El Salvador expects bitcoin to rise in price to launch its long-awaited bonds

El Salvador expects bitcoin to rise in price to launch its long-awaited bonds
Key facts:
  • When the price of bitcoin is high is when it is being measured against the dollar, the minister said.

  • The fall in the price of bitcoin discourages the purchase of the bond, he warned.

The government of El Salvador is again delaying the launch of the volcano bonds announced by President Nayib Bukele in November 2021. This was announced by Alejandro Zelaya, the minister of finance, on May 2, 2022 by rejecting the deadline for the issue, as reported by El Mundo.

In this way, the issuance of volcano bonds, also called “bitcoin bonds”, continues to be postponed since March, month they were going to launch. The reason shared by the finance minister is that there are currently no favorable conditions in the market for its launch and they expect the cryptocurrency to rise in price. Previously, the postponement had been due to the war between Russia and Ukraine.

Alejandro Zelaya said: “As the price quoted (bitcoin) is affected against strong currencies, for some investors this discourages the purchase of the bond, so it should normally be done when the price is high.”

“Why? Because when we say that the price is high is when it is really being measured against the dollars, then for each bitcoin they will give you more dollars. So, I have an incentive to buy the bond with bitcoin and thus be able to earn because my national accounts are in dollars,” he added. This could be a strategy to motivate the purchase of bonds, capitalizing on the emotion that raises normally generate.

In this way, he confirmed that the government of El Salvador will launch the volcano bonds as soon as it initiates a rally bullish. The cryptocurrency is currently trading at USD 38,500, according to the Crypto News calculator. According to analyst predictions, its value could reach USD 100,000 in 2022, although there is no certainty that this will happen because others say that it would fall to USD 30,000 soon.

The Minister of finance of El Salvador, Alejandro Zelaya, explains that bitcoin bonds will be launched when the market is favorable and bullish. Source: Twitter

Analysts estimate that the value of bitcoin is being affected by the global financial context, in which investors are avoiding buying risky assets. This is due to the advance of the Russian war against Ukraine, the confinement measures of China and the generalized inflation that generates uncertainty about the economic future.

The postponement of the issuance of bitcoin bonds are not a “fiasco,” the minister said

Faced with the postponement of the launch of the volcano bonds, the finance minister said that no one can say that “this is a fiasco”, since the delay has been due to market conditions. A situation that they cannot control and that, based on their strategy, will define how and when the issue will be made.

“The president of the Republic (Bukele) is the one who tells us the right time, according to us how we see the market,” he said. In addition, in March, he had mentioned that its issuance will depend on the impact of the Ukrainian war and any factors in the investment context.

As previously reported, El Salvador aims to achieve an oversupply of more than USD 1,000 million by launching the volcano bonds. For this reason, it is logical that they want them to enter the market at the moment when they can capitalize on it with greater force. Although the interest they generate in investors is to be expected in view of the delays and the fact that institutional investment options in bitcoin around the world have increased.