El Salvador’s Continued Belief in Bitcoin
When these are put to rest, or when they are delayed as has been seen this week, the price has risen accordingly. The price of Bitcoin today indicates a positive shift upwards, although it remains volatile. Its current position hovering around the $100,000 mark will depend partly on how other countries react to these tariffs. If they provide a significant number of essential goods to the United States, this could further increase inflation. Even the Federal Reserve has acknowledged that its aim of maintaining inflation at 2% might need to be revised if the current policy persists. If fears of inflation persist, Bitcoin may continue to trade sideways.
Considering the long term, we can observe the bond market. Investors often look at the yield curve here, examining the interest rates of bonds with varying maturity periods. People tend to consider long-term bonds as indicative of the Federal Reserve’s future actions. If these interest rates decline, it could signal reduced spending and the onset of stagflation.
Two additional factors could signal the trajectory Bitcoin will take. Firstly, the recent surge in Bitcoin’s value was, in part, due to the incoming government’s support for a strategic Bitcoin reserve. While this was believed to be a certainty, the lack of progress on this front is notable. The government has stated that it will assess this, indicating that a decision may take time. This outcome will inevitably impact the price of Bitcoin.
Secondly, market liquidity is diminishing. The Treasury General Account has seen a rise in recent months despite a self-imposed debt limit. The U.S. is not reducing its debts; in fact, they are increasing. Consequently, we might witness higher borrowing rates. When this occurs, people often turn to traditional, less risky assets.
El Salvador should also be cognizant of the strains faced by Bitcoin producers. MARA, one such business, reported a 12% decrease in production from the previous month due to various challenges, including extreme weather conditions and intermittent outages. With rising energy costs and reduced Bitcoin production rewards, companies in this sector must carefully assess the viability of their operations.
The future of Bitcoin, much like that of El Salvador, remains intertwined with events in the U.S. The historical and economic ties between El Salvador and the U.S., including accepting deported individuals from the U.S. for financial gain, highlight the interconnectedness of the two nations. As such, major U.S. events can significantly influence Bitcoin, which, for better or worse, El Salvador is closely associated with. The direction of Bitcoin’s future may mirror that of El Salvador itself.
