Robert Steinadler, 5 months ago
There is not a lot of good news available lately, but it seems that one particular player in the market is keeping up the good work. El Salvador is a small country and not economically powerful. Nevertheless, its president Nayib Bukele came up with yet another powerful plan.
Why is El Salvador buying more Bitcoin on a daily basis, and why is this a sound plan despite current market conditions?
This is not the first time El Salvador is buying Bitcoin. The country introduces BTC as legal tender in September 2021 and invest on several occasions into Bitcoin. El Salvador accumulated around 2381 BTC over the last 14 months or so.
This initial investment is down around $50 million of unrealized loss. So far, president Bukele kept on buying throughout the bull market which wasn’t the best investment decision in hindsight. His country, on the other hand, is profiting of the growing Bitcoin economy. A stream of companies has settled in El Salvador with the hope to find everything they need and optimal regulatory backup from the country’s president.
Bitcoins bonds and the Bitcoin City, on the other hand, are still postponed given the fact that the start of both projects has been stalled during bear market.
It was today when Bukele announced on Twitter that his country would start to buy 1 BTC per day starting tomorrow. Only 1 hour later Justin Sun, the figurehead and founder of Tron (TRX), assisted the president of El Salvador pledging publicly to do the same.
This is not only a marketing stunt, but a long-term strategy that is applied by many investors throughout different assets classes worldwide. The so-called dollar cost average effect (DCA) is powerful since it is a strategy that worries less for the optimal point in time to enter the market.
The basic idea behind DCA is, that time in the market always beats timing the market. By buying at arbitrary points in time, the average cost for the position is lowered if the market keeps going down. As soon as the winds pick up again, DCA investors reap their rewards. It seems that Bukele is aiming to profit from the effect and stabilize the value of his country’s investment. While he announced to start by tomorrow, it is not clear when and if El Salvador is ever going to stop buying BTC.
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