After and due to their failed attempt to raise a "Bitcoin bond," the market doesn't believe in the government. Their non-Bitcoin based sovereign debt is now trading at 30 cents on the dollar, down from 94 cents on the dollar last March. [1] This makes it all but impossible for them to raise more sovereign debt on the capital markets.
I don't think it's the price of Bitcoin so much as their going all-in on it and then seeing their gamble collapse out from under them. They've now lost money on all the "dip buys" their dictator was tweeting about - in English only - to show off to the laser-eyed.
Their issue is that they showed such poor judgement.
[edit] Further, of course, they're thumbing their nose at the IMF by refusing to roll back BTC-as-tender. No matter what you think of that demand or that policy decision, if the IMF is the only one lined up to bail you out, it's their way or the high way.
the bitcoin bond was worse than the existing el salvador bonds in all ways.
I.e. you could have bought a normal bond and bitcoin spending the same amount of money and having strictly better returns in all circumstances.
And reportedly, nobody bought them[0].
I am not sure that emission scared investors, if anything, had someone showed up to buy them, it would have been free money fo the government.
That may be one factor, but not the only one. Someone had made graph of the bond prices and added the dates of some government actions and announcements. I'll try to post it below if I find it.
Salvadoran bonds reached their all time high after the Elections in March 2021, because investors expected stability with an officialist majority party in the local congress.
On the first session though. One of the first things the congress did was to change the Supreme Court and the Attorney General.
Did I say all that happened in just two hours, live, in a HD televised session with what I believe scripted dialogs. They even had crane cameras and rail cameras for cinematic effect.
Hard to explain. Just imagine C-SPAN turning from C-SPAN into a reality-show-contest production style. Laws (including your legal tender) being approved in 2 hours with no previous announcements. Sometimes at midnight too.
And let me get to the part when the interpretation of laws can change with a government's official tweet or tv appearance. Yes. Sometimes more than once a day. And sometimes the interpreted law being the opposite of the written law. Sometimes in a foreign language. Really. :)
Imagine living in a reality show where every major change in the plot is announced on Sunday at primetime. Except the reality show is your country. :)
Those changes started worrying bond investors. Many other things, good and bad, have happened ever since, too long to type in a comment.
In less than a year. The 2052 bonds went from an all time high to an all time low. [1]
> Did I say all that happened in just two hours, live, in a HD televised session with what I believe scripted dialogs. They even had crane cameras and rail cameras for cinematic effect.
It was a way to get around bond regulations, the bond is a wrapper around Bitcoin. It’s similar to how some companies buy MSTR because they are not allowed to buy Bitcoin directly, but want some exposure.
A pension fund might very well be allowed to buy junk bonds since it is a well-known if risky instrument whereas bitcoin ETFs are a newfangled weird instrument that is probably not covered by their guidelines.
I mean allowed in the sense that the investment guidelines set by the board allow it.
Source: I work at a pension fund where I think we are in precisely this situation.
I think in the next few years the pressure for junk bonds like this in pension funds will just grow as inflation rate moves farther away from bond yields.
You are correct that at the time of announcement, if you had believed in Bitcoin and El Salvador (for some reason) it would have been advantageous to simply buy - separately - Salvadoran sovereign debt on the capital markets and Bitcoin on the spot markets.
Did he persecute people like Pinochet did? Calling him a dictator is like having someone saying that misgendering them caused them PTSD: it is putting war induced trauma in the same bag as whatever misgendering is.
"Persecuting people like Pinochet" isn't really the bar.
I was alluding to the time he brought the military into the legislature to force through his 'crime package.' [1]
Belorussian leader Alexander Lukashenko refers to himself as the "last dictator in Europe" and I don't think he "persecutes people like Pinochet." He was also elected.
I have no idea who exactly is or isn't a dictator, but there is a Spanish word for the situation when a democratically or legally elected leader acquires dictatorial powers by breaking down institutions: it's called an "autogolpe" or self-coup.
I realize it happens outside of Central and South America, but it's suggestive that there's a specific word.
I don't think it's the price of Bitcoin so much as their going all-in on it and then seeing their gamble collapse out from under them. They've now lost money on all the "dip buys" their dictator was tweeting about - in English only - to show off to the laser-eyed.
Their issue is that they showed such poor judgement.
[edit] Further, of course, they're thumbing their nose at the IMF by refusing to roll back BTC-as-tender. No matter what you think of that demand or that policy decision, if the IMF is the only one lined up to bail you out, it's their way or the high way.
[1] https://www.boerse-frankfurt.de/bond/usp01012ca29-el-salvado...