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Bitcoin

El Salvador's Bitcoin Losses Swell To 28% As Bukele Buys More (yahoo.com) 87

Posted by BeauHD from the we'll-see-who-gets-the-last-laugh dept.
An anonymous reader quotes a report from Bloomberg: President Nayib Bukele's Bitcoin gambit is becoming onerous for cash-strapped El Salvador but that isn't stopping him from adding to his stockpile. Bukele's bought 2,301 Bitcoins for the government since making them legal tender back in September, based on his announcements on Twitter. That includes a purchase of 500 coins yesterday as their price plunged below $31,000, extending a wild six-month sell-off. Those tokens are worth $74 million today. That's 28% less than the $103 million Bukele paid for them, according to calculations by Bloomberg.

Bukele has shown himself to be a true believer in crypto, winning attention and admirers from around the world in the process, and says he trades the nation's stockpile of coins on his phone. The 40-year-old has said he will push ahead with plans to issue a $1 billion blockchain bond to fund the construction of Bitcoin City, an income and capital gains tax-free jurisdiction he hopes to create on the country's coast. Bukele tweeted pictures on Monday of a mockup for the planned city, which includes an international airport. It would use geothermal energy from a nearby volcano. According to JPMorgan's emerging market bond index, El Salvador's dollar bonds have pluged 24% this year, "as concern mounts that the government will fail to pay back $800 million of notes that come due in January," notes Bloomberg. "Moody's cut the government's credit rating to Caa3 last week, citing an increased risk of default."
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El Salvador's Bitcoin Losses Swell To 28% As Bukele Buys More More

El Salvador's Bitcoin Losses Swell To 28% As Bukele Buys More

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  • Bukele lost money every time he "bought the dip" (Score:5, Funny)

    by Lisandro ( 799651 ) on Wednesday May 11, 2022 @05:04PM (#62524100)

    Which is a pretty amazing achievement, i must admit.

    • Re:Bukele lost money every time he "bought the dip (Score:5, Insightful)

      by Darinbob ( 1142669 ) on Wednesday May 11, 2022 @05:21PM (#62524128)

      "and says he trades the nation's stockpile of coins on his phone."

      And that right there is a big neon sign shouting "that government is broken." Nowhere should one single person have access to that much of a nation's money. Whoops, wiped left instead of right... But it's El Salvador. Lots of crime, a terrible civil war, so yes, let's elect some criminals to oust the existing criminals, what could go wrong? So no surprise you get someone who's effectively got full control of the reins and is enriching himself.

      • Ok but we're talking about $100M. I know guys who trade more than that on their phone.

      • , a terrible civil war,

        Forty years ago. You need to move on from that. The US had a civil war, too.

        • Forty years ago. You need to move on from that. The US had a civil war, too.

          Unrest goes hand in hand with economics. The USA had a civil war too, but moved beyond that to a wealthy nation with stability underpinned by economic security.

          El Salvador on the other hand has not moved on, so neither should anyone's opinion of it. When it becomes stable and free from gang violence and a government which consolidates power and which still constantly "disappears" people, then we may start comparing it to the USA.

          • a government which consolidates power and which still constantly "disappears" people,

            What are you talking about? You're making up nonsense.

        • It lasted 12 years, and ended 30 years ago. And it is still struggling with the aftermath.

          • So what? America is still struggling with the aftermath of their civil war, too. And arguably the American civil war aftermath causes more violence than the El Salvador civil war, which was resolved with land redistribution and power restructuring.

      • Lots of crime, a terrible civil war, so yes, let's elect some criminals to oust the existing criminals, what could go wrong?

        It goes hand in hand with economics. Economic security is a very good indicator of personal security and corruption. It stands to reason that a place investing the government in bitcoin will be one of crime, civil war, and corruption.

    • Which is a pretty amazing achievement, i must admit.

      This is *probably* not as much about bitcoin as it is the overall market.

      The economy has been in a slow slide for awhile now, and highly volatile investments tend to lead the trend of the more stable parts of the market.

