El Salvador took the international media spotlight in 2021 by becoming the first sovereign nation to make bitcoin (BTC) an official currency. However, national investment in the cryptocurrency has not paid off so far. In fact, with the most recent drops in the price of the digital asset, the country has already lost more than half of the amount invested .
El Salvador’s President Nayib Bukele is a big supporter of cryptocurrencies and has staked the country’s economy on bitcoin . While the national currency is no longer used and the Salvadorans’ economy was based on the dollar, the officialization of the crypto asset as the national currency was celebrated by some and much criticized by others.
The main promise was to facilitate and cheapen international remittances from migrants who send money to family members in El Salvador. To this day, this is one of the most important sources of income in the country.
Bitcoin would also lessen Salvadoran dependence on US monetary authorities, according to Bukele. Ultimately, cryptocurrency could bring long-term enrichment to El Salvador’s economy, should the digital currency appreciate.
However, today the country has tens of millions of dollars in losses , according to data from the website nayibtracker.com , which monitors El Salvador’s crypto portfolio. As per the cryptocurrency quote this Tuesday, June 14, 2022, Salvadoran investments in bitcoin are worth less than half of what Bukele paid .
El Salvador invested $105 million in bitcoin
In October 2021, El Salvador made its most expensive purchase of bitcoins. At the time, Bukele bought the assets during a sudden price drop, acquiring 420 BTC for around $60,300 each. The cheapest purchase made by the Salvadoran government was on May 9, when another 500 BTC was purchased for US$30,700 a coin .
Currently, the Central American country holds 2,301 bitcoins . According to an average price of $23,000 on Tuesday, Salvadoran equity in the crypto asset is worth approximately $53 million . That’s roughly half of the $105 million total that the government of El Salvador used to buy the cryptocurrencies.
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In a momentary analysis, every purchase ever made by the Bukele government is now in the red. After all, El Salvador made bitcoin official in 2021, the year in which the asset and the entire crypto market recorded multiple records. The cryptocurrency is now trading at its lowest since 2020 .
Crypto market is down in 2022
This is not a good year for cryptocurrencies. While major assets have struggled to maintain their prices since January, the last month has been particularly harsh for the crypto market . Some events, such as the complete failure of the stablecoin Terra and the digital currency Luna, have dragged the entire sector into the red.
According to data from CoinMarketCap , in the last month alone, bitcoin has plummeted from $32,000 to less than $21,000 , its lowest price since 2020. Ether (ETH), the second largest cryptocurrency, has lost virtually half the value between May and June, falling from US$2,200 to US$1,100.
El Salvador wants to be the first nation in the world to treat bitcoin as a currency. So far, cryptocurrency hasn’t helped any of the country’s financial woes. Of course, the Salvadoran population is not happy with Bukele.
Protests have already been held against BTC and the president has been described as “authoritarian”. Furthermore, the situation in El Salvador is serious. A wave of violent crime has put 2% of the country’s adult population in prison , for example, not to mention accelerating inflation.
The current situation in the crypto market is not a death sentence for El Salvador’s already battered economy. Bitcoin supporters still believe in a big appreciation in the long term. But right now, Salvadoran citizens are losing more and more purchasing power as the cryptocurrency plummets.