El Salvador, the first country to legalize Bitcoin (BTC), has announced with great fanfare the creation of a Bitcoin City in the country. To be able to finance this metropolis dedicated to the queen of cryptocurrencies, the government will use “volcanic bonds”. Unfortunately, their launch has been delayed.
Bitcoin City, a city imitating a giant coin
If you haven’t heard anything about El Salvador’s Bitcoin City, you’ll want to check out this article. Otherwise, recently, the country’s finance minister announced that the launch of the “volcanic bonds” has been delayed.
Quick reminder: the local government plans to raise $1 billion through bitcoin-backed bonds. Half will be used to increase the country’s BTC reserves, and the other $500 million will be used to build a geothermal energy infrastructure.
As for Bitcoin City, President Nayib Bukele made the announcement in front of a cheering crowd last November. He promised, on that occasion, to give it the shape of a large coin and will endow it with residential areas, stores, railroads and bars. To honor the name “Bitcoin City”, this metropolis will operate on the basis of bitcoins.
Concerns about the Russian-Ukrainian war
In an interview on local television, Finance Minister Alejandro Zelaya gave some explanations for this delay of the “volcanic bonds”. He mentioned the lack of favourable conditions for the launch of these bonds. This would probably be due to the uncertainty linked to Vladimir Putin’s invasion of Ukraine. For him the best thing would be to wait until the market conditions improve, and bitcoin (BTC) recovered.
And regarding BTC, the revelation of the construction of this bitcoin metropolis was followed by a 38% drop in the largest cryptocurrency. And at the moment, it is far from returning to its historic ATH of $68,789.63 in November 2021.
For Mr. Zelaya, ideally, the volcanic bonds would be issued in the first half of 2022. But a delayed launch during the month of September is not out of the question either.
Note, however, that this delay will not be without consequences:
“After September, if you go to the international market, it’s difficult [to raise capital].”
Bitcoin City, BTC bonds… at a standstill?
It is certain that El Salvador will regret the delay, knowing that the country had intended to offer bitcoin bonds between the 15th and 20th of this March. Nevertheless, the finance minister was able to put on an optimistic face during his interview. For him, these bonds would be “substantially” oversubscribed and demand would reach $1.5 billion, or another $500 million.
A new report from the El Salvador Chamber of Commerce and Industry, released earlier this week, revealed that only 3.6% of Salvadoran businesses are showing an increase in sales since Bitcoin was legalized in September 2021.
Let’s also not forget that at the same time, Bukele announced that his country plans to invest millions of dollars in BTC. On several occasions, he has “bought down” a quantity of bitcoin assets. Except that most of these purchases took place at a time when their prices were above $42,000. In other words, El Salvador has to show a negative balance sheet with the crypto assets it has acquired since 2021.
But who said that the bitcoin (BTC) price will stay at its current level for a long time. Haven’t we reported here on Cointribune a slew of predictions about it possibly hitting the $1 million mark? Otherwise, regarding Bitcoin City, it is only a slight delay to be compensated by other ideas as the President of El Salvador has been used to suggest since his exercise of power.