June 3, 2022 6 min to read.

Launch of the Bitcoin bond project in El Salvador still on track.

Is El Salvador ready for bitcoin bond? How many bitcoins El Salvador have right now?

Table of Content

1. Finance minister Minister Alejandro Zelaya attended face-to-face meeting of TCS
2. El Salvador has 2,301 bitcoins now
3. Finance Minister says: "we have said on many occasions in the short term the variations are constant but in the long term well
4. Bitcoin decline in value exacerbates financial crisis in El Salvador
5. IMF demands reversal
6. Bitcoin acceptence by Firms in El Salvador

Finance minister Minister Alejandro Zelaya attended face-to-face meeting of TCS

We are not selling the coins that we have bought in this moment. -Alejandro Zelaya

Finance minister Alejandro Zelaya said June 1 on a national television news show that El Salvador still does not believe the right time is right for launching its highly anticipated Bitcoin bond due to the current market conditions.

El Salvador and the International Monetary Fund (IMF) are in discussions, Zelaya also said in the interview, and an update will be forthcoming.

El Salvador has 2,301 bitcoins now

Considering recent drops in the value of bitcoin, analysts have questioned El Salvador's strategy of buying the currency, estimating the country has lost more than $35 million on the investment based on current prices and the value of bitcoin at purchase.On May 9, El Salvador's government bought 500 bitcoins during a price drop, bringing its total government purchases to 2,301 bitcoins.

There has been some confusion regarding how El Salvador's bitcoin transactions work.Zelaya responded that, as part of the Chivo Pets pet hospital fund, some of the country's bitcoins were sold by Bukele to the country.Despite fluctuations in bitcoin's price, Bukele said the project was financed with a "surplus" of $4 million.In his speech, Zelaya described the state-run bitcoin trust fund, which allows Mexico to maintain both dollars and bitcoins at the same time.

Finance Minister says: "we have said on many occasions in the short term the variations are constant but in the long term well"

we have said on many occasions in the short term the variations are constant but in the long term well always tends to appreciate in value if you wolvert the appreciation curve or the blame for behavior of the price of vitoria always upwards in the short term have small increases it goes down to the shabab but normally over time it always tends to appreciate some falls have been requested somewhat violent is a finite currency that is also part of its nature is some of the characteristics that they have of behavior as a currency in the world stock market the same thing happens to the dollar also that it falls it rises it also falls that is the falls in the prices the pound is the turkish pound fell a few days ago abruptly right then the stock markets behave like this that is how el salvador behaves very well what it has is not an investment strategy -Alejandro Zelaya

Bitcoin decline in value exacerbates financial crisis in El Salvador

The decline in the value of bitcoin and the country's cryptocurrency reserves are exacerbating the "deepest financial crisis El Salvador has experienced in decades". That's what Salvadoran economist Tatiana Marroquín told the Spanish news agency [i]EFE[i]. From Marroquín's point of view, the current decline in Bitcoin & Co. goes hand in hand with the "accelerated" and "unreflected" indebtedness of the government under President Nayib Bukele and his "arbitrary decisions" in economic and political matters.

</p>According to the International Monetary Fund (IMF), El Salvador’s national debt is on the way to “unsustainability” due to current government policies. Rating agency Moody’s recently warned of the possibility of a default on El Salvador’s debt, which the country has to repay in 2023 and 2025. Moody’s sees no “credible plan” to deal with that debt.</p> </p>The economic fallout from Russia’s invasion of Ukraine, high inflation and rising interest rates have seen the value of bitcoin (and other cryptoassets) plummet by more than fifty percent from October’s all-time high. El Salvador’s state finances are feeling this particularly badly, even if the losses from the decline in Bitcoin’s value alone “are not enough to drive the country into bankruptcy,” says Marroquín.</p>

IMF demands reversal

Since the introduction of bitcoin as a regular means of payment, the government has bought bitcoin several times. The investments announced by President Bukele, for which there is no further information other than the President's tweets, were made when Bitcoin prices ranged between $30,700 and $58,000. In total, between September 6, 2021 and May 9, the government amassed 2,301 bitcoins for more than $100 million, for an average bitcoin price of just over $43,500 or more. Currently (as of May 16) the price is around 29,600 US dollars – and the trend is falling.

According to Marroquín, investors' fear today stems from "the fact that the money has been lost (due to the collapse in prices, note) and from the arbitrariness of the management of public funds". According to the economist, "the president is unable to accept that he made a mistake, which is another sign of how inflexible and unreflective the government of El Salvador is." She accuses Bukele of "thinking more about the Bitcoin narrative than the welfare of El Salvador."

At the end of January , the IMF asked El Salvador to give up Bitcoin as a means of payment . The use of Bitcoins is associated with too many risks - for financial stability, financial integrity and consumer protection as well as the associated tax contingencies. El Salvador has been negotiating a $1.3 billion loan package with the IMF for some time. However, the government had to postpone indefinitely the issue of a first Bitcoin-backed bond of USD 1 billion, originally planned for March.

Bitcoin acceptence by Firms in El Salvador

According to the survey that made by National Bureau of Economic Research, only 20% of the companies in El Salvador accept Bitcoin as a payment method.

On the other hand, El Salvador was launched an app called the “Chivo Wallet”, which allows users to digitally trade both Bitcoin and dollars over the Lightning Network, the survey measured the attiude towards the Chivo App. According to the survey 61.85% of people agree with the use of Chivo.

Source

ARE CRYPTOCURRENCIES CURRENCIES? BITCOIN AS LEGAL TENDER IN EL SALVADOR - NBER WORKING PAPER SERIES