With the ongoing market slump, El Salvador is holding significant losses on its Bitcoin investments
El Salvador is holding onto a significant loss on its Bitcoin investments with the ongoing market drop. Its purchase process and wallet were not disclosed, so the exact amount remains unknown. But estimates put the loss in the range of $10 million to $12 million.
El Salvador is down $12 million on its Bitcoin buys
El Salvador’s “Bitcoin experiment” was hailed by some as pioneering in so far as leading the way for other nation-states to follow. But the losses highlight the risks associated with crypto investments. More so with the amount of involvement and the public manner in which El Salvador has conducted its business. But are there any of these countries that don’t support accepting Bitcoin as a legal tender?
El Salvador made history on September 7 as the first sovereign country to adopt Bitcoin as a legal tender. In the run-up to “going live,” and ever since, the move has been vehemently opposed by some quarters. Including international agencies, such as the IMF, who warned it would interfere with funding negotiations. And private companies, including S&P Global and Moody’s, spoke of negative implications for its credit rating.
Problems do not help this with Chivo Wallet. Some users reported identity fraud, and others talked about their Bitcoin balances mysteriously disappearing. Despite all of the above, President Bukele is staunchly supportive of Bitcoin testing.
Since September, President Bukele has tweeted instances of buying the dip. Based on this, it’s estimated El Salvador holds 1,391 BTC, which cost $73.2 million to acquire.
However, at current prices, the value of the shares held is $59 million, resulting in a loss of $14 million – higher than previous estimates due to Bitcoin’s continued decline. Last week, Finance Minister Alejandro Zelaya said El Salvador had sold Bitcoin, but when and how much is unknown.
President Bukele said Bitcoin would hit $100,000 this year in light of the current downturn. He also said two other countries would adopt BTC as legal tender by 2022. But he remains tight-lipped about which country that will be.
Last week, investment managers Fidelity released a report on future trends. They refer to El Salvador’s approach to Bitcoin, which they say represents an opportunity for wealth and prosperity.
Drawing on game theory, Fidelity said, if Bitcoin continues to perform well, other countries will be forced to join El Salvador, even if they don’t subscribe to its ideology. The asset managers describe this as buying a “form of insurance.”
“We, therefore, wouldn’t be surprised to see other sovereign nation-states acquire bitcoin in 2022 and perhaps even see a central bank make an acquisition”, they stated.
That being so, the reverse must also be true. Accordingly, poor performance will not deter countries from coming to the board.
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