El Salvador’s Big Bitcoin Gamble Backfires to Deepen Debt Woes

(Bloomberg) —

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An epic rout that has wiped out about two-thirds of Bitcoin’s value is exacerbating the debt crisis in the world’s most crypto-friendly country.

In the year since El Salvador approved Bitcoin as legal tender, the nation has lost almost $56 million by gambling on the digital asset, according to calculations by Bloomberg. That may not sound like much, but for a financially troubled country like El Salvador, every bit counts.

The losses now represent more than half of what President Nayib Bukele’s government spent to buy the 2,301 Bitcoin disclosed through announcements on Twitter. The crypto currency was tumbling for a ninth straight session on Wednesday, on pace for its longest losing streak since 2014. Still, the extent of the decline doesn’t seem to have cowed Bukele, who hinted in a Tweet on Tuesday that it may represent a buying opportunity.

Based on the president’s tweets, the nation last purchased 500 Bitcoin a little more than a month ago.

Read more: El Salvador’s bonds fell to all-time low in May on Bitcoin turmoil

It highlights an important risk for investors in the cash-strapped Central American nation’s debt, which has been dragged lower by concerns surrounding wide fiscal deficits and an $800 million bond coming due in January. El Salvador’s dollar debt is the worst-performing in Latin America this year as it struggles to secure new financing through a stalled Bitcoin-linked bond.

Concern over the nation’s ability to get the funding it needs to roll over looming debts pushed S&P Global Ratings to downgrade the nation to CCC+ this month, a move that put it on par with Ukraine and Argentina.