Florence Muchai
El Salvador’s president Nayib Bukele announced in September 2021 that the Central American nation would be the first to accept Bitcoins as legal currency. The government spent $105 million on it, after which the government bought more in 2022. The Salvadoran government’s gamble on Bitcoin has already cost it more than enough money to pay its next interest payment to bondholders.
However, it appears that President Nayib Bukele is not ready to give up on his strong investment convictions. El Salvador is hosting 44 nations from around the world this week to discuss economic advancements, including Bitcoin.
President Nayib Bukele furthers Bitcoin adoption as El Salvador hosts 44 countries to debunk Bitcoin
El Salvador’s President Nayib Bukele announced on Twitter that Monday, 16 May 2022, 32 central banks and 12 financial authorities from 44 nations would convene in El Salvador. The meeting will address financial inclusion, the digital economy, banking the unbanked, El Salvador’s Bitcoin adoption, and its opportunities in the country.
It’s unclear whether these nations are meeting to discuss Bitcoin specifically or if the entire agenda has been made public. President Nayib Bukele subsequently revealed the list of authorities and national banks in attendance in tweets.
The majority of central banks and authorities are from developing nations, such as Nigeria, Egypt, Nepal, Pakistan, Bangladesh, Kenya, Uganda, Rwanda, Paraguay, Angola, Guinea, and Madagascar.
Bukele’s tweets arrive days after the Twitter feed “Bitcoin Beach” announced that several countries have flown to El Salvador, officially confirming the meeting. On 13 May 2022, the Twitter account for Bitcoin Beach announced that central bankers from Angola, Armenia, Bangladesh, Burundi, Congo, Costa Rica, Egypt, Gambia, Ghana, India, Namibia, Senegal, Sudan, Uganda, Zambia, and 25 other developing nations would fly to El Salvador.
Almost immediately after President Nayib Bukele’s declaration, Bitcoin Beach posted a worldwide map that appears to have countries that either accepted Bitcoin or are attending Monday’s meeting colored in, stating, “Probably nothing.”
The Bitcoin value of El Salvador has plummeted 45% as a result of the crypto bubble’s popping, putting the country’s $66 million in Bitcoins acquired by government coffers at risk. That is less than half of the nation’s next coupon payment on its foreign debt, which got scheduled to arrive on 15 June and mature in 2035 for $US38.
El Salvador’s current Bitcoin economic situation
According to his social media posts, since becoming the world’s first government to make Bitcoin legal currency in September, the Nayib Bukele administration has spent about $US105 million acquiring bitcoins. The country’s 2301 bitcoins, valued at around $US66 million as of today, have tumbled 45% since the first purchase.
That is yet another setback for President Bukele, a devout Bitcoin believer who has been attempting to sell a Bitcoin-backed bond for more than five months. But investors have lost faith in El Salvador’s bonds, not just with the government’s ability to repay its debt but also with its propensity to do so.
In 2021, El Salvador owes $US382 million in interest to its bondholders, with July being the heaviest month for payments since $US183 million comes due. In April, the central bank reported that El Salvador had $US3.4 billion in reserves. According to the report, the government is also considering selling a Bitcoin-backed bond worth $1 billion to raise cash. It’s not clear yet whether the transaction will go through.
The government was also in discussions with the International Monetary Fund for an extended loan, but talks broke down when President Nayib Bukele recognized Bitcoin as legal currency. Since then, credit default swap spreads have increased by more than 20 percentage points, implying an 87 percent chance of a default within the next five years.
According to reports, President Nayib Bukele purchases Bitcoin on his phone during market downturns. He doesn’t do it correctly, though, since the moment he buys, the price subsequently drops, creating a more suitable dip purchase.
It’s risky because it’s an extremely volatile asset, and it’s an investment that is totally at the discretion of the president.
former El Salvador Central Bank Chief Carlos Acevedo.
Bukele has remained bullish on Bitcoin, despite its value having dropped dramatically. He’s doubled down with a further tranche of 500 bitcoins for $15.5 million, which is now worth $14.1 million in just four days.
PresiThe country’s government made the decision to adopt Bitcoin in order for people there who rely on remittances from the United States and other countries to avoid being victimized by notoriously predatory services.
