El Salvador: Unfavorable Market Conditions Delay Proposed Bitcoin Bond

Key Insights:

• El Salvador first scheduled to launch a $1 billion bitcoin bond between March 15 – 20.
• Market volatility and unfavorable conditions are the reasons to postpone BTC bonds until September.
• El Salvador has already adopted BTC as legal tender.

El Salvador has left Bitcoin bond anticipators in disappointment, as the country postponed the release of its $1 billion BTC bond until September.

Per the Central-American nation’s Finance Minister Alejandro Zelaya, “now is not the time to issue the bond” due to unfavorable market conditions. 

Speaking on Tuesday, on a TV show, “Frente a Frente,” the minister said that current crypto market volatility and the war between Russia and Ukraine had prompted the government to postpone the BTC bond launch. As quoted by Reuters, he said,

“In May or June, the market variants are a little different. At the latest in September. After September, if you go out to the international market, it is difficult (to raise capital).”

El Salvador had previously scheduled the launch of the bond between March 15-20; however, Zelaya hinted last week that there might be delays due to the ongoing conflict.

All About the Bitcoin Bond

In November, El Salvador planned to construct a ‘Bitcoin City’ near the Conchagua volcano, funded by the income from the bonds.

The city is expected to have residential and commercial regions, services, entertainment, restaurants, and an airport.

The plan referred to as “volcano bonds” is supposed to use the volcano as a power source for mining. The government said it would convert $500 million into Bitcoin and use the other $500 million for infrastructure and Bitcoin mining.

The Bitcoin bond, if launched, will be provided by the crypto infrastructure company – Blockstream – which uses Liquid Protocol to widen Bitcoin adoption.

The BTC bond attracted attention from key players across the crypto space. Carlos Acevedo, former President of El Salvador’s central bank, recently said,

“If this is a failure, a lot of doors close. This issuance is going to define a lot.”

Whereas, 70% of Salvadoreans have little trust in Bitcoin and think that the bonds, if launched, would benefit foreigners, business tycoons, and the elite class, according to a poll conducted by Central American University in December.

The country’s President Nayib Bukele first announced the Bitcoin law in June 2021, making a grand promise to his citizens. Adopting Bitcoin, he said, would digitize the economy, decrease dependence on the U.S. dollar, lower remittance fees, which account for about 20% of the country’s gross domestic product, and drive investment.

El Salvador, in September ’21, officially adopted Bitcoin as a legal tender, making it the first country to embrace Bitcoin. This was followed by criticisms from the International Monetary Fund (IMF), urging the authorities to narrow the scope of the Bitcoin law by removing bitcoin’s legal tender status.

Bitcoin Price Outlook

At press time, the largest cryptocurrency by market value was trading at $42117.98 after raising to $42,673, up 4.1% in the past 24 hours. Bitcoin touched $43,337 earlier Tuesday, its highest since March 3.

IntoTheBlock Insights wrote,

“As $BTC soars to $42,000, more than 15,000 BTC in outflows from exchanges were spotted yesterday, the largest since January 29.”