El Salvador’s stake in Bitcoin was slashed in half on Tuesday, as more than $100 million in the nation’s publicly disclosed assets lost more than 50% in value.
President Nayib Bukele announced on Twitter the country’s 10 Bitcoin purchases have a market value of about $51 million. El Salvador took advantage of a price dislocation that resulted in a quick return at least four times, according to Bukele.
The president said El Salvador bought 420 coins for more than $59,000 each in late October, an investment of almost $25 million and the country’s largest single trade. The purchase is now worth $9.5 million, down nearly 63%.
Last September, El Salvador became the first nation to make Bitcoin a legal tender through its “Bitcoin Law,” despite objections by the International Monetary Fund (IMF), the World Bank, credit agencies, and the U.S. The opposers’ critiques argued that given the country’s economic situation, it was not the time to take a gamble on an unstable currency.
The World Bank estimates El Salvador’s household poverty rate was 23% in 2019.
About one in four Salvadorians live abroad, and their remittances account for about 20% of GDP. These remittances are the second-largest source of external income after exports and have helped reduce poverty, according to the U.S. government. Remittances were received by about a third of all households.
Meanwhile, about 70% of El Salvadorans remain unbanked.
Since last September, El Salvador’s government has purchased 2,301 units of Bitcoin, which fell on Monday to its lowest value since 2020.
On Monday, El Salvadoran Finance Minister Alejandro Zelaya dismissed concerns that a plunge in the value of the cryptocurrency could damage the Central American country’s economy.
“When they tell me that the fiscal risk for El Salvador because of Bitcoin is really high, the only thing I can do is smile,” Zelaya said. “The fiscal risk is extremely minimal.”
According to credit rating agency DBRS Morningstar, the amounts El Salvador has lost are only a fraction of the $3.65 billion the country held in foreign reserves last month.
Refinitiv data reports El Salvador has $7.65 billion in marketable debt outstanding and an $800 million payment due in January 2023.
Named after the country’s president, the Nayib Bukele tracker documents each acquisition the government announces, its cost basis, total reserves, and the average cost basis of those funds.
Decrypt reported in September of last year that El Salvadoran police arrested, without charge, anti-Bitcoin activist and cryptocurrency specialist Mario Gomez, who has been an outspoken critic of Bukele’s Bitcoin Law.
Gomez’s attorney, Otto Flores, said the police released the activist a few hours after his initial detainment.
Prior to his arrest, Gomez participated in several conferences to discuss what he believed to be the faults and dangers of Bukele’s implementation of the Bitcoin Law.
Bukele has been characterized as authoritarian-minded. Amnesty International has accused his government of committing “massive human rights violations” due to police activity that has seen more than 36,000 people arrested in just over two months.
