El Salvador, whether it is the government or the central bank, must buy a lot of bitcoin in the market, otherwise what do you spend? This is also good news for the market, and it will definitely pull up the bitcoin market when the time comes. El Salvador can buy at lows and sell at highs to make a lot of money.
Look at the "one of the fiat currencies" again. There are two fiat currencies in Savaldo, the US dollar and Bitcoin.
He does not have a national currency, but uses the US dollar as its legal tender, which was abolished more than 20 years ago. Not only El Salvador, but also many poor countries in the world, such as some African countries and American countries, do not have their own currencies, and they all use the US dollar as their own currency.
Sawardo is one of them. However, with its economic volume, it does not have much impact.
Combining these two things into a piece of analysis, we can understand that El Salvador's announcement of Bitcoin as legal tender is actually a false move, and his real purpose is to hype bitcoin in the name of the country and try to make money from it. When this market is almost over, there is a plan to announce the abolition of the status of Bitcoin as a fiat currency.
So at about seven o'clock in the evening of June 8 this year, the Salvadoran government suddenly convened a parliament and announced that it would turn Bitcoin into legal tender. After the announcement was made to the public, the local people were confused: after a night's sleep, the country had an extra legal tender.
According to the poll afterwards, 96% of merchants in El Salvador are reluctant to accept bitcoin, and 93% of ordinary people oppose the use of bitcoin, which is quite high, almost 100%.
However, fortunately, the legal tender of the US dollar has not been abolished, and everyone can continue to use the US dollar, so the impact on the people for the time being is not large.
On September 6, the Salvadoran government announced that it had purchased 400 bitcoins in two installments that day. According to the market at that time, it cost about $21 million, and the unit price of each piece was $52,500, which was exactly the time of the high point.
As a result, on September 8, the market gave the Salvadoran government a blow, and the value of bitcoin plummeted from $52,000 to $42,000, and $10,000 fell in one piece. This means that the 400 bitcoins that the Salvadoran government bought in the early stage are 4 million dollars less overnight.
Bitcoin, which El Salvador had high hopes for, did not appreciate as much as they wished. Bitcoin is now worth around $30,000, down nearly $10,000 more than when the Salvadoran government first bought it. The loss was nearly half.
Don't look at bitcoin has recently soared again, virtual currency itself is a digital asset hyped by financial institutions in developed countries in Europe and the United States, which is used as a tool to hype and make money, and can be discarded at any time.
And Latin American countries, neither the Internet economy, nor do they have the right to speak in the field of high technology. You don't have these two things, but you want to use virtual currency as an economic growth point and bundle it with the national economy? Once the virtual currency is abandoned by the market, there is no place to cry.