Morgan Stanley Proposes to Buy El Salvador Bonds Broken by Bitcoin Market Crash
Morgan Stanley is encouraging its investors to buy bonds from El Salvador, which has seen a huge performance following the recent crash in the crypto market. The country’s bitcoin venture has not paid off this year, although it continues to invest in it.
Bloomberg reports that Morgan Stanley is suggesting investors buy bonds from El Salvador, which has been battered by the crypto market crash. The country has invested heavily in bitcoin, and the recent market crash has seen bonds perform particularly poorly this year.
Bruised bindings
Bloomberg had access to a memo in which Morgan Stanley’s head of global credit strategy for emerging markets, Simon Waever, said that “markets are clearly pricing in a high probability of the autarky scenario where El Salvador defaults, but there is no restructuring.” El Salvador’s 2027 bond has fallen to 28 cents.
El Salvador’s purchase of bitcoin is well known in the financial world, and some see it as an experiment. Most countries oppose making bitcoin legal tender, and many more have only just begun to allow it as an asset.
El Salvador has actually doubled down in the bear market, and the country has taken advantage of the bear market to buy 80 more bitcoins. President Nayib Bukkele has urged investors to be patient, as they have become anxious following the recent market crash. The country’s finance minister has also said that the financial risk of the crash is “extremely minimal”.
El Salvador bitcoin game looks beaten
El Salvador shocked the world — and won over some in the crypto community — when it said it would make bitcoin legal tender. The move was met with both celebration and derision, but the market crash has changed many people’s opinions on the matter.
Several global organizations have questioned the move and even said it poses a strong risk. The World Trade Organization (WTO) and the International Monetary Fund (IMF) have both spoken out against it, and the latter has urged the country to drop it as a currency.
El Salvador has also spurred other countries to do the same. The Central African Republic has also made bitcoin legal tender, and this too was criticized by global authorities. While the legalization of bitcoin has its benefits for the markets, larger entities will now be wary of market volatility and allocate their capital accordingly.
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