Traditional investors shun El Salvador’s bitcoin bond. After being rejected by a large number of overseas investors. Abitcoin-backed bond worth $1 billion in El Salvador may be able to tap. Into vast pools of wealth among cryptocurrency enthusiasts.
In addition to demand from bitcoin “whales,” or investors. Who own huge amounts of the world’s most popular cryptocurrency. According to those involved in the campaign. Demand from institutional investors is expected to be critical. In raising money for the bond.
The announcement was followed by a statement by Bitfinex Chief Technology Officer Paolo Ardoino. Who stated that the crypto exchange had received “half a billion dollars.” In interest from its users in the transaction. Which would be supported by the company’s technological infrastructure. He went on to say that before there could be any considerable interest. From potential investors, the “main characteristics” of the bond. Would have to be hammered out. That would necessitate the approval of new securities legislation in El Salvador.
We have received emails from users who have reached out to us. On their own initiative in response to their expressed interest. The company “extremely interested” in participating, according to Ardoino. But they are “waiting for the specifics to be revealed” before they do so. His statement followed by clarification. Saying that the exchange will not be engaging in the bond’s marketing campaigns.
El Salvador’s Debt Product is due in just Over a Year
Just over a year ago, El Salvador became the first country to use bitcoin as legal cash. With President Nayib Bukele’s enthusiastic backing.
The so-called volcano bonds, whose proceeds will invested in bitcoin. And used to build a “bitcoin city” at the foot of the Conchagua volcano. Might provide a financial lifeline to Bukele’s government. Whose finances are in doubt.
The crypto community’s enthusiasm for the first-ever sovereign borrower. Offering contrasts significantly with most large traditional investors’ reservations.
Buyers of the 10-year bitcoin bond would be helping El Salvador. Whose existing 10-year dollar bonds presently yield over 20%.
After a five-year lock-up period, El Salvador will sell bitcoin and share half of any earnings with investors.
Those yields soared as most investors shunned Bukele’s cryptocurrency experiments. Fearing the bitcoin bond would distance El Salvador. From traditional debt markets and harm its ties with the IMF.
Bitcoin has so far increased macroeconomic risks. Rather than changed how economic transactions performed in El Salvador. Wrote Barclays analysts last week.
Buyers and Traditional Investors of El Salvador’s Bonds also Lack Fundamental Information
Buyers of El Salvador’s bond are likewise unaware of the legal basis. For the tokens or who would issue them.
People familiar to the initiative believe prominent players. In the crypto world will find the bonds appealing. Despite their low returns and uncertain future.
El Salvador has indicated it may also allow retail investors to buy the bonds. Although the extent of the marketing is unknown.
Unknown wealth outside the banking system wants to remain so, according to an industry leader. Who has worked with Bitfinex. For these investors. Obtaining government debt via crypto is appealing. “Even if the returns are lower”.
The bitcoin bond’s reputation as a “world first” drew potential investors. Project participants said. The urge to be a part of something revolutionary is strong.
The government has announced a delay in the issue of bitcoin bonds. Putting the timing and future of the issuance in doubt. An earlier sale date of March has postponed. Last week, Bukele blamed market factors for the delay. While his finance minister, Alejandro Zelaya. Insisted that the issuance set to go. Zelaya also stated that the bond would issued by La Geo. A state-owned thermal energy firm.
“A transaction seems unlikely in the near future,” Barclays analysts added.
Ardoino says the bond’s parameters will finalized. After the government passes its securities legislation.
“It could take a week to a few months. “That’s the primary roadblock,” he remarked. While many traditional investors fear Bukele’s bitcoin campaign would drive El Salvador. Further away from the IMF and towards bankruptcy. Others also believe crypto traders will save the country.