Bitcoin’s $100k break boosted bonds in El Salvador

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As a seasoned crypto investor with over two decades of experience in the stock market, I must admit that the recent surge in El Salvador bonds fueled by Bitcoin’s meteoric rise has caught my attention. The idea of Bitcoin driving sovereign bond prices up in traditional markets is truly unprecedented and intriguing.

In the realm of emerging market debts, El Salvadoran bonds stood out as strong performers, boosted significantly due to Bitcoin‘s soaring value above $100,000.

The surge in Bitcoin’s (BTC) value on December 5 sparked an increase in El Salvador bonds, as reported by Bloomberg’s data on sovereign debt maturing in 2035 and 2041. President Nayib Bukele, a supporter of Bitcoin, commented on this development through X, stating that “this is the first instance in history where Bitcoin has boosted sovereign bonds in traditional financial markets.

Hooah!

— Nayib Bukele (@nayibbukele) December 5, 2024

The Bitcoin investment approach worth $269.7 million that El Salvador adopted has resulted in a profit of approximately $333.6 million on paper (unrealized), causing the country’s total Bitcoin holdings to be estimated at around $603.3 million when Bitcoin reached its peak value.

At the moment of reporting, Bitcoin dipped below $100,000 due to long-term investors cashing out while anticipating potential market adjustments. Data from blockchain analysis showed these investors realizing approximately four times their initial investment as returns.

Bitcoin closing in on Google

Even though there’s a drop, a significant portion of Bitcoins are still kept away from exchanges, suggesting increased institutional interest and reducing the availability of liquid assets. According to Thomas Perfumo, Kraken’s head of strategy, this supply pattern is likely to maintain the upward price trend.

Approximately 94% of all Bitcoins that will ever be mined have already been created. The remaining amount increases by approximately 0.8% per year, with this growth rate likely to decrease from now on. The total supply of Bitcoin is fixed and known today, tomorrow, and in the future. Given the current high demand, it’s logical to expect a rise in its value or positive price action.

Thomas Perfumo, Kraken head of strategy

Regardless of the enthusiasm surrounding the market and significant investments flowing into Bitcoin, critics such as Peter Schiff and Charles Bobrinskoy from Ariel Investments continued to express reservations about it.

According to Bobrinskoy, Bitcoin is considered a “speculative bubble fueled by momentum” and a “quick money-making opportunity,” which he predicts will eventually decrease in value. At the time of his comments, Bitcoin ranked as the seventh most valuable global asset, outperformed only by Google, Amazon, Microsoft, Nvidia, Apple, and Gold.

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2024-12-06 00:32