On Thursdays, El Salvador President Nayib Bukele stated that the government bought 80 more bitcoin to the current stash of 2,301.
Bitcoin price has dropped in previous days, plunging under $30,000 on Wednesday. Meanwhile, President Bukele sees this crash as an opportunity. The president had bought another 80 Bitcoin at $19,000 per coin.
President Bukele tweeted, “El Salvador bought today 80 BTC at $19,000 each.”
He added, “Bitcoin is the future; thanks for selling cheap.”
Despite the cryptocurrency price decline, President Bukele still bought additional bitcoin. So, his administration currently faces criticism. However, the president said on June 19th that patience is the key to bitcoin investment.
He emphasized, “I see that some people are worried or anxious about the price of bitcoin in the market; my advice: stop looking at the chart and enjoy life. If you invested in #BTC, your investment is safe, and its value will grow a lot after the bear market (pessimistic markets and falling prices).”
Bitcoin as Legal Tender
El Salvador was the first country to accept cryptocurrency as a legal tender similar to the dollar in September 2021. During that time, the bitcoin price was around $44,000.
In November 2021, bitcoin reached its historical quotation of more than $68,000. After that, the crypto has maintained its downward trend, dragged down by other crypto assets collapse in the middle of market turbulence.
The El Salvador government has introduced the Chivo Wallet, an electronic wallet allowing its citizens to operate crypto without paying high commissions when sending remittances.
This Thursday, Central Reserve Bank President Douglas Rodriguez said that El Salvador received $3,145.6 million in family remittances, from January to May, with a 3.9% growth compared to the similar period last year.
Many of the remittances arrive via the banking system alongside other service companies. However, people who sent remittances by electronic wallet did not reach 2% of shipments.
Rodrigues assured, “Remittances through Chivo Wallet registered from January to May $52 million with zero costs and commissions for sending them.”
El Salvador’s Risky Financial Situation
The El Salvador government is heavily in debt, with $800 million coming due in January. According to El Pais, Salvadoran bonds trade at around 40% of their face value, which many traders consider a serious risk.
The country’s bitcoin experiment was previously known to worsen the precarious financial situation. Not only that, but the president has also spent millions of dollars on volatile and risky bitcoin. This action damaged his relationship with the International Monetary Fund.
A few months ago, the International Monetary Fund recommended that the country must liquidate its bitcoin to improve its balance sheet. However, Alejandro Zelaya, Treasury Minister, declared, “No international organization is going to make us do anything, anything at all.”
After that recommendation, the bitcoin price dropped about 17%.
Bitcoin City, What Is It?
It is no secret that President Bukele plans to build a new Bitcoin City in the Conchagua volcano. The goal is to create a global cryptocurrency hub for entrepreneurs and users powered by the volcano’s geothermal volcano. The president even tweeted photos of him while reviewing the planned metropolis’ scale model.
He plans to sell around $1 billion in bitcoin bonds to start the project. 50% of the proceeds will be invested in bitcoin, while the remaining percentage will be spent on the infrastructure. Bond investors will get 50% of the gains once the bitcoin gains value more than the ten-year life of the bond.
Critics stressed that the arrangement does not make sense, especially since those who want to enter bitcoin investment can invest directly and get 100% gain.
Bringing the Average Price Bitcoin Investment
The latest bitcoin purchase is expected to bring down the average price invested per coin. In other words, bitcoin will have to skyrocket from $45,171 to $44,219 in order for the president to recoup the crypto investment made on behalf of El Salvador.
The bitcoin accumulation strategy after the massive drops was replicated by long-term crypto investors. For example, MicroStrategy CEO Michael Saylor announces the latest $10 million bitcoin purchase, which brings 129,999 bitcoins at a $30,664 average price to his company’s treasury. This is equivalent to $1.3 billion in losses. However, Saylor tends to be not concerned regarding the short-term fluctuations of bitcoin, like President Bukele.
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