El Salvador is probably every Bitcoin (BTC) and cryptocurrency fan’s favorite country. The nation made headlines when it made the original cryptocurrency a legal tender. However, the government has been struggling with its financial woes of late.
Regardless, Morgan Stanley, one of the world’s premier financial institutions, has said that it is willing to purchase El Salvador’s tumbling bonds. These bonds are among the worst-performing ones this year. Simon Waever, global head of emerging-market sovereign credit strategy at Morgan Stanley, said that El Salvador’s Eurobonds (worth $7.7 billion) had been treated poorly in the market.
“Markets are clearly pricing in a high probability of the autarky scenario in which El Salvador defaults, but there is no restructuring.”
The price of the nation’s bonds for 2027 has decreased from 32 cents per dollar to 28 cents in 2022. The bond even dropped to 26.3 cents on July 15.
Waever contends that even though El Salvador’s financial situation is precarious, its debt should trade at a price of about 43.7 cents on the dollar. Waever also says that the additional monetary tightening will prevent the bonds from reaching such levels.
Is Bitcoin to blame for El Salvador’s woes?
Many have pointed fingers at President Bukele’s policies for the country’s current predicament. The BTC law, in particular, has drawn a lot of flack. Bukele moved to purchase Bitcoin at its peak, and BTC values have fallen by nearly 70% since. This has added further pressure to the country’s economy. However, the country also made BTC purchases when the markets were down, at $19k per BTC. Buying the dip has its benefits, bringing the average cost down.
Nonetheless, a financial crunch is not exclusive to El Salvador. Almost every major economy in the world is facing an economic slump. However, can Bitcoin be blamed when other countries like the US registered record inflation along with UK and Spain? And these countries have nothing to do with Bitcoin, and hence it would not be fair to blame El Salvador’s financial problems on its Bitcoin initiatives.
Morgan Stanley’s decision to purchase bonds from the country indicates some trust in the markets bouncing back up. Like all financial institutions, Morgan Stanley is eyeing the money. And they most probably see it, even if many do not.