El Salvador May Have Lost $10 Million as Cryptocurrencies Slump
2022 hasn't been the best of starts for cryptocurrencies. Bitcoin lost over $8,000 value against the U.S. dollar between Christmas and last Friday. Amidst this slump, El Salvador may have lost $10 million, a Bloomberg report said.
Last year, the Central American country made headlines as it became the first country to accept Bitcoin as its legal tender. Country's President Nayib Bukele pushed through the legislation needed to get this done and even decided to give its citizens $30 worth of Bitcoin to kickstart the new movement. As the cryptocurrency soared, the El Salvador government announced its plans to use profits from its Bitcoin trades to build a pet hospital and also 20 schools.
Now that Bitcoin is no longer on an upward trend, questions are being raised about whether a government should even be trading cryptocurrencies. The country is clearly buying cryptocurrency as Bukele himself has confirmed on Twitter, on more than one occasion.
It was a long wait, but worth it.— Nayib Bukele 🇸🇻 (@nayibbukele) October 27, 2021
We just bought the dip!
420 new #Bitcoin🇸🇻
According to Bloomberg's calculations, based on the timing of tweets and then prevalent rates of Bitcoin, El Salvador has purchased $71 million worth of the cryptocurrency. If the country held on to all the Bitcoin, as of Wednesday, they are approximately worth $61 million, resulting in a $10 million or 14 percent loss, the media outlet reported.
It is unclear how the government decides to buy the assets. While Finance Minister Alejandro Zelaya had earlier said that a team of government officials take a call on whether to buy or sell Bitcoin, a tweet from Bukele says a different story.
Phone. https://t.co/sIhXq6v2OD— Nayib Bukele 🇸🇻 (@nayibbukele) December 5, 2021
The government's Bitcoin address is a secret and it has a $150 million purse to carry out its transactions. Although the fund comes from a state-run bank, there are no details of the transactions carried out so far in the public domain, Bloomberg reported.
In November last year, Bukele published plans of building a Bitcoin city to boost cryptocurrency businesses which also involves buying more Bitcoin with public money. With high opacity in how business around the crypto coin is conducted, the El Salvadorian taxpayer is surely not going to be happy.
Disclaimer: Some members of the IE team, including editors of this article, have personally invested in a number of cryptocurrency and stock markets. However, their private investment viewpoints have no impact on editorial content.