The government of El Salvador sees a buying opportunity in the lower Bitcoin (BTC -3.96%) price. President Nayib Bukele announced that the country bought another 500 Bitcoins this week, boosting its Bitcoin holdings by 28%.
What's new?
President Bukele announced the Bitcoin purchase in a tweet.
"El Salvador just bought the dip!" he wrote. "500 coins at an average USD price of ~$30,744."
That works out to an investment of $15.4 million. El Salvador now holds 2,301 Bitcoins on its balance sheets, worth $72.4 million at today's prices. It's a fairly small investment, worth roughly 0.3% of El Salvador's $24.6 billion gross domestic product, but you have to start somewhere.
The average Bitcoin price in President Bukele's report is actually not a huge discount to El Salvador's long-term purchase prices. Before this buying spree, the average cost of an El Salvadorean Bitcoin was roughly $31,500, according to data from Bitcoin Treasuries. The largest and oldest cryptocurrency has seen its coin prices fall nearly 52% over the last 6 months, including a 25% in the last month alone.
That being said, Bitcoin prices soared in the fall of 2021, so El Salvador's return to the buying window makes sense. The country is deploying capital that may not have been available in last year's original rounds of Bitcoin buys, taking advantage of a return to more modest crypto prices.
Who else is buying Bitcoin?
El Salvador is not the only large-scale Bitcoin buyer these days. Software developer MicroStrategy (MSTR -5.45%) continues to pour cash into its Bitcoin holdings, which consisted of 129,218 digital coins as of March 31. If you do the math on MicroStrategy's Bitcoin assets, the tally stands at $4.1 billion today. That's one of the largest Bitcoin collections in the world.
And MicroStrategy keeps growing that investment. The company took out a $205 million three-year term loan from Silvergate (SI 9.76%) at the end of March, putting every penny to use in buying more Bitcoin.
There are some Bitcoin bears in this market, too
The biggest Bitcoin bulls are picking up more coins on this dramatic dip. At the same time, master investor Warren Buffett doubled down on his view that Bitcoin is a worthless asset. If you offered him all the Bitcoin in the world for $25, he wouldn't take it.
So whose example should you follow? Bitcoin bears are as easy to find as the bulls, and it's hard to argue with Buffett's financial credentials.
However, Buffett would also be the first to tell you that he won't invest in things he doesn't understand -- and that he doesn't understand Bitcoin. Moreover, Warren Buffett is as human as anyone else. He isn't always right.
Nobody really knows where Bitcoin will go from here. MicroStrategy and El Salvador are betting that the digital currency will replace traditional currencies like the U.S. dollar in many ways and that the current volatility will mature into stable storage of fiscal value. Buffett expects old-school banking and government-backed currencies to win in the long run, undermining the goals of Bitcoin and other cryptocurrencies.
Image source: Getty Images.
Who's the better role model?
Perhaps the best approach is to follow in El Salvador's footsteps. MicroStrategy is going all-in on Bitcoin while the Latin American nation is making a relatively small investment in digital currencies. If Bitcoin skyrockets in the long run, El Salvador will pocket significant gains from its early involvement. If Buffett is right and Bitcoin turns out to be worthless in the end, the country can swallow that painful blow while MicroStrategy goes bankrupt.
All things considered, I recommend buying a limited amount of Bitcoin at today's low prices.
