We all complain about politicians. But spare a thought for the Salvadoran people, whose laser-eyed president, a crypto-brother, is turning an already troubled country into an even deeper shortage.
Here is the latest from Nayib Bukele. A reminder, this is the president of one of the world’s poorest countries, not some uneven Reddit trader who took shrooms watching Videos of Michel Saylor and decided to embrace the “cyber hornets serving the goddess of wisdom”.
El Salvador just bought the dip! 🇸🇻
500 coins at an average USD price of around $30,744 🥳#Bitcoins
—Nayib Bukele (@nayibbukele) May 9, 2022
The story of El Salvador’s pivot to bitcoin has been told well many times before – car crashes always draw snags, and it’s not often you can see the crash before it happens. happen – but we were curious how bad his P&L now was.
After spending a few unfortunate hours scrolling through Bukele’s Twitter account, we believe we’ve found all of the official purchases, totaling 2,280 bitcoins since the first announced 200 on September 6, 2021, the day before bitcoin officially became legal tender in El Salvador. A day later, “El Hodlador” said he had already bought 200 more.
El Salvador has just purchased 200 new coins.
—Nayib Bukele (@nayibbukele) September 6, 2021
In some cases, Bukele announced the average purchase price. Otherwise, FT Alphaville simply took the price on the day of the announcement as a reasonable approximation of the cost. Bitcoin purchases totaling 150 coins were not announced on Twitter, but just announced as part of El Salvador Reserve. And obviously, we don’t know what the country is actually holding right now, and how many might have”leak”.
But taking the announcements at face value and with the assumptions mentioned, we found that El Salvador spent around $101.5 million for its 2,280 bitcoins. Although Bukele comically brags that he has already made a profit on yesterday’s purchases, his crypto hoard is worth a pixel-perfect $72.6 million.
A country with a GDP per capita of $3,799reserves of less than 4 billion dollars (equivalent to only three months of imports, generally considered a level of danger) and public debts of more than 13 billion dollars (about 85% of GDP) lost about 28, $9 million across its crypto platforms over the past half year.
Here is a chart showing the grim trajectory of the world’s first sovereign bitcoin purse.
Of course, the bitcoin brothers will shout that the bitcoin acquired by El Salvador will prove to be a bargain when the cryptocurrency eclipses gold and even the US dollar. It looks like Bukele is staying popular in the country, but above all thanks to having tamed violence. (It already seems to be reversing after the end of a truce between the gangs and the government).
The IMF has already done his clear views. The market’s view on bitcoin from El Salvador is also quite unequivocal: a country that was probably bankrupt is now almost certainly bankrupt.
El Salvador’s “bitcoin bond” seems DOA. But here’s the price of his $800 million bond that matures next January. Although it matures in less than a year, it is trading at 76.9 cents on the dollar. This gives a yield of more than 50%.
UPDATE: We had planned to highlight our colleague Ethan Wu’s timely work on Unhedged as well, but the tragicomedy of the situation kept us distracted.
In today’s Unhedged, Ethan explored an interesting article about El Salvador’s Bitcoin experience, and the results were, predictably, disappointing.
The typical Chivo user was a young man with a high school education and access to the internet and the formal financial system, which contradicts Bukele’s claims that the technology would drive financial inclusion. The most common reason to use Chivo was to cash out the $30 bonus; 61% of users abandoned the app immediately after.
Even among Chivo users who accepted remittances, most did so in dollars, not bitcoins. Similarly, some businesses, around 20%, accept bitcoin. But these are mostly bigger companies, and almost all convert to dollars immediately after making bitcoin sales.
You can find the complete document here.