2022 not the best start for cryptocurrencies. Bitcoin lost over $8,000 against the US dollar between Christmas & last Friday. Amid this slump, El Salvador may have lost $10 million, according to a Bloomberg report.
Last year, the Central American country grabbed the headlines by becoming the first country to accept Bitcoin as legal tender. The country’s president, Nayib Bukele, passed the necessary legislation to get this done & even decided to give its citizens $30 worth Bitcoin to start the new movement.
As the cryptocurrency skyrocketed, the Salvador government announced plans to use the profit from its Bitcoin trade-to build pet hospital & 20 schools as well.
Since Bitcoin is no longer in an upward trend, the question arises whether a government should trade in cryptocurrencies at all. Obviously, the country is buying cryptocurrencies, as Bukele himself confirmed on Twitter more than once.
According to Bloomberg calculations, based on timing of the tweets & then prevailing bitcoin prices, El Salvador has bought $71 million worth of cryptocurrencies. If the country held all the bitcoins, they would be worth around $61 million as of Wednesday. resulting in a loss of $10 million, or 14% loss, the news agency reported.
It’s not clear how the government decides to buy the assets. While Finance Minister Alejandro Zelaya previously said that a team of government officials answered a call to buy or sell Bitcoin, a tweet from Bukele tells a different story.
The government’s bitcoin address is secret & it has a $150 million wallet to conduct its transactions. Although the fund originates from a state bank, there are no-details of transactions carried-out so far in public domain, Bloomberg reported.
Last year in November, Bukele released plans to build a bitcoin city to boost cryptocurrency businesses, which includes buying more bitcoin with public funds.
Given the great opacity of how business is conducted around cryptocurrencies, the Salvador taxpayer will certainly not be happy.