While the price of bitcoin continues to fall and approaches what financiers call “the cross of death”, the warning voices continue to sound for El Salvador, which is the only country in the world to have legalized the crypto asset and to have bought tokens with public funds.
“The president of Salvador, Nayib Bukele, is probably the only head of state in the world who uses public funds to trade Bitcoin with his phone,” Bloomberg published this morning.
The media points out that the purchases of 1,391 tokens that the State has bought with public funds implied an expense of about $ 71 million and that to date these are equivalent to about $ 59 million, that is, it implies a loss of $ 12 million, making own calculations because there is no data or official information with which to contrast.
“Even with bitcoin falling, any potential trade loss is overshadowed by the nation’s falling bonds, which have raised El Salvador’s financing costs,” notes Bloomberg.
El Salvador’s bonds performed the worst in the world last year, and prices do not appear to recover. While the country risk continues to climb, exceeding 15%, the highest rate in the history of this indicator.
And as economists continue to point out and warn of the risks in crypto, the government is enlisting a designated $ 1 billion issuance in bitcoins.
For Carlos Acevedo, former president of the Central Reserve Bank, this issue would close the doors to be able to negotiate later with traditional bondholders.
“Although from the point of view of an investor who does his analysis, it is not a good business … it can work as a kind of solidarity of the sect of ‘bitcoiners’, but it is not a good business. It makes no sense that you buy the bond of a country with the level of indebtedness of El Salvador and that for 5 years it will have that frozen, because the value of bitcoin is expected to rise, for that it is better to keep it in the digital wallet, “he says. .
Nathalie Marshik, head of emerging markets sovereign research at Stifel Nicolaus & Co. in New York, told Bloomberg that: “I can understand why the Salvadoran taxpayer would be upset about this, especially given the recent nosedive in Bitcoin. It is difficult to justify a government trading such a risky asset with taxpayers’ money in such opaque circumstances ”.
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