0Bit coin
Bitcoin crash erases $36 million in value from El Salvador government's massive crypto investment as national debt growsHannah Towey
Fri, May 13, 2022
A store that accepts bitcoins in El Zonte, La Libertad, El Salvador on September 4, 2021
.MARVIN RECINOS/AFP via Getty Images
El Salvador, the first country to make bitcoin legal tender, racked up $36 million in cryptocurrency losses on Thursday.
The popular cryptocurrency plummeted 50% from its all-time high this week.
The government bought an additional 500 coins at $30,744 each on Monday, President Nayib Bukele said.
El Salvador – which became the first country to make bitcoin legal tender in September — has seen the value of its massive cryptocurrency investment plummet by $36 million as bitcoin dropped over 50% from its all-time high on Thursday.
President Nayib Bukele bet big that bullish bitcoin investments could rescue El Salvador's economy from its growing debt-to-GDP ratio. Now, the crypto market's crash is fulfilling critics' warnings against investing treasury funds into volatile digital currencies.
Bukele's administration has spent a total of $103 million on 2,301 bitcoins since September of last year, according to Bloomberg data. As of Thursday afternoon, the coins were valued at around $67 million. El Salvador currently owes an estimated $23.3 billion in national debt.
The International Monetary Fund (IMF) issued multiple warnings to the administration about legalizing bitcoin as an acceptable form of payment for any purchase or debt. In February, Fitch Ratings downgraded El Salvador's default rating from a "B-" to a "CCC," citing financing uncertainty spurred by the law.
"Households and businesses who hold Bitcoin balances and save in Bitcoin could lose wealth through large swings in value," the IMF El Salvador team, led by Alina Carare, warned in February.
"The adoption of Bitcoin as legal tender is fully funded by public money, through a trust fund. If the price of Bitcoin was to plummet, the resources in the trust could be rapidly depleted," IMF continued.
Undeterred by the drop, President Bukele announced "El Salvador just bought the dip!" on Monday. The purchase was the country's largest to-date, adding 500 bitcoins priced at an average of $30,744 each to its holdings.
Bukele's bullish investment in cryptocurrency has led to a mixed reception by the country's citizens, with past bitcoin protests drawing thousands of attendees. A spokesperson for the administration did not immediately respond to Insider's request for comment.
According to a September survey of 1,281 people, most Salvadorans (67.9%) disagree with the government's decision to make bitcoin legal tender. The nation's digital wallet, "Chivo Wallet," has not seen widespread use as the majority of sales continue to be paid in physical currencies, as Insider has previously reported.
El Salvador, the first country to make bitcoin legal tender, racked up $36 million in cryptocurrency losses on Thursday.
The popular cryptocurrency plummeted 50% from its all-time high this week.
The government bought an additional 500 coins at $30,744 each on Monday, President Nayib Bukele said.
El Salvador – which became the first country to make bitcoin legal tender in September — has seen the value of its massive cryptocurrency investment plummet by $36 million as bitcoin dropped over 50% from its all-time high on Thursday.
President Nayib Bukele bet big that bullish bitcoin investments could rescue El Salvador's economy from its growing debt-to-GDP ratio. Now, the crypto market's crash is fulfilling critics' warnings against investing treasury funds into volatile digital currencies.
Bukele's administration has spent a total of $103 million on 2,301 bitcoins since September of last year, according to Bloomberg data. As of Thursday afternoon, the coins were valued at around $67 million. El Salvador currently owes an estimated $23.3 billion in national debt.
The International Monetary Fund (IMF) issued multiple warnings to the administration about legalizing bitcoin as an acceptable form of payment for any purchase or debt. In February, Fitch Ratings downgraded El Salvador's default rating from a "B-" to a "CCC," citing financing uncertainty spurred by the law.
"Households and businesses who hold Bitcoin balances and save in Bitcoin could lose wealth through large swings in value," the IMF El Salvador team, led by Alina Carare, warned in February.
"The adoption of Bitcoin as legal tender is fully funded by public money, through a trust fund. If the price of Bitcoin was to plummet, the resources in the trust could be rapidly depleted," IMF continued.
