President Nayib Bukele made bitcoin his personal crusade when it was announced in 2021 that his country would make the number one crypto currency legal tender alongside the U.S. dollar.
Since that time, El Salvador has managed to acquire 2,301 bitcoins to hold on its balance sheet. According to Business Insider, the average purchase for its bitcoins is $45,908.
However, the crypto market has plunged over recent months and as of yesterday, bitcoin had lost as much as 70% of its value since the market top last November.
The cost to the El Salvadoran treasury is estimated to be around $56 million on its bitcoin holdings, as per calculations carried out by Bloomberg.
Making matters worse is the fact that El Salvador has an $800 million bond due in January, and given that it has gone out on a limb with bitcoin, the country has caused the ire of world financial institutions such as the IMF, and will struggle to raise any more short-term financing.
Rating agencies have lowered El Salvador accordingly. S&P Global Ratings lowered the country to a CCC+, and Fitch also lowered its rating to CCC back in February, stating that the country’s bitcoin adoption put IMF financing for 2022/23 in jeopardy.
Nevertheless, despite all the negativity surrounding his championing of bitcoin, Bukele has hinted that his country could buy the bitcoin dip once again, stating that El Salvador’s bitcoin losses didn’t even account for 0.5% of its entire national budget.
The country’s finance minister Alejandro Zelaya was also relatively dismissive about bitcoin’s current downward trajectory, and his country’s financial obligations, saying:
"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, the fiscal risk is extremely minimal."
On the other hand, replying to Bukele’s tweet, Peter Schiff, a well-known bitcoin sceptic, suggested that the President cut his country’s losses.
