Despite growing concerns in global financial markets, El Salvador has continued its ongoing strategy of purchasing Bitcoin.
While most investors are becoming more cautious due to worsening economic indicators and rising international tensions, the Central American country has maintained its Bitcoin buying plan during a weekend when the cryptocurrency fell below $80,000.
At the same time, escalating tariff conflicts involving the United States, China, and the European Union have added to the uncertainty, affecting both traditional and digital assets.
El Salvador Increases Bitcoin Holdings While Prices Decline
El Salvador’s government has confirmed that it is continuing to acquire Bitcoin regularly, using daily dips as buying opportunities.
This approach, introduced by President Nayib Bukele, began after Bitcoin was officially recognised as legal tender in 2021.
Since then, the government has gradually built up its national reserves of Bitcoin, framing the cryptocurrency as a long-term asset within its broader financial system.
Although the government did not reveal the specific amount of Bitcoin purchased over the weekend, the country has publicly committed to buying Bitcoin daily. The timing of this latest accumulation comes just as Bitcoin’s price fell sharply, dipping below $80,000.
Market-wide liquidations reached over $590 million on Sunday, with the majority of them, approximately $207 million, coming from long positions. Ethereum traders also saw significant losses, contributing $72 million in long liquidations.
Despite these signs of weakness in the market, El Salvador remains committed to its strategy. For President Bukele and his administration, Bitcoin is more than just a financial asset, it represents an alternative approach to economic independence and reduced reliance on traditional financial institutions.
The daily purchase initiative appears to follow a dollar-cost averaging strategy, where regular buying occurs regardless of short-term market performance.
However, this approach is not without criticism. Economists and international institutions have raised concerns about the risks involved in exposing national reserves to a highly volatile asset.
With Bitcoin’s value subject to large fluctuations within short periods, the decision to continue investing public funds during a downturn may seem questionable to some observers.
Nonetheless, El Salvador is treating Bitcoin as a long-term asset, and this recent purchase during a sharp dip suggests a consistent strategy, not a reaction to short-term market movements.
Bitcoin Falls Below $80,000 as Global Trade Conflict Escalates
The price decline in Bitcoin and broader financial market instability can be partially explained by ongoing trade tensions between the United States and several major economies.
Over the past week, the administration of former President Donald Trump announced a series of new tariffs affecting goods from the European Union and China. These actions have triggered a chain of retaliatory measures and raised concerns about a possible global trade war.
In response to US tariffs, China has implemented a 34% tax on all goods imported from the US. The EU is also preparing a list of targeted products worth $28 billion to be hit with additional tariffs, including meat, wine, cereals, chewing gum, and even items like vacuum cleaners and toilet paper.
This escalation in trade disputes has put pressure on both traditional markets and cryptocurrencies as investors move to reduce risk.
Bitcoin has not been immune to these developments. As a speculative asset, it often mirrors broader market sentiment, especially during times of heightened economic uncertainty.
With the Nasdaq 100, S&P 500, and Dow Jones all entering correction territory last week, concerns about inflation, slowing growth, and the potential for stagflation have increased.
The combination of higher tariffs and weaker economic activity is creating a difficult environment for policymakers and traders alike.
Federal Reserve Chair Jerome Powell recently warned that the proposed tariffs could lead to higher consumer prices while also slowing economic growth.
This scenario reduces the effectiveness of central bank policies. If inflation increases due to tariffs, raising interest rates may become necessary.
At the same time, if economic output slows, higher interest rates could worsen the situation by further limiting business activity and employment. This balancing act leaves very little room for central banks to respond effectively.
In this context, the drop in Bitcoin’s price reflects more than just developments within the cryptocurrency market. It is part of a broader movement across financial markets reacting to political decisions and global trade instability.
The long-short ratio for Bitcoin has fallen to 0.89, meaning more traders are shorting the asset, expecting further declines in the short term. This shift in sentiment is significant, considering that Bitcoin had reached new all-time highs just weeks ago.
The overall market capitalisation of the crypto sector has also fallen by 2.45% in a single day, bringing the total down to $2.59 trillion. Bitcoin remains the largest asset, accounting for 62% of the market, followed by Ethereum with an 8% share.
Still, the current environment remains fragile, with further volatility expected as new trade measures come into effect and markets respond to upcoming economic data.
Conclusion
El Salvador’s decision to buy more Bitcoin during heightened market pressure highlights the country’s long-term commitment to integrating the asset into its financial system.
While traditional markets are reacting negatively to rising tariffs and economic uncertainty, the Salvadoran government appears to be staying the course with its accumulation strategy.
As global trade tensions continue to influence both stock and crypto markets, El Salvador’s Bitcoin holdings may serve as a case study in the risks and potential of national crypto adoption during uncertain economic times.