El Salvador Buys 150 Bitcoin During The Dip, Chad Move Or Foolish Endeavor? | Crypto News

El Salvador Buys 150 Bitcoin During The Dip, Chad Move Or Foolish Endeavor?

President Nayib Bukele tweeted that El Salvador has bought the dip, adding 150 Bitcoin to its coffers to give a cumulative holding of 700 tokens.

Buying the dip during fearful sell-offs is a strategy typical of Michael Saylor and MicroStrategy. This has often drawn criticism on the grounds of increasing his shareholder’s risk exposure. In addressing these concerns, Saylor states that zooming out tells you everything you need to know about his Bitcoin strategy.

Nonetheless, with deteriorating macroeconomic conditions, might buying the dip this time be the wrong move to make?

Bitcoin Takes A Beating

The leading cryptocurrency reached a local top of $52,600 on September 7, the day El Salvador’s Bitcoin legal tender bill passed into law.

Sentiment in the run-up to that day was positive as Bitcoin was riding an eight-week uptrend. There was even a price pump campaign to mark the law passing with a coordinated $30 $BTC buy.

However, things didn’t go to plan, with a near 20% swing to the downside when the Bitcoin law passed. Some speculate influential bodies deliberately tanked the price of Bitcoin as a warning to El Salvador for going against the IMF and World Bank.

While $BTC did stage a comeback of sorts, peaking at $48,700 on Saturday, today has seen an 11% swing to the downside, stoking fears of further dips to come.

The sell-off bottomed at $42,800 at 13:00 GMT. But with a flood of bad news on the macroeconomic front, especially concerning Chinese property firm Evergrande, might this relief rally be short-lived?

Bitcoin hourly chart
Source: BTCUSD on TradingView.com

The Elephant In The Room

As much as Bitcoin is touted as a hedge, past data shows a high degree of positive correlation with stocks. For example, March 2020’s stock crash was reflected in Bitcoin as it fell 55% over six days to bottom at $4,300.

The 2008 financial crisis, while the result of many factors, still had a tipping point in the collapse of Lehman Brothers on September 15, 2008. The bank was overexposed to subprime mortgage debt, resulting in bankruptcy when mortgage defaults began to peak.

Now, some 13 years later, a similar story is playing out with Evergrande, who faces a liquidity crisis in not having the cash on hand to service its debts.

“Evergrande faces obligations of more than $300bn to creditors and other businesses, and a crucial interest payment deadline on its offshore bonds looms on Thursday.”

What’s more, some analysts point out that the issues faced by Evergrande could spill out into global markets. Therefore, potentially being that single tipping point for a global economic collapse.

If that were to happen, how would Bitcoin, and the wider cryptocurrency market, fare?

The chances are, considering the interconnection through institutional investing and traders who trade both stocks and crypto; Bitcoin would also suffer.

As such, buying the dip this time around, with so much uncertainty looming, is brave, to say the least.

For now, it’s all eyes on Evergrande to see how this situation plays out.

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