El Salvador President Moves $406 Million Worth of Bitcoin to Cold Wallet
El Salvador President Nayib Bukele announced on X that his administration has transferred a significant portion of the country’s Bitcoin treasury into a cold wallet and plans to store it in a physical vault within El Salvador’s national territory. The wallet currently holds 5,689 Bitcoin, valued at $406 million.
Bukele’s move comes after El Salvador was previously believed to be holding 2,848 Bitcoin, worth $173 million, as reported by Decrypt in late February. Since making Bitcoin legal tender in 2021, Bukele has been actively involved in promoting and utilizing the cryptocurrency in various ways, such as establishing a Bitcoin mining operation powered by geothermal energy and offering Bitcoin “volcano bonds.”
Friction with International Monetary Fund and U.S. Lawmakers
The decision to adopt Bitcoin as legal tender has not been without controversy for El Salvador. The International Monetary Fund (IMF) has been engaged in a prolonged dispute with the country over this move, urging El Salvador to reverse its decision. Additionally, U.S. lawmakers have expressed concerns about the potential risks posed by Bitcoin adoption in El Salvador to Americans.
Challenges of Dealing with Unpredictable Fees
One of the challenges introduced by accepting Bitcoin as legal tender is dealing with unpredictable transaction fees. For example, when Bitcoin Ordinals experienced a surge in popularity similar to NFTs in May 2023, network fees skyrocketed to over $30 per transaction. This posed a significant cost burden for users in El Salvador.
To highlight the issue, Marce Romero, an individual from El Salvador, criticized the high fees on X at the time. They argued that a $100 transaction cost over $20 to complete, suggesting that the use of Bitcoin for NFTs may not be the most important or practical application of the cryptocurrency.
Bitcoin Transfers from Bitfinex to El Salvador’s Cold Wallet
Blockchain data reveals that the majority of the Bitcoin in El Salvador’s cold wallet, approximately 4,568 BTC, is being sent from the crypto exchange Bitfinex. The most recent transaction saw 4,007 BTC transferred from a Bitfinex exchange address to the cold storage wallet.
As of the time of writing, the price of Bitcoin stands at $67,934, having experienced an 8% drop in the past day. This decrease can be attributed to Grayscale’s transfer of $400 million worth of BTC to Coinbase for selling purposes. The sale exerted downward pressure on the market and pushed Bitcoin below $69,000.
Despite this price volatility, El Salvador’s treasury wallet has continued to receive additional Bitcoin since Bukele shared the initial screenshot. Currently, the wallet holds 5,689.7 BTC, valued at approximately $415 million.
Hot Take: El Salvador’s Growing Bitcoin Holdings
El Salvador’s President Nayib Bukele has made a bold move by transferring a significant amount of Bitcoin to a cold wallet and planning to store it in a physical vault. This decision showcases El Salvador’s commitment to embracing cryptocurrencies and utilizing them as part of its economic strategy.
The country’s growing Bitcoin holdings highlight its dedication to exploring new avenues for financial innovation and positioning itself as a leader in the crypto space. Despite facing criticism and challenges from international organizations and lawmakers, El Salvador remains steadfast in its belief in the potential of Bitcoin as legal tender.
While market fluctuations may impact the value of El Salvador’s Bitcoin holdings, Bukele’s move signifies the country’s long-term vision and commitment to harnessing the benefits of cryptocurrencies. As El Salvador continues to navigate the evolving landscape of digital currencies, its experiences and strategies will serve as valuable lessons for other nations considering similar paths.
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