El Salvador's legalization of bitcoin led to sales of its government bonds
El Salvador's government debt market felt selling pressure as bitcoin fell below $44,000. On the same day, a law recognizing bitcoin as a legal means of payment went into effect, Bloomberg writes.
Yields on El Salvador's government bond issues with near-term maturities exceeded those of securities with later maturities. The inverted nature of the curve of government bonds indicates the risk of recession and the country's problems with service obligations.
El Salvador's legalization of bitcoin led to sales of its government bonds
The publication notes that changes in El Salvador's government debt market began in June after the country's Legislative Assembly passed a bill to legalize bitcoin.
"El Salvador slipped on the first day of the new bitcoin law. The situation in the government debt market acts as a sign that widespread use of the first cryptocurrency could have serious consequences for the country," commented Ben Emos, a strategist at Medley Global Advisors.
"El Salvador slipped on the first day of the new bitcoin law. The situation in the government debt market acts as a sign that widespread use of the first cryptocurrency could have serious consequences for the country," commented Ben Emos, a strategist at Medley Global Advisors.
Bloomberg also cited El Salvador's Supreme Court's permission for President Nayib Buquele to run for a second term as a possible reason for the near-maturity bond sell-off. Human Rights Watch saw this step as "dismantling the country's democratic institutions."
As a reminder, on September 7, the Salvadoran government purchased 550 BTC in a $150 million fund approved by the authorities to ensure the exchange of bitcoin and dollars.
As a reminder, on September 7, the Salvadoran government purchased 550 BTC in a $150 million fund approved by the authorities to ensure the exchange of bitcoin and dollars.
In August, locals protested the legalization of the first cryptocurrency. The Salvadoran Association of International Cargo Carriers demanded that the obligation to accept digital gold as payment be abolished.
According to a survey, 70% of Salvadorans opposed the bill. According to another survey, only 20% of respondents supported the Buquelet initiative.
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