Despite a slew of reports suggesting that El Salvador’s Bitcoin ‘gamble’ was a failure, the Latin American nation seems to be doubling down on its Bitcoin bet as its President, Nayib Bukele, announced the purchase of 80 BTC at an average price of $19,000 per token. This brings the total amount invested to $1.52 million.
Nayib Bukele, popularly known as the Bitcoin President, took to Twitter to announce the acquisition but compared to previous times he announced the purchase of Bitcoin by his nation, this time around, he posted transaction ID screenshots of its recent transaction purchase.
He then stated, “El Salvador bought today 80 #BTC at $19,000 each! #Bitcoin is the future! Thank you for selling cheap,” accompanying the text with screenshots of 40 purchases made on Thursday. This purchase comes despite reports stating that El Salvador is on track to default on its $1 billion loans due next year.
What you should know
- El Salvador’s last bitcoin purchase was in May, according to Bukele, when the Central American country acquired 500 coins for a total of $15.3 million, at a price of $30,744 each.
- According to data based on Bukele’s announcements, El Salvador is 55.79% down on its bitcoin bet. From September to date, the country has acquired 2301 coins for a total of $103.9 million, but its portfolio is currently worth $44.9 million, using Bitcoin’s current market price of $19,500 as of the time of this writing.
- Also in May, El Salvador Finance Minister Alejandro Zelaya said that the bitcoin amount the country had at that time represented less than 0.5% of its annual budget, adding that the bitcoin losses posed “extremely minimal” risk to the country’s fiscal position.
- However, El Salvador’s economic growth has plummeted with its deficit remaining high. The country’s debt-to-GDP ratio, a key metric used to compare what a country owes to what it generates, is set to hit nearly 87% this year, stoking fears that El Salvador isn’t equipped to settle its billion-dollar loan obligations.
- The government has an unrealized paper loss on bitcoin of nearly $60 million. In aggregate, the entire experiment (and all its associated costs) has cost the Salvadorian government around $374 million, according to estimates from the country’s website.
- This becomes significant when considering the fact that El Salvador has $7.7 billion of bonds outstanding but to an economy of $29 billion, it is comparatively small.
Negotiations have stalled with international lenders in part because they are unwilling to throw money at a country that is spending millions in tax dollars on a cryptocurrency whose price is prone to extreme volatility.
Rating agencies, including Fitch, have knocked down El Salvador’s credit score citing the uncertainty of the country’s financial future, given the adoption of bitcoin as legal tender. That means that it’s now even more expensive for President Bukele to borrow much-needed cash.
