As El Salvador's national debt rises, the government's large crypto investment loses $36 million in value.
- On Thursday, El Salvador, the first country to make bitcoin legal tender, lost $36 million in cryptocurrency.
- This week, the popular cryptocurrency fell 50% from its all-time high.
- President Nayib Bukele announced on Monday that the government purchased an extra 500 coins for $30,744 each.
El Salvador, the first country to make bitcoin legal tender in September, has seen the value of its large cryptocurrency investment plunge by $36 million as bitcoin fell more than 50% from its all-time high on Thursday.
President Nayib Bukele staked a lot of money on bullish bitcoin bets to save El Salvador's economy from spiralling debt. Now, the crypto market's meltdown is confirming critics' predictions that treasury assets should not be invested in 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. The coins were valued at about $67 million as of Thursday afternoon. El Salvador is currently in debt to the tune of $23.3 billion.
The International Monetary Fund (IMF) has given several warnings to the Trump administration regarding the legalisation of bitcoin as a form of payment for any purchase or obligation. Fitch Ratings reduced El Salvador's default rating from a "B-" to a "CCC" in February, citing the law's impact on funding.
In February, the IMF El Salvador team, led by Alina Carare, cautioned that "households and enterprises who retain Bitcoin balances and save in Bitcoin risk lose wealth due to big swings in value."
"Through a trust fund, the adoption of Bitcoin as legal tender is entirely funded with public funds. If the price of Bitcoin falls, the trust's assets might be quickly exhausted "IMF kept going.
President Bukele, undeterred by the decrease, declared on Monday, "El Salvador just purchased the dip!" The acquisition, which added 500 bitcoins worth an average of $30,744 apiece to the country's holdings, was the country's largest to date.
Bukele's bullish cryptocurrency investment has received a mixed response from the country's residents, with previous bitcoin protests bringing thousands of people. The administration's spokeswoman did not immediately reply to Insider's request for comment.
Most Salvadorans (67.9%) disapprove with the government's plan to make bitcoin legal tender, according to a September poll of 1,281 respondents. As previously reported by Insider, the country's digital wallet, "Chivo Wallet," has not seen widespread use because the majority of sales are still made in physical currencies.