Question #293 ·
Why did El Salvador’s purchase of 1,090 BTC for $100 million affect Bitcoin’s price stability?
- Because El Salvador sold large Bitcoin amounts, creating temporary selling pressure.
- It signaled corporate ETFs would flood markets with additional leveraged positions.
- Government buying reduced supply pressure and provided support during market downturn. Right answer
- The purchase increased global financial interest rates and strengthened Bitcoin correlations.
Why is this the correct answer?
This is correct because when a government buys a large amount of Bitcoin, it directly reduces the circulating supply, which can help stabilize prices by adding buying pressure. In this case, El Salvador’s purchase of 1,090 BTC for one hundred million dollars signaled confidence and provided a floor under recent declines. For beginners, it is useful to recognize that big institutional or sovereign purchases can offset selling pressure and smooth out price swings, improving market stability.