Undeterred by the drop, President Bukele announced "El Salvador just bought the dip!" on Monday. The purchase was the country's largest to-date, adding 500 bitcoins priced at an average of $30,744 each to its holdings.
Bukele's bullish investment in cryptocurrency has led to a mixed reception by the country's citizens, with past bitcoin protests drawing thousands of attendees. A spokesperson for the administration did not immediately respond to Insider's request for comment.
According to a September survey of 1,281 people, most Salvadorans (67.9%) disagree with the government's decision to make bitcoin legal tender. The nation's digital wallet, "Chivo Wallet," has not seen widespread use as the majority of sales continue to be paid in physical currencies, as Insider has previously reported.
El Salvador buys the bitcoin dip, adding 500 coins to its balance sheet
El Salvador just added another $15.5 million worth of bitcoin to its balance sheet, as the world’s most popular cryptocurrency continues its sell-off.
In a tweet on Monday, President Nayib Bukele revealed that the country bought the dip, adding another 500 bitcoin to government coffers.
It is El Salvador’s largest coin purchase since it first began adding the digital currency to its balance sheet in Sept. 2021 — the same month it became the first country to adopt bitcoin as legal tender, alongside the U.S. dollar.
President of El Salvador, Nayib Bukele, gestures during his speech at the closing ceremony of the Latin Bitcoin conference (LaBitConf) at Mizata Beach, El Salvador, where he announced “Bitcoin City”, on November 20, 2021.
Marvin Recinos | AFP | Getty Images
El Salvador just added another $15.5 million worth of bitcoin to its balance sheet, as the world’s most popular cryptocurrency continues its sell-off.
In a tweet on Monday, President Nayib Bukele revealed that the country bought the dip, adding another 500 bitcoin to government coffers.
It is El Salvador’s largest coin purchase since it first began adding the digital currency to its balance sheet in Sept. 2021 — the same month it became the first country to adopt bitcoin as legal tender, alongside the U.S. dollar.
Bitcoin is down more than 8% in the last 24 hours, and it’s nearly 55% off its November all-time high.
El Salvador purchased bitcoin at an average price of $30,744, according to the president’s tweet.
The country’s total reserve is up to 2,301 bitcoin, or about $71.7 million at current prices, based on data tracked by Bloomberg.
This is the latest in a string of dip buys over the last nine months, in which President Bukele — who has tethered his political fate to the success of the country’s bitcoin experiment — has doubled down on his bitcoin bet, as the crypto market plummets.
The country’s decision to lean into bitcoin is not without its skeptics — a contingent that has been gaining momentum in recent months.
For months, the International Monetary Fund has bemoaned Bukele’s bitcoin experiment.
In January, the IMF pushed El Salvador to ditch bitcoin as legal tender.
IMF directors “stressed that there are large risks associated with the use of bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities.”
The report, which was published after bilateral talks with El Salvador, went on to “urge” authorities to narrow the scope of its bitcoin law by removing bitcoin’s status as legal money.
The IMF report went on to say that some directors had expressed concern over the risks associated with issuing bitcoin-backed bonds, referring to the president’s plan to raise $1 billion via a “Bitcoin Bond” in partnership with Blockstream, a digital assets infrastructure company. However, that bond offering was put on ice in March, due to “unfavorable market conditions,” according to Finance Minister Alejandro Zelaya.
Part of El Salvador’s nationwide move into bitcoin also involved launching a national virtual wallet called Chivo that offers no-fee transactions and allows for quick cross-border payments. For a country where 70% of citizens do not have access to traditional financial services, Chivo is meant to offer a convenient on-ramp for those who have never been a part of the banking system.
IMF directors agreed that the Chivo e-wallet could facilitate digital means of payment, thereby helping to “boost financial inclusion,” though they emphasized the need for “strict regulation and oversight.” Many Salvadorans have reported cases of identity theft, in which hackers use their national ID number to open a Chivo e-wallet, in order to claim the free $30 worth of bitcoin offered by the government as an incentive.
A report published in April by the U.S. National Bureau of Economic Research also showed that only 20% of those who downloaded the wallet continued to use it after spending the $30 bonus. The research was based upon a “nationally representative survey” involving 1,800 households.
