On: El Salvador expected to default as Bitcoin plummet...

[xiphias2]

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.

[riffraff → xiphias2]

but these are junk bonds, it's not like there's pension funds that are going to buy them.

MSTR as a bitcoin proxy made sense at a time when you could not easily own bitcoins, but there are direct ways to do it now anyway (GBTC, BITO).

I am ignorant and I just don't know, but which regulation would forbid you from buying a bitcoin ETF but allow you to buy junk el salvador bonds?

[adament → riffraff]

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.

[xiphias2 → adament]

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.

[riffraff → adament]

thanks for your reply!

[arcticbull → riffraff]

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.