The world of cryptocurrencies was preparing for a long “winter”, but the scandal that engulfed Ftx and the young cryptobillionaire Sam Bankman-Fried turned it into a nightmare. However, this does not seem to scare the Salvadoran president, the populist Nayib Bukele, who remains faithful to bitcoin. Heedless also of the warnings of the International Monetary Fund and of the rating agencies which now speak in no uncertain terms of probable default at the beginning of 2023. Indeed, Bukele raises. After making headlines just over a year ago by making El Salvador an open-air cryptolaboratory with the adoption of bitcoin as legal tender, it now doubles. Just this week, the Minister of Economy presented a bill to extend legal tender to all cryptocurrencies.
The Central American country is preparing for the repeatedly postponed launch of a billion-dollar bond, the first in the world guaranteed by bitcoin. The project for the Volcano Bond envisaged that half a billion would go to finance a “Bitcoin City” that would act as a showcase for investments. The city is expected to be built on the coast, near Conchagua, the volcano that would be used for energy to support the bitcoin industry. The remaining half a billion should be used for further purchases. Then at the beginning of the year, Bukele indicated that he would use the sum to reduce the foreign debt, predicting that bitcoin would reach $100,000. Things went the other way around and today it languishes at around 16,000.
If the stagnation of prices continues or if the value is reduced even more, Bukele could consider it an investment in the future. However, this time the president moderated his tone and, faced with the new collapse of the crypto price list, he no longer mentioned the possibility of “buy on the dips”. The investment, for now, is failing. The public tracker indicates that there are 2,396 bitcoins in the state coffers, the last eight purchased a week ago, with a total investment of over $107 million, at an average price of $44,825. The total value is now reduced to less than $40,000. But the loss is almost irrelevant to the total external debt.
All eyes are on next January, when a 688 million dollar Eurobond expires. And bitcoin is far from $100,000. It is no coincidence that Bukele this month announced a free trade agreement with China, which would also offer to buy Salvadoran $21 billion in foreign debt. The country would thus pass from dollarization to submission to Beijing.