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El Salvador’s President Nayib Bukele has pledged to buy Bitcoin at a pace of one coin per day starting Friday, November 8. The move comes as the flagship cryptocurrency has tumbled to two-year lows amid the recent collapse of cryptocurrency exchange FTX.
Nayib Bukele to Purchase One BTC Per Day
In a Thursday tweet, President Nayib Bukele announced that they will start buying one BTC per day. “We are buying one Bitcoin every day starting tomorrow,” he said. However, the Bitcoin bull did not identify a cap for how many BTC coins he plans to acquire or for how long they will stick to the strategy.
We are buying one #Bitcoin every day starting tomorrow.
— Nayib Bukele (@nayibbukele) November 17, 2022
The strategy of purchasing an asset at regular intervals, regardless of its price performance, is known as dollar cost averaging (DCA). One specific advantage of the practice is that it removes the emotional component of decision-making and minimizes the impact of volatility, thus reducing investment risk while allowing investors to end up paying less in dollar terms for the investment.
As reported, El Salvador adopted Bitcoin as a legal tender in June 2021, becoming the first country in the world to do so. The country has also directly invested millions in Bitcoin since September 2021, when it started acquiring BTC.
However, since the country purchased BTC when the coin was in the mid of a bull market, its holdings have lost more than half of their value over the past couple of months. According to public records, El Salvador currently holds 2,381 BTC purchased at an average buying price of $43,357.
With Bitcoin currently trading around the $16,500 mark, El Salvador’s BTC holdings are worth $39.4 million. Since the country has spent nearly $103.23 million on its BTC purchase, El Salvador is down by more than $63 million on its BTC investment.
Notably, aside from the financial loss, El Salvador’s bet on Bitcoin has also affected its relationship with the IMF. Earlier this year, the IMF asked the country to drop Bitcoin as legal tender in order to receive the requested $1.3 billion loan. This led to the country stalling talks with the IMF, which further exacerbated investors’ confidence in El Salvador’s ability to honor upcoming payments.
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Bitcoin at Two-Year Low Amid FTX Saga
Last week, FTX announced that it filed for Chapter 11 bankruptcy in Delaware, putting an end to its desperate scramble for investors to repair its balance sheet. FTX US, the US arm of the crypto exchange, has also been included in the proceedings, despite claims by the former CEO that their US exchange was fine.
Following the news, cryptocurrency prices went into a free fall. The flagship cryptocurrency dropped to as low as $15,682, a level not seen in two years. The broader crypto market has also lost around 20% over the past couple of days.
Meanwhile, FTX contagion has spread wildly over the past few days, reaching BlockFi, Genesis, and Gemini. As per the latest reports, crypto lender BlockFi is preparing to file for bankruptcy, while Genesis announced yesterday that it was halting redemptions on its lending product and would stop making new loans.
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