- El Salvador, the first country to make bitcoin legal tender, racked up $36 million in cryptocurrency losses on Thursday.
- The popular cryptocurrency plummeted 50% from its all-time high this week.
- The government bought an additional 500 coins at $30,744 each on Monday, President Nayib Bukele said.
El Salvador – which became the first country to make bitcoin legal tender in September — has seen the value of its massive cryptocurrency investment plummet by $36 million as bitcoin dropped over 50% from its all-time high on Thursday.
President Nayib Bukele bet big that bullish bitcoin investments could rescue El Salvador’s economy from its growing debt-to-GDP ratio. Now, the crypto market’s crash is fulfilling critics’ warnings against investing treasury funds into volatile digital currencies.
Bukele’s administration has spent a total of $103 million on 2,301 bitcoins since September of last year, according to Bloomberg data. As of Thursday afternoon, the coins were valued at around $67 million. El Salvador currently owes an estimated $23.3 billion in national debt.
The International Monetary Fund (IMF) issued multiple warnings to the administration about legalizing bitcoin as an acceptable form of payment for any purchase or debt. In February, Fitch Ratings downgraded El Salvador’s default rating from a “B-” to a “CCC,” citing financing uncertainty spurred by the law.
“Households and businesses who hold Bitcoin balances and save in Bitcoin could lose wealth through large swings in value,” the IMF El Salvador team, led by Alina Carare, warned in February.
“The adoption of Bitcoin as legal tender is fully funded by public money, through a trust fund. If the price of Bitcoin was to plummet, the resources in the trust could be rapidly depleted,” IMF continued.