As bitcoin sinks, El Salvador has strengthened its bet in cryptocurrencies. The president of the South American country, Nayib Bukele, in a tweet announced a massive 500 bitcoin purchase plan at an average price of $ 30,744. The largest purchase ever made by a state.
The operation brought the country’s total reserves to 2,301 bitcoins, for a value of 72 million. This was revealed by a calculation made by Bloomberg, who analyzed the information that President Bukele shared on Twitter overnight.
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“El Salvador just bouhgt the dip”, tweeted Bukele, an expression difficult to translate into Italian but which refers to when you take advantage of the sudden drop in the price of a good (the dipthe dip) to stock up on it by buying it in quantity.
Yet analysts have not escaped that the new outlay of money has brought the total value of the country’s investment in bitcoin to a figure that is still 25% less than the investment made so far: 103 million dollars.
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Effect of several purchases made throughout the course of 2021, when the crypto reached values even more than double compared to the current ones. For now, therefore, the investment has not paid off. El Salvador ‘buys the dip’, but for now the dish is crying. However, this did not take an ounce of trust away from Bukele, who on Twitter simply describes himself as ‘El Presidente’, convinced that he will lead his nation to become the capital of the new crypto economy.
Bitcoin City, the volcano
To confirm his plans there is also an ambitious project, launched last November: to build the first ‘Bitcoin City’ in the world, financed with covered bonds, needless to say, by cryptocurrencies. “We will start fundraising in 2022, the bonds will be available in 2022“Bukele then told what Reuters had defined as ‘a cheering crowd’.
The city, explained Bukele, will rise in the east of the country, will receive its energy supply from a volcano and its activities will not be subject to any taxes other than VAT. In the night, immediately after announcing the purchase of new bitcoins, Bukele also published a series of tweets with models of the ‘Bitcoin City’: day view, night view, view from the crater.
A dollarized and bitcoinized economy. The risks
El Salvador thus gained a strong media coverage when last year, in late July, it made bitcoin fiat currency. First country in the world. The country’s economy, ‘dollarized’ in 2021 was dollarized, was soon after ‘bitcoinized’, making both currencies official in the country to, in Bukele’s words, “favor remittances by Salvadorans abroad”, which are worth over 24% of the country’s gross domestic product, according to the World Bank. According to official figures, El Salvador has 6.5 million inhabitants and an annual GDP of 27 billion dollars. A poor country.
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Bitcoin represented a hope to revive the proven local economy. But at the moment, aside from strong attention from the international bitcoin holding community, Salvadorans aren’t smiling yet. Indeed, the collapse of crypto, also caused by a market readjustment after the monetary tightening of the central banks of the main Parsis in the world, had an unpleasant effect. A blow, even quite hard, to its state coffers.
Among Bukele’s projects there was also try to pay part of the goods, salaries and pensions in bitcoin. Now, with bitcoin collapsing by more than half its value, imagining that its revenues are also halved may not be the best for a community already tried by hardships and economic difficulties.