      The market has contracted around 18% overall [google.com], basically since the beginning of the year. (Click on 5 Year tab to plainly see this.)

      Highly volatile tech stocks, bleeding edge stuff and the like, such as Tesla, have been dropping more than the more conservative parts of the market.

      The fall of

      • This is *probably* not as much about bitcoin as it is the overall market.

        The economy has been in a slow slide for awhile now, and highly volatile investments tend to lead the trend of the more stable parts of the market.

        IIRC, El Salvador's first purchase was back in Sep 2021, when BTC was "cheap" at ~$50k.

  • So . . . no impact on El Salvadore's economy? (Score:4, Funny)

    by mmell ( 832646 ) on Wednesday May 11, 2022 @05:08PM (#62524108)
    I mean, where do you go from "broke"?

  • I would like to correct... (Score:5, Insightful)

    by OpenSourced ( 323149 ) on Wednesday May 11, 2022 @05:08PM (#62524110) Journal

    Bukele has shown himself to be a true believer in crypto

    He has shown himself to be a true believer in buying some encrypted files with real money, in the hope that somebody will buy them later from him, at a bigger price. If he was a crypto believer he would have created a stable crypto coin for the country, instead of speculating with the money of his citizens.

  • That bitcoin, which is 100% inflation-proof by its technical design, and thus, should be one of the best inflation hedges, is crushed in value based, it seems, on inflation and interest-rate fears.

    Do the big market players who drive these panic price movements, and are now investing in bitcoin, really, totally, not get what bitcoin is?

    I would think those, like El Salvador's president who are buying (a) dip, will be vindicated in the end, once bitcoin shifts in the market's psychology to the inflation hedge
    • *I mean, big market players who are now institutionally invested in, but divesting from....

    • Re:It's more than a little weird (Score:5, Informative)

      by Lisandro ( 799651 ) on Wednesday May 11, 2022 @05:38PM (#62524182)

      That bitcoin, which is 100% inflation-proof by its technical design, and thus, should be one of the best inflation hedges, is crushed in value based, it seems, on inflation and interest-rate fears.

      You're confusing "deflationary by design" (BTC) with "inflation hedge" (for US dollars). Because Bitcoin is not, by any metric, a good inflation hedge.

      Hell, if you factor in inflation, your BTC investment has devalued ~60% in less than 6 months. To the moon!

      • because it has a scarce, slow-growing supply.
        Unlike the fiat currency (e.g. printing-like-no-tomorrow USD) that it is a hedge against.
        Logically, bitcoin, which is and will always remain scarce, should act the same.

        And don't give me some rubbish about gold actually being useful. It's not useful to any level that justifies its value, which is maintained by collective agreed shared belief (and the longstanding stability of that belief) only.

        Bitcoin will be an even better inflationary hedge when chunks of the e

        • Logically, bitcoin, which is and will always remain scarce, should act the same.

          I'd suggest reevaluating your logic, because it is clearly not working out here...

          A few pointers to consider:

          a) The fact that something is scarce doesn't automatically make it valuable.
          b) There're a bazillon cryptocurrencies out there which are just as scarce as Bitcoin. In fact, most of them are direct forks.
          And, again, c) Bitcoin being deflationary by design has nothing to do with making for a good USD inflation hedge. Those things are not connected.

          • Re: (Score:2, Funny)

            by presidenteloco ( 659168 )
            I don't accept that a deflationary (or non-inflationary) asset is not one type of inflation hedge.
            Gold,
            Real estate
            both work on that principle. They aren't making new land, as they say.
            Yeah there are other hedges, but that is one kind of hedge.

            Let's say you live in failed state X, with a massive inflation rate in your discredited currency.
            Buy bitcoin is not the worst inflation hedge you could have picked.

            • I don't accept that a deflationary (or non-inflationary) asset is not one type of inflation hedge.

              Well, i guess i can't help you then.

            • They aren't making new land, as they say.

              Forget about Bitcoin, just become a Georgist [wikipedia.org]

            • both work on that principle. They aren't making new land, as they say.

