The Bitcoin Crash Is Taking El Salvador’s Big Bet With It

The ongoing crypto crash has managed to wipe out more than 50 percent of the value of El Salvador’s bitcoin hoardings.

The NB Bukele Tracker, named after the country’s bitcoin-obsessed president, records each purchase announced by the country, its cost basis, total reserves, and the average cost basis of those reserves. Bukele has purchased 2,301 bitcoins at an average cost of $45,908 and a total cost of $105.6 million. Today, with the price of bitcoin hovering around $22,000, El Salvador’s reserves have lost 51% of their value and are worth $51.6 million.

El Salvador’s embrace of bitcoin has been bombastic, and has been widely lambasted by critics inside and outside the country. Shortly before its most recent purchase on May 9, rating agency Moody’s slashed the country’s debt. Earlier, in January, the IMF recommended that El Salvador liquidate its bitcoin holdings and release the cryptocurrency as legal tender, resulting in outrage from the government: Treasury Minister Alejandro Zelaya said on local television that “Nobody is going to make an international organization, whatever we do, we do it.”

A planned bitcoin bond was supposed to help finance the construction of the currently built “Bitcoin City,” which Bukele unveiled last month as a gold-scale model. Bukele envisions a geothermal city built in the shadow of a volcano that also serves as a tax haven, but details are scant about how any of this would actually be built.

But El Salvador doesn’t seem worried. On Monday, Zelaya told a press conference that the bitcoin price drop posed an “extremely minimal” financial risk as it represented about half a percent of the national general budget.

The largest publicly known holders of bitcoin, which include El Salvador, are posting massive on-paper losses amid the ongoing crash. Michael Saylor’s MicroStrategy holds 129,218 bitcoins that were bought at a cost of about $4 billion, but are now worth $2.9 billion (a 26 percent loss). Cylar has a $205 million loan with Silvergate that was used to buy some of that bitcoin, which may require a margin call when bitcoin falls below $21,000 (which was as of Tuesday). morning was briefly) although the chief executive officer Told MicroStrategy had the funds to bring the price down to $3,652.

In a February filing with the SEC, Tesla said it bought $1.5 billion worth of crypto tokens in 2021 and has a value of about $2 billion by the end of the year. Bitcoin is down more than 50 percent in the same period, and Tesla’s gains were wiped out in early May.

It is unlikely that the pain will end soon. Other crypto-related companies are gearing up for a “crypto winter” with venture capital firm Andreessen Horowitz warning that “dark days” were ahead and Coinbase rescinding job offers last week and laying off 18% of its workforce today. Announced plans to (and immediately cut fired employee access to workplace systems).

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