El Salvador were the first to adopt Bitcoin as a legal tender and also the first to buy it as a reserve asset. Reserve assets are one of the four functional types of investments distinguished in the balance of payments. Reserve assets consist of financial instruments available to the central authorities for financing or absorbing an imbalance of payments or for regulating the size of such imbalances.
Deficit in balance of payments happen during developmental activities, high rate of inflation, cyclical fluctuations, change in demand, import of services, political instability, political disturbances and more.
Balance of payments is affected by rate of consumer spending on imports, international competitiveness, exchange rate, structure if the economy and others.
Disequilibrium in the balance of payments is balanced by expanding exports and restraining imports, reducing policies, devaluation, exchange control etc.
El Salvador adopting Bitcoin as a reserve asset means they are trusting BTC to provide enough capital to pay for domestic production. They believe Bitcoin has an impact in providing them with the surplus for their economic growth in the short term.
The BOP of a country reveals its financial and economic status, El Salvador are trusting Bitcoin for their BOP.
The expectation is that eventually several nations will hold Bitcoin across the globe.
Crypto Tolkien expressed: To sum up: 1. USD is losing its status as the top Foreign Exchange Reserve currency with continued de-dollarization 2. Bitcoin continues to grow in popularity, and is being formalized by banks, cities, and now nations 3. The trend towards Bitcoin and crypto will continue.
Community Response: Nations buying BTC seems inevitable. Even if done privately, as a matter of national security you don’t want to be the one country that gets left out if national treasuries start buying.
Exactly, don’t want to be last one left standing without any BTC.
More and more nations will use BTC as legal tender, and eventually hold it as a reserve asset.
Hard to see this stopping but betting against the FED is a dangerous bet.
The trend towards crypto will continue but not exclusively to bitcoin.
So, if governments sit on BTC by the time all are mined, what are all the retail investors going to do?
I wonder if every generation has had it this bad. Boomers outliving their own skin. Staying in jobs they can’t perform, keeping 2 entire generations under their thumb for way too long.
I think you’ll find the larger retail owners are boomers and not Millennials. In fact, I think the majority of Bitcoin owners are Boomers.
Get the latest Crypto & Blockchain News in your inbox.