El Salvador buys 500 bitcoins as the cryptocurrency market continues

El Salvador President Nayib Bukele gestures during his speech at the closing ceremony of the Latin Bitcoin (LaBitConf) conference in 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 bitcoin to its balance sheet, as the world’s most popular cryptocurrency continues to sell.

In a tweet on MondayPresident Nayib Bukele revealed that the country bought the downside, adding another 500 bitcoins to the government’s coffers.

It is El Salvador’s largest coin purchase since then started adding digital currency to its balance sheet in September 2021 – the same month it became the first country to adopt bitcoin as legal tender, alongside the US dollar.

Bitcoin has dropped more than 8% in the past 24 hours and is nearly 55% off its November all-time high.

El Salvador bought bitcoin at an average price of $ 30,744, according to the president’s tweet.

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

This is the latest in a series of declines over the past nine months, in which President Bukele – who tied his political destiny to the success of the country’s bitcoin experiment – doubled his bitcoin bet as the cryptocurrency market plummets. .

The country’s decision to lean on bitcoin is not without skeptics, a contingent that has gained momentum in recent months.

For months, the International Monetary Fund has been discussing Bukele’s bitcoin experiment.

In Januarythe IMF pushed El Salvador to abandon bitcoin as legal tender.

IMF directors “stressed that there are major risks associated with the use of bitcoin for financial stability, financial integrity and consumer protection, as well as associated potential tax liabilities.”

The report, which was released after bilateral talks with El Salvador, continued to “urge” the authorities to narrow the scope of its bitcoin law by removing bitcoin’s status as a fiat currency.

The IMF report went on to say that some directors had expressed concern about the risks associated with issuing bitcoin-backed bonds, referring to the president plan to raise $ 1 billion via a “Bitcoin Bond” in collaboration with Blockstream, an infrastructure company for digital resources. However, that bond offering was put on hold in March due to “unfavorable market conditions”. according to finance minister Alejandro Zelaya.

Part of El Salvador’s nationwide transition in bitcoin also involved the launch of a national virtual wallet called Chivo that offers free transactions and allows for quick cross-border payments. For a country where 70% of citizens do not have access to traditional financial services, Chivo wants to offer a convenient access ramp to those who have never been part of the banking system.

IMF directors agreed that the Chivo e-wallet could facilitate digital means of payment, thus helping to “promote financial inclusion”, although they stressed the need for “rigorous 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, in order to claim the free $ 30 worth of bitcoin offered by the government as an incentive.

A relationship published in April by the US 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 on a “representative survey. nationwide “which involved 1,800 families.

El Salvador has been trying since early 2021 to secure a $ 1.3 billion loan from the IMF, an effort that seems to have turned sour on this bitcoin line.

The country will have to find another support to support its finances. The IMF expects that, under current policies, public debt will rise to 96% of GDP by 2026, putting the country on “an unsustainable path”.