The price of Bitcoin has continued to move on an upward trajectory, as the price of the crypto asset has recently broken above the $70k mark.
The world’s most traded cryptocurrency rallied over 10% during the past week and 47% during the past month, according to CoinMarketCap data. The new all-time high comes three days after Ethereum breached the $4,000 mark for the first time since December 2021.
Bitcoin’s bullish momentum can largely be attributed to increased institutional interest generated by the recently approved exchange-traded funds (ETFs) by the US Securities and Exchange Commission.
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Since launch, the ETFs have amassed 4.06% of the current Bitcoin supply, surpassing $56.9 billion in total on-chain holdings, according to data from Dune.
As there are continued massive inflows of ETFs, on-chain data analysis examines how recent swings in investor sentiment could impact BTC’s prospects of reaching $75,000 in the coming week.
On the upside, crypto analysts predict that Bitcoin price could advance towards $80,000 if the ETF inflows rise further in the coming week. Bitcoin has hit a new all-time high 36 days before the much anticipated Bitcoin halving event set to occur on April 20, which will see mining rewards reduced from 6.25 BTC ($418,800) to 3.125 BTC ($209,400).
Bitcoin Rally And The Impact on El Salvador
Recall that on September 7, 2021, El Salvador adopted Bitcoin as a legal tender, making it the first country to do so. The move spearheaded by President Nayib Bukele aimed to promote financial inclusion, attract investment, and reduce theft amongst others.
Meanwhile, El Salvador’s adoption of Bitcoin was followed with widespread scrutiny after the IMF stated that the Latin American country’s adoption of a cryptocurrency as legal tender, entails large risks for financial and market integrity, financial stability, and consumer protection.
Following the criticism, President Nayib Bukele argued adopting Bitcoin is a way of offering digital banking to the great majority of the population, around 70 percent of whom don’t yet have a bank account.
After the adoption of Bitcoin, the price of Bitcoin plunged, with several analysts calling El Salvador’s move a flawed one. Meanwhile, President Nayib issued a statement that the best time to purchase the crypto asset was when the price was down.
Soon after, in December 2023, El Salvador President Nayib Bukele said the nation’s Bitcoin portfolio was in the black by about $3.6 million after being in the red for an extended period.
Clapping back at all the naysayers who doubted his decision to purchase Bitcoin, Bukele took to X to declare his country’s controversial bet on Bitcoin is now paying off.
He wrote,
“El Salvador’s bitcoin investments are in the black. With the current bitcoin market price, if we were to sell our bitcoin we would not only recover 100% of our investment but also make a profit.
“It is important that the naysayers and the authors of those hit pieces take back their statements. The responsible thing to do would be for them to issue retractions, offer apologies, or, at the very least, acknowledge that El Salvador is now yielding a profit.”
In January 2024, El Salvador’s financial landscape also witnessed a notable improvement recently, with its dollar-denominated sovereign bonds showcasing an impressive rally. The country’s government bond, due in June 2035 with a 7.65% annual coupon, surged more than 200%
With the recent Bitcoin rally, renowned venture capitalist Tim Draper has predicted that El Salvador’s investment in Bitcoin will significantly enhance the nation’s standing in the global wealth hierarchy.
In his remarks, Draper emphasized Bitcoin’s transformative impact on El Salvador’s economic landscape, envisioning a future where the country could potentially liberate itself from financial dependence on institutions like the IMF.
He said,
“I mean, now [El Salvador] is taking off. They’ll be able to pay off the IMF [if] Bitcoin hits, I don’t know $100,000 and never have to talk to them again”.
He further projected that embracing Bitcoin could catapult El Salvador from one of the poorest and most crime-ridden nations to one of the wealthiest in just a few decades, eclipsing nations resistant to cryptocurrency adoption.
Amidst the recent rally in cryptocurrency prices, the performance of Bitcoin as a legal tender in El Salvador however warrants careful evaluation. While the surge in Bitcoin’s value may temporarily bolster confidence in the decision, the long-term sustainability and effectiveness of the adoption strategy remains uncertain.
The success of El Salvador’s Bitcoin experiment will depend on its ability to address the practical challenges of implementation, mitigate risks, and deliver tangible benefits to the Salvadoran people.