El Salvador’s Bitcoin Bet Down 50%, Here’s What The FinMin Thinks

El Salvador, the first country to nationally adopt Bitcoin, faces a loss of about $40 million on its investments in the token. 

But country’s Finance Minister, Alejandro Zelaya,  does not think this is something to worry about.

In a recent press conference, Zelaya said that $40 million “does not even represent 0.5% of our national general budget,” Reuters said in a report.   

According to the minister, the drop does not create any fiscal risk for El Salvador.

Bitcoin has plummeted by nearly 30% in the past 48 hours, and faces further weakness due to highly leveraged traders in the market. The token is trading around its lowest levels since late-2020.

El Salvador’s Bitcoin bet slumps 50%

El Salvador is the world’s first country to make cryptocurrency legal. President Nayyib Bukele has personally announced Bitcoin purchases by the country on his Twitter handle. 

Since El Salvador legalized Bitcoin in September 2021, the token has plummeted by over 60%. El Salvador has consistently purchased Bitcoin since then, and reportedly holds about 2,301 tokens. 

Those tokens were purchased at an average price of $45,171, at a total value of $103 million. Bitcoin is trading at $22,000 as of Tuesday, valuing El Salvador’s holdings at about $50 million.

Market volatility has already hit planned bond issuance

But while Finance Minister Zelaya brushed off the fiscal risks from digital assets, the country has still faced some disruptions from volatility in the market. 

El Salvador had earlier this year  postponed a planned Bitcoin bond issuance worth $1 billion, citing unfavorable market conditions. 

The bonds, which were set to be used to fund a mining operation using volcanic energy, are now expected to be issued in September 2022.

The country also planned to use the Bitcoin bonds in order to clear its sovereign debts.

But the International Monetary Fund and other authorities have advised El Salvador to rethink its decision over using Bitcoin as legal tender.