              Person you're engaging in this back-and-forth is correct. BTC being deflationary does not make it an unqualified hedge against inflation against another asset with a different set of valuation criteria.
              It certainly means it can be. But then again, so can buggy whips, which have been a deflationary asset since they stopped making them. Of course if demand falls off faster than supply, you've still got an asset converging in value to zero.

              • I think I was quite clear in stating that the value of gold (and thus its potential value as a hedge) is derived predominantly from the sustained collective belief in its value. The value of gold is a meme. The scarcity is a necessary but not sufficient prerequisite for this sustained collective belief in the value per amount.

                Bitcoin is the first (functionally sound and effective) cryptocurrency. Thus it has attracted a similar meme-based value, assisted by but on top of its scarcity.

                With cryptocurrencies,
                • You said:

                  I don't accept that a deflationary (or non-inflationary) asset is not one type of inflation hedge.

                  You are wrong.

                  The reply that I'm currently replying to is a lot more reasoned, but your original assertion that something being deflationary somehow makes it a good hedge is pure nonsense.

                  If your point is that cryptocurrency, like gold, is really only valuable as long as idiots keep buying it, then we're on the same page.
                  Its deflationary nature may (but I doubt it) have something to do with that, but it being deflationary does not make it a hedge. Idiots purchasing it at prices that aren't ref

                  • A currency gets its value directly based on the value at which people consent to exchange it for other things of value.
                    The stability and substantiveness of that value is determined by the amount of economic transaction churn that uses that currency as the intermediary.
                    There is probably a positive feedback loop whereby stability, high-value, and popularity of use reinforce each other.
                    That's a slightly more technical breakdown way of saying the value is maintained by collective continued belief in the value a
          • Most cryptocurrencies are direct forks of bitcoin in what sense? In the same sense that most software is a direct fork of Hello World?

            • No, in the sense that they're literal code forks [mapofcoins.com] of the original Bitcoin implementation.

              Building your coin with a fixed cap of tokens doesn't really make it "scarce" when you can make 10,000,000 clones of it. Any value you assign to Bitcoin based on this fact is purely made up.

              • So yes there are some recognizable meme coins like doge in that list, but I would bet the top 10 out of 10 most actively traded cryptocurrencies that aren't BTC are either ethereum forks or ERC20 tokens (USDT, USDC) that live on EVM chains.

                • It's the same thing.

                  Just in case my original point was missed in the replies: there's nothing that makes Bitcoin special among all other cryptocurrencies out there. Certainly not the fact that it's deflationary by design - which is also a terrible trait for something intended to replace money.

                  • My point is that modern cryptocurrencies are not bitcoin forks at all, bitcoin and other PoW chains should die in a fire and it's starting to look like they will. The more you know...

        • Re: (Score:2)

          by mmell ( 832646 )

          And don't give me some rubbish about gold actually being useful

          You mean all that gold we've been using to make electronics and space telescopes was wasted?

          Even Helium has a value and a use. Gold even more so. I still haven't figured out any use for blockchain technology, except logfile encryption. Someone invented an accounting ledger as a logfile using bitcoin logfile encryption to account for money that doesn't exist - the only possible value is that ascribed to it. It has no intrinsic value (as you'

    • Re:It's more than a little weird (Score:5, Insightful)

      by Burdell ( 228580 ) on Wednesday May 11, 2022 @05:42PM (#62524186)

      When something doesn't work the way you think it should because others don't "get it" and their actions work counter to your ideals, maybe it's not the others that don't "get it".

      • Re: (Score:2, Funny)

        by presidenteloco ( 659168 )
        Well we'll see in the long run. So far, "getting" ethereum and tesla since 5 or more years ago has been working just fine.

        • Re: (Score:2)

          by mmell ( 832646 )
          Are you factoring in all the cryptocoin that's stolen within this theft-proof economy? Are you factoring in all the cryptocoin that goes *poof* because someone unplugged Mt. Gox or sent a few million BTC to non-existent wallets? Are you factoring in all the losses should a player like El Salvadore come to own >51% of any given cryptocoin?

