In the latest development, El Salvador Nayib Bukele announced that they will resume their Bitcoin purchases once again. In his recent tweet, President Nayib Bukele wrote: “We are buying one Bitcoin every day starting tomorrow”. However, he hasn’t suggested how long they will continue with this buying program.
We are buying one #Bitcoin every day starting tomorrow.
— Nayib Bukele (@nayibbukele) November 17, 2022
El Salvador’s Bitcoin Law came into effect last year on September 7, 2021. The country has acquired nearly $375 million worth of Bitcoins, however, has been sitting at more than $60 million in unrealized paper losses.
President Nayib Bukele has been the biggest proponent of Bitcoin and believes that the crypto would be good for the country’s financial health. Furthermore, he has gone against all odds for their Bitcoin bet despite repetitive warnings from the IMF and the World Bank to withdraw from their Bitcoin bet.
The last year’s BTC price decline has certainly been a deadly blow for El Salvador. The unfolding of the FTX episode over the last week has also put BTC under huge selling pressure. But it seems that President Nayib Bukele has amassed enough confidence to take a long-term bet on fresh Bitcoin purchases.
El Salvador and the China Axis
In addition to acquiring Bitcoins, President Nayib Bukele has been working on creating an entire Bitcoin economy infrastructure. He also shared plans of floating Bitcoin volcano bonds and establishing a Bitcoin City which hasn’t materialized yet.
While President Bukele has been relying on Bitcoin-denominated volcano bonds to pay off their national debt, things haven’t turned in his favor so far. Luis Membraño, a Salvadoran economist said:
“If Bukele dreamed that he could create a different and innovative political economy, against the advice of the IMF, that dream has failed. There are no easy alternatives, no short-cuts.”
Due to its ambitious Bitcoin plans, every top rating agency has downgraded El Salvador’s credit line. Rating agency Fitch expects that the country could default on its debt in the coming January. On the other hand, a looming recession, rising inflation, and the worsening fiscal situation are likely to hurt the country’s economy further.
Economist Membraño said that El Salvador could fall into the financial axis of China asking it for debt financing. “It would represent a total realignment of El Salvadoran foreign policy,” he said.
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