El Salvador postpones its $1B bitcoin-backed bond, planned for March 15-20, citing unfavorable market conditions; BTC is down ~35% from its November 2021 peak
SAN SALVADOR (Reuters) - El Salvador postponed an unprecedented issue of a bitcoin-backed bond planned for last week …
Context & Ripple Effects
The bond was the financing engine of Bitcoin City: $1B split between mining infrastructure and more bitcoin purchases, announced at the November 2021 price peak. With BTC down roughly 35% from that high, the March 15-20 window closed without a sale.
The postponement lands on a treasury already underwater. President Bukele's 2,301 BTC purchases had slipped to a $74M valuation against $103M paid by May, and the same market slide later deepened those losses to ~$56M on paper.
First-order effects
- El Salvador loses its planned funding path for Bitcoin City's mining buildout and further BTC accumulation, leaving the project dependent on fiscal budget or new investors.
- Bukele's government faces the bond question again with a weaker hand: any re-pricing happens against a 35% drawdown and a public record of unrealized losses on its existing holdings.
Second-order effects
- Sovereign crypto-linked debt gets repriced: the failed window signals to other issuers that bitcoin-collateralized bonds carry a risk premium traditional fixed-income buyers won't absorb at par.
- Suppliers and partners counting on the $500M mining allocation — energy, hardware, site development around Bitcoin City — see their pipeline stall until a replacement funding source appears.
Third-order effects
- The arc runs from legal-tender launch through bond postponement to retreat: by late 2024 El Salvador agreed to scale back bitcoin under an IMF deal for a $1.4B loan, with merchant acceptance no longer mandatory — suggesting market discipline, not ideology, sets the ceiling on state crypto experiments.
The trend: Sovereign bitcoin adoption is being forced into reverse by market cycles, as states that bought at the top trade ideological positioning for conventional financing from institutions like the IMF.