El Salvador Buys the Dip, Adding 500 BTC to State Coffers

El Salvador capitalized on bitcoin’s (BTC) dump below $31,000 yesterday by adding another 500 coins to its holdings.

According to a tweet from its president, El Salvador took the opportunity to add $15.5 million worth of BTC to its treasury amid macroeconomic turmoil resulting from the war in Ukraine and energy supply shortages.

While no official statistics are available concerning the number of bitcoin held by El Salvador, President Nayib Bukele’s announcements to date on social media bring the tally to 2,301. This would value the country’s holdings at $73.7 million.

El Salvador has bought previous dips

According to Bloomberg data, the purchase is the most significant investment the Central American country has made since making bitcoin legal tender last Sept. 

El Salvador has bought previous dips, the last one being in Jan when the price was a shade over $36K. 

Bukele’s plan is to issue $1 billion worth of bitcoin bonds to fund the construction of Bitcoin City in the country.

Part of Bukele’s drive to push the project forward comes from the desire to turn the country into a tech haven, changing the narrative from a country that feeds the U.S. job market to one that is a pioneer in a cutting-edge industry, TIME notes.

In Jan, the International Monetary Fund warned the El Salvadorean government about accepting bitcoin as legal tender. “There are large risks associated with the use of bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities,” is said

The decision to adopt bitcoin as legal tender came about partly following a successful experiment that saw an anonymous donor contribute over $100,000 in bitcoin to a non-governmental organization (NGO) in El Zonte, a small coastal village in El Salvador. 

The contribution resulted in foreign businesses flocking to the area, turning a philanthropic effort into a bitcoin experiment. 

According to Bukele, residency is offered to anyone spending three bitcoin or more. At the same time, the status of bitcoin as legal tender rather than as an investment instrument means that foreigners are exempt from capital gains tax should they make a profit from their holdings.