El Salvador made headlines in 2021 as the first country to designate Bitcoin as legal tender. But the fanfare was soon met with growing skepticism as crypto markets entered a devastating bear market. Despite criticism, Salvadoran President Nayib Bukele continues dollar-cost averaging BTC purchases - a strategy now paying dividends with the country's investments regaining profitability.
Keypoints
- El Salvador's total Bitcoin investment is now worth $131 million, with a net profit of $3.6 million (2.84% gain)
- This comes after the country's Bitcoin portfolio fell as low as $45 million during the crypto winter
- El Salvador has been dollar-cost averaging Bitcoin purchases throughout 2022
- President Bukele says the country has no plans to sell its Bitcoin, as price fluctuations don't impact its long-term strategy
- El Salvador became the first country to adopt Bitcoin as legal tender in 2021, though adoption has been limited
According to a December 4th tweet from President Bukele, El Salvador's total Bitcoin holdings are presently worth $131 million, representing a net gain of $3.6 million for a 2.84% return on investment. This is a remarkable turnaround considering the nation's investments sank as low as $45 million this year, amounting to paper losses exceeding $50 million.
The journey began in September 2021 with an inaugural BTC purchase of $10.3 million, using public funds. Bullish on Bitcoin's long-term trajectory, Bukele proceeded to buy additional tokens throughout 2022, even as prices descended. This dollar-cost averaging approach aims to reduce overall average cost.
But dollar-cost averaging requires tremendous conviction in the underlying asset, amid plunging values. And El Salvador persisted with its Bitcoin experiment despite criticism from groups like the International Monetary Fund over fiscal risks. So does Bukele feel vindicated now?
While profitable in dollar terms, Bukele insists they never intended to sell anyway. As he reaffirmed, "We have no intention of selling; that has never been our objective." This implies a stance resembling Bitcoin maxis who preach holding the asset indefinitely.
Of course, in the volatile world of crypto, today's winners can become tomorrow's losers. So only time will tell whether El Salvador's Bitcoin gambit pays off in the long run. Nonetheless, Bukele remains a mega bull, downplaying interim price drops.
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