El Salvador's Bonds Strengthen Along With The Success Of Bitcoin Revenue

El Salvador President Nayib Bukele, "I've said that." (photo: twitter @herqles_es)

JAKARTA - El Salvador, which adopted Bitcoin as legal currency in 2021, has seen its dollar bond performance surpassing the majority of emerging markets with a return of 70% by 2023. The massive increase in the value of these bonds has attracted interest from several large institutions, including JP Morgan, Eaton Vance, and PGIM Fixed, which prompted President Nayib Bukele to say, "I've already said so."

In addition to large institutions, companies such as Lord Abbett & Co LLC, Neuberger Berman Group LLC, and UBS Group AG have also added the bonds since April, Bloomberg reported.

Paolo Ardoino, Bitfinex's Chief Technology Officer, told Cointelegraph that the performance of El Salvador's bonds is a clear signal that investors support El Salvador's government financial policy and reflect renewed interest in investing in the story of El Salvador.

"As the first company to get a Digital Asset License, we see significant interest in the issuance of digital assets and renewable energy investments, which are abundant in the country and are used for Bitcoin mining and providing more energy for the country's power grid," Ardoino said.

In the past year, almost every legacy international news outlet said that because of our “#Bitcoin bet”, El Salvador was going to default on its debt by January 2023 (since we had an 800 million dollar bond maturing today).Literally, hundreds of articles https://t.co/rEiK7K13U4

— Nayib Bukele (@nayibbukele) January 24, 2023

In the past year, almost every legacy international news outlet said that because of our “#Bitcoin bet”, El Salvador was going to default on its debt by January 2023 (since we had an 800 million dollar bond maturing today).Literally, hundreds of articles https://t.co/rEiK7K13U4

The increasing demand for El Salvador's debt bonds in 2023 is very different from its performance a few years ago when it first adopted Bitcoin as a legal currency. The BTC adoption created uncertainty among investors betting on the country's bonds, with several financial institutions cast doubt on the country's financial future.

In February 2022, the American credit rating agency, Fitch, lowered the country's long-term Debt Issuer rating from B- to CCC, citing policy uncertainty and Bitcoin adoption, along with debt payments of US$800 million (Rp12 trillion) due in January 2023.

El Salvador paid $ 800 million in full on time earlier this year, which raised confidence in the country's bonds. President Nayib Bukele at the time noted that they had proven all financial experts who doubted whether they would be able to pay their debts on time after Bitcoin adoption.

This investor confidence increase can be seen from bond performance throughout 2023. At the same time, El Salvador has also passed the passage of a historic crypto law, paving the way for Bitcoin-based bond issuance called the "Volcano bond."

El Salvador and its president have received criticism since first adopting Bitcoin in September 2021 as legal currency along with the United States dollar. Financial experts predict that BTC adoption will further burden El Salvador's financial condition. However, within two years, the country's bonds have been the prima donna among large institutions, which previously advised not to buy them.