El Salvador doubles down on Bitcoin bet to the tune of $1.5 million – El Salvador appears to be doubling down on its Bitcoin wager despite a barrage of headlines stating that the Latin American country’s Bitcoin “gamble” was a flop as its President, Nayib Bukele, announced the acquisition of 80 BTC at an average price of $19,000 per token. The entire amount invested now stands at $1.52 million.
The Bitcoin President, Nayib Bukele, rushed to Twitter to announce the purchase, but unlike prior times when he did so, this time he released transaction ID images of the country’s most recent transaction purchase.
“El Salvador acquired today 80 #BTC at $19,000 each,” he stated. “The future seems to be with bitcoin! Thank you for selling cheap,” was said beside a screenshot of 40 purchases made on Thursday.
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Despite claims to the contrary, El Salvador is reportedly on track to default on its $1 billion in loans that are due next year. According to Bukele, El Salvador last purchased bitcoin in May, when the Central American nation paid $15.3 million for 500 coins, at $30,744 each.
Data based on Bukele’s announcements shows that El Salvador lost its bitcoin wager by 55.79 percent. The country has purchased 2301 coins since September for a total of $103.9 million, but as of this writing, using Bitcoin’s current market price of $19,500, its portfolio is only worth $44.9 million.
Alejandro Zelaya, El Salvador’s finance minister, claimed the country had less than 0.5 percent of its annual budget in bitcoin at the time. He added that the risk of the country’s finances being adversely affected by bitcoin losses was “extremely minimal.”
El Salvador’s economic growth, however, has been plummeted and its deficit is still substantial. El Salvador’s debt-to-GDP ratio is expected to reach about 87 percent this year, which fuels concerns that the country won’t be able to pay back its billion-dollar loan obligations. This ratio is a fundamental indicator used to compare a country’s debt to its GDP.
In relation to bitcoin, the government has an unrealized paper loss of around $60 million. According to calculations on the country’s website, the entire experiment (and all associated costs) have cost the Salvadoran government a total of almost $374 million. This is crucial since El Salvador has bonds outstanding totaling $7.7 billion, which is a minor amount given the country’s $29 billion economy.
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Because they are reluctant to give money to a nation that is spending millions of tax dollars on a cryptocurrency whose price is subject to tremendous volatility, negotiations with international lenders have halted.
The introduction of bitcoin as legal tender has caused rating agencies to downgrade El Salvador’s credit rating, notably Fitch, citing the uncertainty of the country’s financial future. President Bukele would now have to pay even higher interest rates to acquire the money he needs.
