Analyst Jaime Reusche believes that there will be risks for El Salvador if it continues to buy Bitcoin. Publicly known information indicates that the country has acquired 1,391 bitcoins to include them in its coffers.
Bitcoin (BTC) adoption in El Salvador has led international risk analysts to keep their eyes on Nayib Bukele. They seek to know all the moves by the Central American president with the cryptocurrency.
According to Jaime Reusche, the management of Bitcoin by the Salvadoran government can lead the country to a risk zone. The analyst considers that that situation reflects a growing possibility of non-compliance with the payment of their external debt.
The Central Bank of El Salvador reported that their external debt amounted to USD 18.45 billion. Reusche said that that is quite risky, particularly for a government struggling with liquidity pressures.
Publicly available information indicates that the Salvadoran government has acquired 1,391 bitcoins until now. They have bought the dips on several occasions but could not do it on the last one.
Bukele recently expressed that he might have missed the dips this time due to the low prices of Bitcoin. Calculations reveal that El Salvador could have lost between USD 10 and USD 20 million after the recent drops in the price.
The Risk Analyst Considers Not Buying More Bitcoin Positive for El Salvador
The Bitcoin holdings of El Salvador do not pose a threat to the ability of the government to meet its international obligations. That could give the Central American country some hope, according to Reusche.
However, the analyst warned that the risks could increase if the government bought more Bitcoin, especially its ability to pay and its fiscal profile.
Reusche Is Also Concerned about El Salvador Bitcoin Bonds
The bonds backed by Bitcoin the government of El Salvador will launch were also among the matters that Reusche examined. In that regard, the risk analyst said that selling enough of them could help them cope with their liquidity pressures.
The expert discussed the condition for El Salvador not to have to restructure its traditional market bonds. He explained that it would depend on people receiving them well and oversubscribing them.
El Salvador expects to raise USD 1,000 million through those bonds, available next February and March. The government stated that they would use the money to build the Bitcoin City and acquire more Bitcoin.
The International Monetary Fund (IMF) is one of the international organizations that also warned about El Salvador purchasing BTC. In November, Gerry Rice, the director of communications of the financial institution, noted that this movement raises some macroeconomic, financial, and legal problems.
Bitcoin is currently trading at around USD 43,363 and has accumulated a loss of 0.4% in the last 24 hours. Its daily trading volume is above USD 14.86 billion, and its market capitalization is about USD 820.88 billion, according to CoinGecko.
Despite the current decline of Bitcoin, many people still trust it for its capacity to recover from the worst crises. The president of El Salvador has not overlooked that and has invested capital in it on several occasions.
By Alexander Salazar
