Latin American nation, El Salvador, popularly known as the Bitcoin nation, just announced, through its President, Nayib Bukele, that it had purchased 500 BTC at an average price of $30,744 per coin. The President tweeted, “El Salvador just bought the dip! 500 coins at an average USD price of ~$30,744 #Bitcoin.”
This purchase comes after the entire cryptocurrency space is having a bloody Monday, with all tokens losing 10% and more as the market continues to sell off after the United States Federal Reserve handed down its policy decision last week Wednesday.
This puts the total amount of purchase at approximately $15.4 million by the Latin American nation, which as of last year, adopted Bitcoin as a legal tender, a move, many international bodies like the IMF frowned against.
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What you should know
El Salvador adopted BTC as a legal tender in September 2021, as a means to overcome catastrophic inflation amid the weakening spending power of the nation. Since the adoption of bitcoin as a legal tender, the country has so far, strategically accumulated the flagship cryptocurrency asset.
El Salvador adopts a ‘buy the dip’ strategy when it comes to accumulating Bitcoin. Anytime there is a fall in the price of Bitcoin, the President announces the accumulation of more Bitcoin into the nation’s reserve.
The latest purchase is currently the cheapest acquisition for El Salvador ever since the country adopted BTC as a legal tender. With BTC trading at the $30,000 support zone as a result of the market sell-off, Bukele believes that “some guys are selling really cheap,” supporting his long-term vision of mainstream Bitcoin adoption.
BTC experienced a steady rise in prices from mid-July 2021, which resulted in an all-time high of almost $69k in the first week of November. However, the next five months saw a steep decline in market prices as investors redirected BTC profits into buying other tokens.
The reason for the market decline we are seeing is as a result of the U.S Fed hiking its interest rate to 1%, the largest increase since 2000, as it handed down its policy decision last week Wednesday.
We are currently seeing the effects of the policy decision made by the federal reserve. The U.S. Fed increase of the interest rate brought about a strong dollar index (a measure of the strength of the U.S. dollar).
As of the time of this writing, the dollar index is trading at a 20 year high, currently above 104 basis points.
When Bitcoin sneezes, the altcoins catch a cold and this was exactly what played out yesterday. We saw a massive sell-off in the altcoin market, with many tokens losing 10% and more.
Nayib Bukele has proposed several initiatives in the country around Bitcoin adoption and mining. The government has started construction of the infrastructure to support the state-issued Bitcoin wallet, Chivo, and recently unveiled plans to launch its own Bitcoin City at the base of a volcano, funded initially by $1 billion in Bitcoin bonds.
Since the adoption of Bitcoin as a legal tender, the Salvadoran government has been investing gains in various infrastructure development projects. In mid-October, the President announced that the $4 million from the profits of their Bitcoin Trust will be used to construct a new veterinary hospital in the capital, San Salvador. Early November, Bukele announced that the surplus earned from the state’s Bitcoin Trust account will be used for constructing 20 new schools.
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