Back in 2021, El Salvador made a splash by becoming the trailblazer for recognizing Bitcoin as a legitimate currency. to officially recognize Bitcoin as an acceptable form of payment . However, the initial excitement soon faced skepticism when the crypto markets plunged into a harsh bear market cycle. Despite the backlash, the country's President Nayib Bukele kept buying Bitcoin using a dollar-cost averaging method, a tactic that is now proving beneficial as El Salvador's investment turns profitable.
Keypoints
- The cumulative value of El Salvador's Bitcoin investments now stands at $131 million, delivering a $3.6 million profit, reflecting a 2.84% gain.
- This recovery comes after the value of the nation's Bitcoin holdings dropped as low as $45 million amidst the crypto downturn.
- Throughout 2022, El Salvador maintained its strategy of acquiring Bitcoin through dollar-cost averaging.
- President Bukele emphasized that the nation isn't looking to sell its Bitcoin holdings, unfazed by short-term price volatility, as this aligns with its long-term investment strategy.
- In 2021, El Salvador became the first nation to adopt Bitcoin as legal tender, though its acceptance has been limited so far.
According to President Bukele's tweet from December 4th, El Salvador's total Bitcoin assets now total $131 million, which is a $3.6 million net gain, equating to a 2.84% return. This is quite impressive, given there was a point this year when these investments had decreased to $45 million, reflecting a paper loss of over $50 million.
El Salvador's #Bitcoin investments are in the black!
After an avalanche of reports lambasting our alleged losses, which were based on #Bitcoin ’s market price at the time…
With the current #Bitcoin market price, if we were to sell… pic.twitter.com/gvl2GfQMfb
— Nayib Bukele (@nayibbukele) December 4, 2023
The journey kicked off in September 2021 with an initial Bitcoin investment of $10.3 million sourced from public funds. Optimistic about Bitcoin's future, Bukele continued to acquire more throughout 2022, even when prices were on a downtrend. This method, known as dollar-cost averaging, is intended to lower the average cost of acquisition.
However, sticking with dollar-cost averaging demands substantial faith in the asset's long-term value, especially when prices are slipping. El Salvador remained dedicated to this Bitcoin experiment despite warnings from organizations like the International Monetary Fund on potential fiscal risks. Does Bukele feel justified now?
Although profitable in terms of dollars, Bukele contends that the intention was never to sell. He reiterated, 'Selling has never been our goal.' This viewpoint mirrors that of Bitcoin maximalists who advocate holding the asset indefinitely.
Naturally, in the ever-changing landscape of cryptocurrency, today's successes can turn into tomorrow's setbacks. Only time will reveal if El Salvador's Bitcoin venture will be successful in the long haul. Still, Bukele remains bullish, brushing off temporary drops in price.
