It should be noted that the topic of the possible adoption of Bitcoin as an official tender in new countries is heard regularly. For example, at the end of January 2023, Brian Armstrong, head of Coinbase, a cryptocurrency exchange, recommended Brazil and Argentina to follow suit. However, his initiative has been criticised.

In this case, Tim Draper, a well-known investor and cryptocurrency enthusiast, decided to promote Bitcoin’s popularity. He is primarily known in the blockchain community for buying 29,656 BTC worth $18.74 million during a long-running asset auction of the hacked Mt. Gox crypto exchange from the US Marshals Service. Accordingly, each bitcoin went to him for $632.

Investor Tim Draper with a Bitcoin tie-up

Why they don’t want to accept Bitcoin

The meeting took place during Draper’s visit to the island nation last week to film an episode of his TV show Meet the Drapers with local entrepreneurs. The billionaire also met with President Ranil Wickremesinghe, where he again made the case for Bitcoin adoption in Sri Lanka.

During the meeting with Wirasinghe, Draper dressed appropriately – he wore a suit and tie with Bitcoin logos on it. However, this did not affect the opinion of the chairman of the Central Bank. Here is what he replied to the billionaire.

The adoption of Bitcoin as a medium of payment in Sri Lanka is 100 per cent likely to never become a reality. We would not want to exacerbate the economic crisis by dealing with Bitcoin.

Obviously, the mention of crisis has to do with Bitcoin's volatility, i.e. the cryptocurrency's ability to change value dramatically. This component is really uncomfortable for most people who are not used to investing and losing on investments. Moreover, the volatility of the coins is noticeable even now: in the last 24 hours, BTC lost 2.2 percent of its value.

Sri Lankan Central Bank Governor Nandalalal Weerasinghe

In Draper’s vision, Sri Lanka could follow the path of El Salvador, where Bitcoin became legal tender back in September 2021. That said, the El Salvador government’s policy on cryptocurrency has been fraught with many both positive and negative outcomes for the economy.

El Salvador’s adoption of Bitcoin has not been without protests among the local population

For example, as of today, El Salvador’s $110 million invested in Bitcoin has turned into $58 million. Consequently, the position itself has sagged by 47 percent or $51.9 million. Naturally, given such results, few will want to mess with cryptocurrencies – especially on this scale and with taxpayers’ money involved.

El Salvador’s Bitcoin position

According to Decrypt sources, Sri Lanka, which is celebrating its 75th anniversary of independence from the UK this year, is gripped by a major economic and political crisis that has seen it default on more than $56 billion in foreign loans in 2022. The country as a whole faced fuel and food shortages, leading to mass protests and forcing former President Gotabaya Rajapaksa to resign.

Obviously, in such a challenging environment, it is unlikely that anyone would want to get involved with a new payment instrument whose value could drop by a notional 50 per cent in a few months. In addition, the association with Bitcoin alone won’t magically solve all the economic problems, and a fixed supply of the cryptocurrency won’t facilitate credit and growth in the state’s economy. So in this case Draper is solely pursuing his own interests and hardly thinks about the locals.

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In general though, people should get in touch with cryptocurrencies – and especially in light of the coming bullrun. According to Morgan Creek Capital Management founder and CEO Mark Yusko, the price of Bitcoin could start rising sooner than many expect. In his latest interview, Yusco also made a bold prediction – he believes the price of Bitcoin could rise to $100,000 by the end of this year, Cointelegraph reported.

Traditionally, we should note that all such predictions mean nothing. They could easily fail and are not even close to being true. Therefore, investors should invest only after their own analysis.

CEO of Morgan Creek Capital Mark Yusco

The head of Morgan Creek Capital expects a significant easing of global central bank policies as early as the second quarter of 2023. Yusko also highlighted the upcoming halving – a procedure for miners to halve their reward for a block of Bitcoin exactly in half. It occurs roughly every four years and is traditionally considered a major factor in the rise in Bitcoin’s value, as it reduces the rate of issuance and the cryptocurrency, which means fewer new coins are in circulation.

Countdown to the next Bitcoin halving

The US Federal Reserve's strategy of raising the benchmark lending rate remains a serious force holding many markets back. Yusco admits that the Fed is definitely not going to cut rates anytime soon, but traders and investors are being proactive - as soon as the first signs of Fed confidence in stabilising inflation are visible, investors will have an appetite for investing. This will clearly affect risky investments, which include cryptocurrencies.

Overall, the pace of key interest rate hikes has already slowed. The Federal Open Market Committee (FOMC) raised the rate by 25 basis points at its last meeting, which has not been done since spring 2022. Prior to that it was raised by 50 basis points in December 2022 and before that by 75 basis points on several occasions.

We think such suggestions from Bitcoin fans sound simply silly. Obviously, the fact of a limited amount of BTC is a good thing, but such is not enough to influence a huge economy. In this case, Tim Draper's position looks like the pursuit of his own interests, as he himself is a major crypto investor. However, on a national scale, the adoption of cryptocurrencies is not going to make much difference right now - especially given the economic crisis.