    • Re: (Score:3)

      by mysidia ( 191772 )

      which is 100% inflation-proof by its technical design, and thus, should be one of the best inflation hedges, is crushed in value based, it seems, on inflation

      Bitcoin itself may be inflation-proof, BUT the currency exchange market for Bitcoin is not - for starters, there exists loaned Bitcoin in the form of "Debt". These are Bitcoins that you have "on paper", but they don't necessarily exist on the blockchain.. that is an exchange that possesses 100 BTC could loan out 1000 BTC to their customers for p

      • Except of course if you are dealing with actual currencies or actual stocks, naked short-selling isn't allowed. You can buy puts but you can't short-sell without first borrowing actual shares for many of the reasons you mention.

        • Re: (Score:2)

          by mysidia ( 191772 )

          ... naked short-selling isn't allowed

          Institutions find ways of doing that, even with stocks. They sign a contract or complete an order promising to sell something they don't have, and then take advantage of systems that exist with exchanges historical reasons where the actual settlement may be delayed by a few days - the buyer doesn't take physical possession of purchased shares until settlement, And even then it's possible the seller ends up in a failure to deliver [investopedia.com] on settlement day and not even comp

          • The situation with strategic failure-to-deliver is well know and yes its' a problem. However, it's not the same problem as crypto markets that have no prohibition on naked shorts

    • Re: (Score:2)

      by RobinH ( 124750 )

      The only real risk to bitcoin value is heavy-handed reactionary regulation.

      I would have thought the fact that bitcoin is a big ponzi scheme is a much bigger real risk.

      • Re: (Score:2)

        by mmell ( 832646 )

        It's not quite a Ponzi scheme. A Ponzi scheme, at least, holds out the promise of profit as long as there are chumps ready to buy in at the bottom of the pyramid. Cryptocoin merely sets a hard bottom to how many layers deep the pyramid can go - and it's not really a hard bottom. If any cryptocoin manages 100% saturation (i.e., all the blockchains found), it'll probably implode on the spot. Subdividing it with proof-of-work (POW) will only devalue what's left in the pyramid without bringing in more fiat

    • That bitcoin, which is 100% inflation-proof by its technical design, and thus, should be one of the best inflation hedges, is crushed in value based, it seems, on inflation and interest-rate fears.

      The natural conclusion then is that inflation isn't' the only thing that affects the price of Bitcoin, or even the primary thing.

      I would think those, like El Salvador's president who are buying (a) dip, will be vindicated in the end

      When a stock is in a down trend, it's better to buy on the way up, rather than buy on the way down.

  • ... he will push ahead with plans to issue a $1 billion blockchain bond to fund the construction of Bitcoin City ...

    If this really tanks, he can be the first blockchain bond villain ... :-)

    • Here’s the plan: We hold the world ransom for puts pinky up to side of mouth “One thousand Bitcoin!”

      Ahem.. Subordinate: “But don’t you think we should ask for more than a million dollars, it’s not that much money anymore...”
      ” I mean one Million Bitcoin!”

  • admirers from around the world (Score:4, Insightful)

    by ishmaelflood ( 643277 ) on Wednesday May 11, 2022 @05:44PM (#62524194)

    He lost $30 million of other people's money. How admirable.

  • Looting El Salvador? (Score:5, Interesting)

    by bkmoore ( 1910118 ) on Wednesday May 11, 2022 @06:11PM (#62524266)

    ....Bukele has shown himself to be a true believer in crypto, winning attention and admirers from around the world in the process, and says he trades the nation's stockpile of coins on his phone....

    This sounds more like el Presidente is looting his country, keeping his nation's BitCoin "reserves" on his personal device. Wouldn't be surprised if they both magically were to "disappear" someday.

  • Unrealized losses aren't realized losses. You only lose if you sell. It's a volatile asset and it's going down now because the fed raise interest rates to fight inflation.... just like stocks in general and tech stocks broadly. Of course, anyone who has followed bitcoin and crypto over more than the last 2 years knows that this is literally nothing. It's a volatile asset... get over it.

    • Yep. Like clockwork, people are eager to proclaim "it's the end this time! For real! I mean it this time!"

