El Salvador President Nayib Bukele gestures during his speech at the closing ceremony of the Latin Bitcoin Conference (LaBitConf) at 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 worth of bitcoin to its balance sheet as the world’s most popular cryptocurrency continues its sell-off.
In a tweet on MondayPresident Nayib Bukele revealed that the country bought the dip, adding another 500 Bitcoin to the treasury.
It is El Salvador’s largest coin purchase since it first began adding the 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 is down more than 8% in the past 24 hours and is almost 55% below its all-time high from November.
According to the president’s tweet, El Salvador bought bitcoin at an average price of $30,744.
The country’s total reserves are as high as 2,301 bitcoin, or about $71.7 million at current prices, based on data tracked by Bloomberg.
This is the latest in a string of dip buying over the past nine months, in which President Bukele — who has tied his political fate to the success of the country’s bitcoin experiment — has doubled down on his bitcoin bet as the crypto market plummets.
The country’s decision to bank on Bitcoin is not without its skeptics — a contingent that has been gaining momentum in recent months.
The International Monetary Fund has been complaining about Bukele’s Bitcoin experiment for months.
In January, the IMF urged El Salvador to phase out bitcoin as legal tender.
Directors of the IMF “emphasized that there are major risks to financial stability, financial integrity and consumer protection and associated tax contingencies associated with the use of bitcoin.”
The report, released after bilateral talks with El Salvador, went on to “urge” the authorities to limit the scope of the Bitcoin Law by stripping Bitcoin of its status as legal money.
The IMF report went on to say that some directors had expressed concern about the risks associated with issuance of bitcoin-backed bonds, citing the president’s plan to partner $1 billion via a “bitcoin bond.” with Blockstream, a digital asset infrastructure company. However, that bond offering was shelved in March due to “unfavorable market conditions,” according to Finance Minister Alejandro Zelaya.
Part of El Salvador’s nationwide shift to bitcoin also included the launch of a national virtual wallet called Chivo, which offers fee-free transactions and fast cross-border payments. For a country where 70% of citizens have no access to traditional financial services, Chivo aims to provide a convenient entry point for those who have never been part of the banking system.
IMF Directors agreed that the Chivo e-wallet could facilitate digital payments and thereby help “promote financial inclusion,” although they stressed the need for “rigorous regulation and oversight.” Many Salvadorans have reported instances of identity theft, with hackers using their national ID number to open a Chivo e-wallet to claim $30 worth of free bitcoins offered by the government as an incentive.
A report released 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 the $30 bonus was issued. The study was based on a “nationwide representative survey” of 1,800 households.
El Salvador has been trying to secure a $1.3 billion loan from the IMF since early 2021 — an effort that appears to have spoiled this bitcoin row.
The country needs to find another backstop to prop up its finances. The IMF predicts that under current policies, public debt will rise to 96% of GDP by 2026, putting the country on an “unsustainable path”.