El Salvador Holds onto Bitcoin with Massive Unrealized Profit
El Salvador, under the leadership of President Nayib Bukele, entered the Bitcoin market in September 2021 with an initial acquisition of 700 Bitcoin. Following in the footsteps of MicroStrategy, the country adopted a Bitcoin strategy and continued to purchase more of the leading cryptocurrency. As of January, El Salvador’s Bitcoin holdings had grown to 2,798 Bitcoin, valued at approximately $130.5 million.
Despite skepticism and backlash from some entities, including media personalities who believed the venture would be unprofitable, Bukele remained steadfast. He noted that critics were quick to write about El Salvador’s supposed losses when the Bitcoin market price dropped.
“When Bitcoin’s market price was low, they wrote literally thousands of articles about our supposed losses,” Bukele tweeted. “Now that Bitcoin’s market price is way up, if we were to sell, we would make a profit of over 40%.”
Due to its Bitcoin acquisition in November 2022, each BTC in El Salvador’s holding has an average cost of $42,440. With the current Bitcoin price at around $61,000, this translates to a significant unrealized profit margin for El Salvador—up to $40 million.
Bukele emphasized this point in his February 28 post: “Now that Bitcoin’s market price is way up, if we were to sell, we would make a profit of over 40%, and our main source of BTC is now our citizenship program.”
No Plans to Sell: El Salvador and MicroStrategy
Much like El Salvador, MicroStrategy has also profited from its adoption of a Bitcoin strategy. The company currently holds a portfolio of 193,000 Bitcoin, valued at over $11.7 billion. MicroStrategy initially acquired its Bitcoin holdings for $6.09 billion, resulting in a profit of approximately $5.7 billion.
Both El Salvador and MicroStrategy have made it clear that they have no intention of selling their Bitcoin holdings, even as the price of the cryptocurrency continues to rise towards new all-time highs.
Why Hold onto Bitcoin?
El Salvador and MicroStrategy’s decision to hold onto their Bitcoin holdings can be attributed to several factors:
- Unrealized profit: Both entities are currently sitting on significant unrealized profits due to the increase in Bitcoin’s market price. Selling now would mean leaving potential gains on the table.
- Long-term strategy: El Salvador and MicroStrategy view Bitcoin as a long-term investment rather than a short-term trading opportunity. They believe in the future potential of Bitcoin and its ability to act as a hedge against inflation.
- Citizenship program: Bukele mentioned that El Salvador’s main source of BTC is now its citizenship program, indicating that the country sees value in holding Bitcoin as part of its economic development plans.
- Bitcoin as reserve asset: Both El Salvador and MicroStrategy may be considering Bitcoin as a reserve asset, similar to gold or other traditional stores of value. Holding onto Bitcoin allows them to diversify their assets and protect against economic uncertainties.
The Benefits of Holding onto Bitcoin
Holding onto Bitcoin can offer various benefits for individuals, organizations, and countries:
- Potential for future price appreciation: As demonstrated by El Salvador and MicroStrategy’s unrealized profit, holding onto Bitcoin can lead to significant gains if the price continues to rise.
- Store of value: Bitcoin’s decentralized nature and limited supply make it an attractive store of value, especially in times of economic uncertainty.
- Hedging against inflation: Bitcoin’s scarcity and fixed supply make it an effective hedge against inflation, as its value is not subject to the same inflationary pressures as fiat currencies.
- Portfolio diversification: Adding Bitcoin to a portfolio can help diversify risk and potentially enhance overall returns, especially when traditional markets are experiencing volatility.
Hot Take: Holding onto Bitcoin for Long-Term Gains 🚀
El Salvador’s decision to hold onto its Bitcoin holdings despite unrealized profits showcases the country’s belief in the long-term potential of the cryptocurrency. By not selling, El Salvador is positioning itself to benefit from potential future price appreciation and the economic opportunities that come with being a Bitcoin-friendly nation.
This approach aligns with MicroStrategy’s strategy as well, highlighting the growing trend of organizations and countries embracing Bitcoin as a valuable asset and long-term investment. As Bitcoin continues to gain mainstream acceptance, holding onto the cryptocurrency could prove to be a wise decision for those looking to secure their financial futures.
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