    • True, unrealized losses aren't realized losses. However the fear amongst the BTC holders is if there will ever be another upside as great as the one which occurred during the pandemic. Or more succinctly, the 40% of people holding BTC that are under water now, want to know if they can get back to even.

      Bear with me, but I think BTC has a lot in common with something like Peloton (PTON). The price of both piddled along in a fairly narrow range until boom, March 2020 and then they start taking off like gang

    • What are you talking about? Owning BTC pays exactly zero percent interest. You only make money if the underlying asset increases in value. On the other hand, I-Bonds pay 9% interest now vs 0% less than a year ago. It's worth selling your BTC even at a loss so that you can buy those inflation-protected I-Bonds unless you expect BTC to rise at a rate higher than 9% which is very unlikely to happen because why would anybody want to buy BTC when you can get 9% return guaranteed!

      • 9% guaranteed return over 5 years is about 55%, which is quite a bit less than what Bitcoin managed over the past 5 years (31,000 in May 2022 versus 537 in May 2016, a 60x increase).
        If we were to take the best 5 years of Bitcoin, from March 2016 to March 2021, it goes from 414 to 58,700 - a 141x increase. Or maybe from Oct 2016 to Oct 2021 - 693 to 61,300 is a 88x increase.

        Plenty of reasons (I mean excuses) to choose Bitcoin over the 9% guaranteed.

        • I specifically stated that there was no interest, only capital appreciation. BTC is a higher-risk asset than I-bonds so you have to get a premium return for that risk. The interest rate on BTC is zero. GME went up 815% in a short time. That doesn't mean I would buy the stock. Sure BTC could wildly appreciate or it could decline. In an era where "hard" assets had a real rate of return of essentially zero, people were willing to take more risk. And many were rewarded. The situation is different now. T
  • If Bitcoin follows itâ(TM)s growth pattern of the past thirteen years, then this Bitcoin investment could be what propels El Salvador into the G20, but thatâ(TM)s a big if. Bitcoin is generally perceived to be a huge liability to risk-adverse money-makers and itâ(TM)s a big wasteful energy drain in the name of securing an immutable ledger against 51% attacks I think interest in it will remain steady among the fringe but never the mainstream. When the last satoshi is auctioned off in a museu

    • "then this Bitcoin investment could be what propels El Salvador into the G20"
      G20 is usually seen as economic power. Switzerland has a lot of money (other people money in their bank system) but that does not make it an economic powerhouse.
      Also, if Elon Musk (>240 billion USD) moves (with everything he owns) into Fiji (with a country wealth of 9 billion USD), he won't magically move Fiji from position 140 in the https://en.wikipedia.org/wiki/... [wikipedia.org], up there with Slovakia, Luxembourg, Algeria, Argentina, twi

  • Almost everything is down over the last six months. Just look how bitcoin correlates to the s&p [businessinsider.com]. In fact, it’s the same pressures dragging down tech stocks as crypto [cnn.com]. It’s a currency, what did people think would happen when fiat money ran short and people needed currency?

  • That's a lot of BTC

  • Socialist governments make their citizens poorer. Sociaism is expensive! This is why only students, the powerful, and the insane want it...
  • "Great news everyone, BTC went up 12% because Elon Musk tweeted something vaguely positive so we can afford that new road!", "Oh shit, Elon posted a dank meme and now the price has plummeted 20% so we'll have to close some schools".

    Betting an economy on magic beans doesn't seem the smartest idea.

  • This is just fools trading tulip bulbs. Even a tulip looks pretty, which has more value than bitcoin.

    Here are the most important things to acquire, in order:

    1. Acquire skills that make you more productive and valuable. You are a machine that generates wealth and you get to keep 2/3 of it after taxes.
    2. Acquire the tools of your trade to increase your own productivity. Super-charge your wealth generation machine.
    3. Use surplus wealth to acquire ownership of things that have intrinsic value, like something you'll
  • Clearly, this guy and Erdogan are the front runners for the Nobel in economics.

  • Does no one own the copyright to Bitcoin?

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