Which got me to think about the possible consequences if El Salvador were to ever announce that it is selling its bitcoins and plans to never buy any more? I am aware that the possibility of that is low since El Salvador has always expressed interest towards bitcoin but just hypothetically, how much would bitcoin be affected if El Salvador does not show support any more?
Generally there are only 2 ways that something like this can affect the price (effect is only on price, not much else):
1. By dumping on the centralized exchanges and pushing the price down.
Meaning if the El Salvadorian government signs up on centralized exchanges like Coinbase, Binance, Kraken, etc. and start selling (dumping) their coins there. That way the price would directly crash because of the increased REAL sell pressure.
But they'll never do such a thing. They'll sell it the same way they bought those coins, off the CEXes...
2. By talking about the sale and causing the weak hands to panic sell.
This is what usually happens and because we are talking about "weak hands" panicking, their collective sell pressure is not something that can be predicted.
But I speculate that because this hypothetical situation is not a very significant thing, the panic sell shouldn't be that big either. And it will definitely be a short lived panic.
2.1. Another important factor during panic sells would be the existing market trend.
During bull runs with a strong momentum, such news would be completely ignored and we may not even see any kind of panic sell. But during a bear market or when price is going side way without knowing which direction to go, the negative effect of it is stronger.
