El Salvador loses $12 million on Bitcoin purchases

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With the ongoing market crash, El Salvador is incurring significant losses on its Bitcoin investments.

Its purchase process and wallets are not disclosed, so the exact amount remains unknown. But estimates put the loss at between 10 and 12 million dollars.

El Salvador’s “Bitcoin Experiment” has been hailed by some as pioneering in that it paved the way for other nation states.

But the losses highlight the risks of crypto investing. All the more so given the quantities involved and the public manner in which El Salvador conducted its affairs.

But has this deterred other countries from adopting Bitcoin as legal tender?

When the dip keeps dipping

El Salvador made history on September 7 by being the first sovereign nation to adopt Bitcoin as legal tender.

As “commissioning” approached, and ever since, the move was violently opposed by some quarters. Including international agencies, such as the IMF, which have warned it would interfere with funding negotiations. And private companies, including S&P Global and Moody’s, who have spoken of negative implications for its credit rating.

It’s not helped by some teething issues with the Chivo Wallet. Some users report identity theft, and others talk about the mysterious disappearance of their Bitcoin balance.

Despite all of the above, President Bukele remains steadfast in his support for the Bitcoin experiment.

Since September, President Bukele has tweeted instances of buying the dip. Based on this, El Salvador is estimated to hold 1,391 BTC, which cost $73.2 million to acquire.

However, at current prices, the value of the holdings stands at $59 million, a loss of $14 million – higher than previous estimates due to Bitcoin’s continued decline.

Last week, Finance Minister Alejandro Zelaya said that El Salvador had sold Bitcoin, but it is unclear when and how much.

Prior to the current downturn, President Bukele said that Bitcoin would hit $100,000 this year. He also said that two more nation states will adopt BTC as legal tender in 2022. But he remained tight-lipped on which countries they will belong to.

Will this deter sovereign nations from investing in Bitcoin?

Last week, Fidelity investment managers released a report on future trends. In it, they mentioned El Salvador’s approach to Bitcoin, which they believe represents an opportunity for wealth and prosperity.

Based 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. Asset managers describe this as buying a “form of insurance”.

“So we wouldn’t be surprised to see other sovereign nation states acquiring bitcoin in 2022 and perhaps even seeing a central bank make an acquisition.”

However, the reverse must also be true. Such poor performance will deter nations from joining us.

Now it’s a waiting game.

Posted in: Bitcoin, Investments

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