El Salvador’s Loss on Bitcoin Holdings is Marginally Higher than Upcoming Bond Payment

El Salvador’s gamble on Bitcoin lead to losses equal to the cash-strapped nation’s next interest payment to bondholders, underlining the increased risk posed by its experiment with cryptocurrency.

The rout that has been driven by Bitcoin down some 40% since late March has deepened El Salvador’s cumulative losses to about $40 million, according to Bloomberg as published.

The figure is little more than the country’s next coupon payment on its foreign debt which is $38.23 million due on June 15 on motes maturing in 2035.

El Salvador earlier spent about $105 million in being Bitcoins since becoming the world’s first country to make Bitcoin its legal tender in September last year.

The cryptocurrency has fallen 45% since the first purchase, cutting down the value of the nation’s 2,301 Bitcoins to about $66 million according to Bloomberg.

“It’s risky because it’s an extremely volatile asset, and it’s an investment that is totally at the discretion of the president,” said former El Salvador Central Bank Chief Carlos Acevedo.

“He buys it on his phone when he wants to take advantage of the dip, but he doesn’t do it right because when he buys there’s always a bigger dip.”

Acevedo said that he thinks the government will be able to make the maturity payment with a combination of loans and cash reserves, a potential pension reform or tapping its special drawing rights with the IMF. Bukele will likely seek re-election and “doesn’t want to bear the political cost of a default,” Acevedo said.

El Salvador owes bondholders $382 million in interest this year, with July being the heaviest month for payments as $183 million comes due. The nation had $3.4 billion in reserves in April, according to the central bank, and the government plans to raise $1 billion with the Bitcoin-backed bond, though it’s not clear at this point whether the transaction will go through.

The nation was also in talks with the International Monetary Fund for an extended fund facility, but negotiations stalled after Bukele adopted the cryptocurrency as a legal tender.