Although El Salvador has lost more than USD 63.6 million due to its BTC purchases, the recent announcement of Bukele represents an excellent opportunity. The openness to cryptocurrencies has boosted tourism and helped reduce the cost of cross-border remittances for Salvadoran citizens.
El Salvador became the first nation to adopt Bitcoin (BTC) as a legal tender in September 2021. After pausing amid a sharp crash in the crypto market, the Salvadoran government will continue to acquire BTC.
Nayib Bukele, the president of El Salvador, recently committed to acquiring 1 BTC daily. He made that startling announcement four months after the Central American nation bought its last Bitcoin.
It is relevant to remember that El Salvador began the continued purchase of Bitcoin when it adopted it as a legal tender. Since BTC was amid a bullish run in September 2021, it offered endless possibilities for the Central American country.
However, the purchases of BTC became a long shot when the crypto winter arrived in the second quarter of 2022.
The Salvadoran government has reported that it has acquired 2,381 BTC at an average price of USD 43,357. Thus, the Central American country has spent almost USD 103.2 million on its bet on the pioneering cryptocurrency.
The amount of Bitcoin that El Salvador owns is equivalent to USD 39.6 million, a loss of more than USD 63.6 million.
However, the recent announcement of Bukele, when BTC is at yearly lows, represents an excellent opportunity. The cryptocurrency could rebound in an upcoming bullish period, allowing El Salvador to offset its losses.
The Main World Rating Agencies Have El Salvador in their Sights
Nayib Bukele has focused on acquiring BTC and developing an economic infrastructure based on it. He planned to launch BTC-backed volcano bonds and create a Bitcoin City this year but has not done so yet.
Luis Membraño, a Salvadoran economist, commented that Bukele failed to create a different and innovative political economy against the advice of the IMF.
The leading rating agencies have reduced the credit line of El Salvador due to its ambitious plans. For example, Fitch Group expects the Central American nation to default on its debt in January 2023.
On the other hand, the looming recession and rising global inflation could further hurt the economy of El Salvador.
However, despite the losses due to Bitcoin purchases, the openness to cryptocurrencies has boosted tourism. Additionally, adopting BTC has helped reduce the cost of cross-border remittances for Salvadoran citizens.
Justin Sun, the founder of the Tron blockchain platform, told Bukele on Twitter that he would do the same. Others of his followers recommended keeping the BTC holdings of the nation in cold wallets despite criticism from the International Monetary Fund.
Meanwhile, Bitcoin is trading at around USD 16,726 and has accumulated a 1.0% gain over the last 24 hours. While its daily trading volume is above USD 23.02 billion, its market capitalization is about USD 321.32 billion, according to CoinGecko.
By Alexander Salazar