El Salvador Buying the Dip, Bullish at Bitcoin Price Drop
El Salvador, the first country to declare bitcoin (BTC) as legal currency last year, has resumed its bitcoin buying frenzy by purchasing another 500 tokens for $15.3 million, according to a Tweet by Nayib Bukele.
El Salvador paid an average of $30,744 for each bitcoin, Bukele said, seizing the opportunity to buy the bitcoin price dip.
El Salvador has made the largest coin buy since adding bitcoin to its balance sheet in September 2021, the same month it became the first country to accept bitcoin as legal cash alongside the US dollar.
Bitcoin has dropped more than 8 percent in the previous 24 hours and is approximately 55 percent below its all-time high from November, prompting many investors to buy while the price is low in anticipation of a bullish market to follow.
According to Bloomberg data, the country’s total reserve is up to 2,301 bitcoin or approximately $71.7 million at current rates.
This is the latest in a run of dip buys by President Bukele, who has staked his entire political career on the success of the country’s bitcoin venture while the crypto market plummets.
The country now has 2,301 Bitcoin worth $73 million at current exchange rates, according to Bloomberg, last purchasing Bitcoin in January, when it paid $36,585 for 410 bitcoins.
Many skeptics are not so pleased with their president’s bullish approach.
The International Monetary Fund has been critical of Bukele’s Bitcoin trial for months, pressuring the president to abandon bitcoin as legal currency.
In their consultation, the IMF “stressed that there are large risks associated with the use of bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities.”
The IMF’s encouraged the El Salvadorian government to limit the scale of their Bitcoin adoption by putting limits on Bitcoin’s status as a legal currency.
The IMF report went on to state that some directors were concerned about the dangers of issuing bitcoin-backed bonds, alluding to the president’s desire to raise $1 billion through a “Bitcoin Bond” in collaboration with Blockstream, a blockchain technology company.
Many Salvadorians are not so pleased with their president’s disposition towards Bitcoin either.
Although one of the reasons behind switching to Bitcoin was to bring financial services to the unbanked, which in El Salvador is around 70 percent of the population, a recent poll by the National Bureau of Economic Research (NBER) in the United States has shown this to be ineffective.
The study showed that barely 20 percent of Salvadoreans currently use the Chivo e-wallet; even after receiving a signing bonus of $30 by the government to encourage Chivo downloads, the majority of customers quit using the program. According to the NBER, even those who still use the Chivo wallet use it to store and exchange money rather than Bitcoin. Those users were mainly young educated males who were already banked, indicating that unbanked Salvadoreans were largely staying with cash, according to the poll.
Whatever the case, El Salvador buying the dip on Bitcoin might be a good strategy for everyday traders, but it remains to be seen if the same is a good idea for an entire nation.
Summary
El Salvador bought an additional 500 Bitcoins for the price of around $15 million as the crypto market plummets. Skeptics and critics have been wary of the country’s financial decision, and many in the country itself are not happy with this venture; however, much remains to be seen.
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