Nayib Bukele is a trained advertising specialist. And so it was no coincidence that the President of the 21,000 square kilometer small El Salvador bought exactly 21 Bitcoin – on December 21, 2021 at 9:21 p.m. Those were the good numbers. But now it seems as if the business could end badly.
So far, the Central American state has bought at least 1391 Bitcoin. An unusual step, after all, Bitcoin is considered a highly controversial object of speculation. The President took over the trade himself: According to his own statements, he bought Bitcoin with his mobile phone. At the exchange rates at the time, the investments cost El Salvador a total of around 71 million dollars. But if Bukele withheld the digital coins, their value may have dropped to $61 million by now. This is suggested by calculations by the Bloomberg news agency.
El Salvador’s flirtation with cryptocurrency began last September. At that time, the small country was the first country in the world to announce that it would introduce Bitcoin as a means of payment. Since then, citizens have been able to pay their taxes using the cyber currency. And the big chains like Starbucks and McDonalds also accept the new currency at their tills. The country also invested in the cryptocurrency, continuing to buy bitcoin even at the record high of more than $68,000 in November. In the meantime, however, the currency has lost around 40 percent of its value.
The crypto community still celebrates small state president Bukele as a hero. He even announced the construction of a bitcoin city in the east of the country. The first city in the world to be financed exclusively through Bitcoin is to be built here. El Salvador is planning to issue its own bitcoin bonds for financing and is tempting with a tax haven: “Invest here and earn as much money as you want,” promised Bukele when he presented his plans. Only VAT will be levied in the city in the future. The self-proclaimed CEO of El Salvador reacted very briefly to a US economist’s criticism of his project and tweeted in nerd jargon: “ID-10t” – idiot.
However, Bukele’s poor country is not particularly attractive for investors. El Salvador’s government bonds were the worst performers in the world in 2021. The country remains highly indebted, and the Fitch rating agency gave it a bad “B-” in terms of creditworthiness. El Salvador is still struggling with the International Monetary Fund (IMF) for a loan of 1.3 billion dollars. But the lender’s concerns are probably too great – in autumn the IMF warned in vain about the crypto experiments. After all, according to government information, the country converted some of its cyber currencies back into dollars last week. However, the Ministry of Finance left it open how many bitcoins they had parted with. El Salvador could have lost a few million dollars in the process.