El Salvador is buying 500 bitcoins while the cryptocurrency sell-off continues

El Salvador President Nayib Bukele gesticulated during his speech at the closing ceremony of the Latin Bitcoin Conference (LaBitConf) on Mizata Beach, El Salvador, where he announced “Bitcoin City” on November 20, 2021.

Marvin Recinos | AFP | Getty Images

El Salvador has just added another $ 15.5 million worth of bitcoin to its balance sheet, while the world’s most popular cryptocurrency continues to sell out.

In a tweet on MondayPresident Nayib Bukele revealed that the country bought the decline, adding another 500 bitcoins to the state coffers.

It is the largest coin purchase in El Salvador since it first began adding digital currency to its balance sheet in September 2021 – the same month it became the first country to adopt bitcoin as a legal tender along with the US dollar.

Bitcoin has fallen more than 8% in the last 24 hours, and is almost 55% lower than the record high in November.

El Salvador bought bitcoin at an average price of $ 30,744, according to a presidential tweet.

The country’s total reserve is up to 2,301 bitcoins, or about $ 71.7 million at current prices, based on data tracked by Bloomberg.

This is the latest in a series of declining purchases in the last nine months, in which President Bukele – who linked his political destiny to the success of the country’s bitcoin experiment – doubled his role on bitcoin as the cryptocurrency market plummeted.

The country’s decision to rely on bitcoin is not without skeptics – a contingent that has been gaining momentum in recent months.

For months, the International Monetary Fund has lamented Bukele’s experiment with bitcoins.

In January, the IMF forced Salvador to reject bitcoin as a legal tender.

IMF directors “stressed that there are major risks associated with using bitcoin for financial stability, financial integrity and consumer protection, as well as associated fiscal contingent liabilities.”

The report, released after bilateral talks with El Salvador, continued to “call” the authorities to narrow the scope of their bitcoin law by removing bitcoin’s status as legal money.

An IMF report further states that some executives have expressed concern about the risks associated with issuing bitcoin-assisted bonds, citing the president’s plan to raise $ 1 billion through “Bitcoin bonds” in partnership with Blockstream, a digital asset infrastructure company. However, that bond offer was put on ice in March, due to “unfavorable market conditions,” Finance Minister Alejandro Zelaya said.

Part of El Salvador’s national transition to bitcoin included the launch of a national virtual wallet called Chivo that offers free transactions and enables fast cross-border payments. For a country where 70% of citizens do not have access to traditional financial services, Chivo should offer a suitable ramp for those who have never been part of the banking system.

IMF executives agreed that the Chivo e-wallet could facilitate digital means of payment, helping to “boost financial inclusion”, although they stressed the need for “strict regulation and supervision”. Many Salvadorans have reported cases of identity theft, in which hackers use their national identification number to open a Chivo e-wallet, to claim free bitcoin worth $ 30 offered by the government as an incentive.

A report released in April by the U.S. National Bureau of Economic Research also found that only 20% of those who took the wallet continued to use it after spending a $ 30 bonus. The survey was based on a “nationally representative survey” that included 1,800 households.

El Salvador has been trying to secure a $ 1.3 billion loan from the IMF since the beginning of 2021 – this attempt seems to have ruined this bitcoin dispute.

The country will have to devise some other safeguard mechanism to secure its finances. The IMF predicts that according to the current policy, the public debt will increase to 96% of GDP by 2026, which will put the country on an “unsustainable path”.

Leave a Comment