While the cryptocurrency is feverish and one bankruptcy follows another, causing chain reactions, panics and rapid asset sales, some large investors take advantage of the moment to actively buy digital assets at the most profitable price.
As you know, El Salvador is the first state in the world, which declared bitcoin as a legal means of payment in September 2021.
During the rise of the cryptocurrency market, many investors admired the country's president's courage in taking such a risky step. However, now that the market is rapidly falling and it is very difficult to say when it will reach the bottom, a huge number of people accuse Nayib Bukele of taking excessive risks and consider his actions a big mistake for the state.
El Salvador's debts are skyrocketing. For a while, Nayib Bukele stopped buying Bitcoin amid bearish market conditions.
And now he has decided to change his terms. On November 16, the president of El Salvador announced that the country will start buying 1 BTC on a daily basis, starting from November 17.
The announcement came nearly three months after the country made its last BTC purchase in July 2022.
The state began buying BTC in September 2021, right after bitcoin was declared legal tender.
At the time, BTC was in the middle of a bull market, and every purchase the nation made looked profitable as the price hit a new record high every other week.
However, with the emergence of a bear market in the second quarter of 2022, El Salvador's previous BTC coin purchases began to look like a gamble that resulted in large losses. The state's budget began to burst at the seams, recording one loss after another.
According to public data, El Salvador now owns 2,381 BTC with an average purchase price of $43,357.
The state has spent $103.23 million to buy BTC. Now the value of all bitcoin purchased is $39.4 million.
The announcement of continued BTC purchases at a time when the top cryptocurrency is trading at a new cyclical low could help El Salvador recoup some of its losses in the coming months.
Despite the losses incurred by the small state in buying bitcoin, the top cryptocurrency has also played a positive role for the country.
Note that the country does not have its own national currency and uses the U.S. dollar and bitcoin to make payments in the state. Bitcoin significantly reduced the cost of cross-border remittances in the country. The adoption of bitcoin has also given a boost to the tourism sector.
Numerous crypto-enthusiasts have decided to visit the first country in the world that has adopted bitcoin as a means of payment and invest in the development of its economy and tourism sector.
The adoption of bitcoin has become part of the state's investment policy. BTC is now accepted in most tourist destinations, but for now mobile apps and services need more improvement.
BTC adoption in El Salvador may not look very promising at the moment because of the intense crypto-winter. However, looking at the history of Bitcoin's price cycle, the state could easily make up for its losses in the next bull cycle by simply continuing to buy BTC while the price is so attractive.
It should not be forgotten that Bitcoin has a deflationary nature and bitcoin issue is limited to 21 million BTC. Every 4 years bitcoin halving happens and the amount of BTCs released is halved. The next halving will be in 2024.