El Salvador buys 500 bitcoins as sales continue in the crypto market

El Salvador buys 500 bitcoins as sales continue in the crypto market

El Salvador’s President Nayib Bukele announced the “Bitcoin City” by making a gesture during his speech at the closing ceremony of the Latin Bitcoin conference (LaBitConf) held in Mizata Beach, El Salvador, on November 20, 2021.

Marvin Recinos | AFP | Getty Pictures

El Salvador has added $15.5 million worth of Bitcoin to its balance sheet as it continues to sell the world’s most popular cryptocurrency.

in a tweet on MondayPresident Nayib Bukele announced that the country bought the dip and added another 500 bitcoins to the government’s coffers.

This is El Salvador’s largest coin purchase since it began adding the digital currency to its balance sheet in September 2021 – making it the first country to accept bitcoin as legal tender, alongside the US dollar, that same month.

Bitcoin is down more than 8% in the last 24 hours and is down nearly 55% from its all-time high in November.

According to the president’s tweet, El Salvador bought bitcoin at an average price of $30,744.

The country’s total reserves are up to 2,301 bitcoins, or about $71.7 million at current prices, according to data tracked by Bloomberg.

This is the latest in a series of dips in the past nine months, when President Bukele, who credits his political fate with the success of the country’s bitcoin experiment, doubled his bitcoin bet as the crypto market plummeted.

The country’s decision to lean on bitcoin is not without its skeptics, a condition that has gained momentum in recent months.

The International Monetary Fund has been complaining about Bukele’s bitcoin experiment for months.

In January, the IMF forced El Salvador to issue bitcoin as legal tender.

IMF directors stressed that “there are major risks on financial stability, financial integrity and consumer protection associated with the use of bitcoin, as well as the associated financial contingent liabilities.”

The report, released after bilateral talks with El Salvador, continued to “encourage” officials to narrow the scope of bitcoin law by removing bitcoin’s legal currency status.

The IMF report went on to say that some executives have expressed concerns about the risks associated with bitcoin-backed bond issuance, citing the president’s plan to raise $1 billion through a “Bitcoin Bond” in partnership with a digital asset infrastructure firm, Blockstream. However, this bond supply was frozen in March due to “adverse market conditions”, according to Finance Minister Alejandro Zelaya.

Part of El Salvador’s nationwide transition to bitcoin included the launch of a national virtual wallet called Chivo, which offers free transactions and allows for fast cross-border payments. For a country where 70% of its citizens do not have access to traditional financial services, Chivo aims to provide a convenient ramp for those who have never been part of the banking system.

IMF directors agreed that the Chivo e-wallet could facilitate digital means of payment, thereby helping to “increase financial inclusion” despite emphasizing the need for “strict regulation and oversight”. Many Salvadorans have reported cases of identity theft where hackers used their national ID numbers to open a Chivo e-wallet to claim the $30 free bitcoin offered as an incentive by the government.

A report by the US National Bureau of Economic Research in April also showed that only 20% of those who download the wallet continue to use the wallet after spending the $30 bonus. The research was based on a “nationally representative survey” of 1,800 households.

El Salvador has been trying to secure a $1.3 billion loan from the IMF since the start of 2021 – an effort that seems to have disrupted the bitcoin lineup.

The country will need to find another foothold to support 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”.

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