El Salvador has been trying since early 2021 to secure a $1.3 billion loan from the IMF — an effort that appears to have soured over this bitcoin row.
The country will need to figure out some other backstop to shore up its finances. The IMF predicts that under current policies, public debt will rise to 96% of GDP by 2026, putting the country on “an unsustainable path.”
TUE, MAY 10,2022
MacKenzie Sigalos@KENZIESIGALOS
KEY POINTS
MacKenzie Sigalos@KENZIESIGALOS
KEY POINTS
El Salvador just added another $15.5 million worth of bitcoin to its balance sheet, as the world’s most popular cryptocurrency continues its sell-off.
In a tweet on Monday, President Nayib Bukele revealed that the country bought the dip, adding another 500 bitcoin to government coffers.
It is El Salvador’s largest coin purchase since it first began adding the digital currency to its balance sheet in Sept. 2021 — the same month it became the first country to adopt bitcoin as legal tender, alongside the U.S. dollar.
Marvin Recinos | AFP | Getty Images
El Salvador just added another $15.5 million worth of bitcoin to its balance sheet, as the world’s most popular cryptocurrency continues its sell-off.
In a tweet on Monday, President Nayib Bukele revealed that the country bought the dip, adding another 500 bitcoin to government coffers.
It is El Salvador’s largest coin purchase since it first began adding the digital currency to its balance sheet in Sept. 2021 — the same month it became the first country to adopt bitcoin as legal tender, alongside the U.S. dollar.
Bitcoin is down more than 8% in the last 24 hours, and it’s nearly 55% off its November all-time high.
El Salvador purchased bitcoin at an average price of $30,744, according to the president’s tweet.
The country’s total reserve is up to 2,301 bitcoin, or about $71.7 million at current prices, based on data tracked by Bloomberg.
This is the latest in a string of dip buys over the last nine months, in which President Bukele — who has tethered his political fate to the success of the country’s bitcoin experiment — has doubled down on his bitcoin bet, as the crypto market plummets.
The country’s decision to lean into bitcoin is not without its skeptics — a contingent that has been gaining momentum in recent months.
For months, the International Monetary Fund has bemoaned Bukele’s bitcoin experiment.
In January, the IMF pushed El Salvador to ditch bitcoin as legal tender.
IMF directors “stressed that there are large risks associated with the use of bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities.”
The report, which was published after bilateral talks with El Salvador, went on to “urge” authorities to narrow the scope of its bitcoin law by removing bitcoin’s status as legal money.
The IMF report went on to say that some directors had expressed concern over the risks associated with issuing bitcoin-backed bonds, referring to the president’s plan to raise $1 billion via a “Bitcoin Bond” in partnership with Blockstream, a digital assets infrastructure company. However, that bond offering was put on ice in March, due to “unfavorable market conditions,” according to Finance Minister Alejandro Zelaya.
Part of El Salvador’s nationwide move into bitcoin also involved launching a national virtual wallet called Chivo that offers no-fee transactions and allows for quick cross-border payments. For a country where 70% of citizens do not have access to traditional financial services, Chivo is meant to offer a convenient on-ramp for those who have never been a part of the banking system.
IMF directors agreed that the Chivo e-wallet could facilitate digital means of payment, thereby helping to “boost financial inclusion,” though they emphasized the need for “strict regulation and oversight.” Many Salvadorans have reported cases of identity theft, in which hackers use their national ID number to open a Chivo e-wallet, in order to claim the free $30 worth of bitcoin offered by the government as an incentive.
A report published in April by the U.S. National Bureau of Economic Research also showed that only 20% of those who downloaded the wallet continued to use it after spending the $30 bonus. The research was based upon a “nationally representative survey” involving 1,800 households.
El Salvador has been trying since early 2021 to secure a $1.3 billion loan from the IMF — an effort that appears to have soured over this bitcoin row.
The country will need to figure out some other backstop to shore up its finances. The IMF predicts that under current policies, public debt will rise to 96% of GDP by 2026, putting the country on “an unsustainable path.”
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