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- In an event over the weekend, El Salvador’s President Nayib Bukele has introduced these so-called bitcoin (BTC) bonds
- While this recently announced bond may likely be one of the top-yielding fixed-income devices on a global scale, it is still believed to become trickier than El Salvador’s remaining government bonds as these have already been deemed junk
Cryptocurrency pundits believe that this latest offering from the Central American nation could be struggling in enticing people to invest in it. This is since the bond looks like it’ll be paying interest at a more toned-down rate in comparison to El Salvador’s usual bonds using dollar denominations.
Bitcoin bonds
As mentioned, President Bukele had such a plan made known on Saturday to provide a one-billion-dollar bitcoin bond alongside a 10-year maturity on the sidechain-based settlement network known as the Liquid Network. Additionally, half of the amassed money will be utilized to buy bitcoin, as the rest of it will fund building up a so-called “Bitcoin City” that will be situated within the vicinity of a volcano along the Gulf of Fonseca.
Meanwhile, this BTC bond is said to be developed by the blockchain tech firm Blockstream and will be processed by Bitfinex. Reports suggest that it will be offering either a 6.5 percent coupon or the rate of the yearly interest payments. Moreover, investors will be getting dividends that are being generated by a spread-out liquidation of BTC holdings, which will start from year six. That said, if Blockstream the projection is anything to go by, it is believed that the annual growth back to investors is likely to hit 146 percent.
10-year yield comparison
In comparison to that of El Salvador’s benchmark decade-long yield on outstanding government bonds, it is as of late sitting at around 13 percent. This is according to ADM Investor Services International’s (ADMISI) Chief Economist and Global Strategist Marc Ostwald. Furthermore, the United States Treasury with the same time frame only yields about 1.5 percent. It’s worth noting that a lot of investors and global authorities alike deem it to have this pristine creditworthiness.
Likely a gimmick
Bannockburn Global Forex’s Chief Market Strategist Marc Chandler believes that El Salvador’s latest bitcoin bonds may well seem to be just a stunt in getting lesser interest rates. He added that what he calls a “the desperate attempt” might do the trick, though it would still need some luck on bitcoin, whose intrinsic value, or lack thereof, is still heavily debated. The strategist went on to say that other nations should follow El Salvador’s footsteps, though they likely won’t.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
