This week, the government of El Salvador, which recognizes Bitcoin as legal tender, increased its Bitcoin holdings by over $100 million. Industry analysts interpret this move as a strategic "buy-the-dip" approach amid Bitcoin’s recent sharp decline, potentially signaling the start of a major rebound for the cryptocurrency, which has retreated nearly 30% from its all-time high and briefly dipped below $90,000.
Standard Chartered, which accurately predicted Bitcoin would surpass $100,000 by late 2024, noted that the recent correction may have concluded after Bitcoin fell below $90,000 during Asian trading hours on Monday. The bank highlighted that while this drop was steeper and faster, it aligns with historical sell-off patterns in the current cycle.
According to El Salvador’s Bitcoin Office, the government added 1,090 Bitcoin to its reserves on Monday evening. President Nayib Bukele shared the news on social media with a single-word caption: "Hooah!" The country now holds 7,474 Bitcoin, worth approximately $700 million at current prices.
Despite signing a $1.4 billion IMF loan agreement earlier this year—which included commitments to limit further Bitcoin purchases—El Salvador has continued accumulating Bitcoin at a rate of at least one per day, skirting the edges of IMF conditions. The IMF stated that El Salvador agreed "not to increase Bitcoin holdings in government digital wallets as part of the program," adding that compliance would be monitored.
Bitcoin was granted legal tender status alongside the U.S. dollar in El Salvador in 2021, though its real-world adoption remains limited. Legally, Bitcoin can be used for debt settlements, taxes, and payments, though economists note it functions more as a "speculative asset" than a mainstream currency. The IMF has repeatedly urged El Salvador to revoke Bitcoin’s legal status, citing risks to financial stability.
On Tuesday, Bitcoin briefly fell below $90,000, erasing its 40% year-to-date gains. However, El Salvador’s aggressive accumulation signals long-term bullish confidence. Geoff Kendrick, Standard Chartered’s head of digital assets research, pointed to extreme market reset indicators, such as MicroStrategy’s price-to-book ratio hitting 1.0, suggesting a potential bottom.
MicroStrategy, led by Michael Saylor, has seen its stock surge 2,000% since 2020, outperforming Bitcoin’s 700% rise. Kendrick reiterated his year-end rebound forecast, predicting this could be Bitcoin’s last dip below $100,000.
Wall Street firm Bernstein dismissed fears of a prolonged bear market, framing the drop as a temporary correction. The firm expects Bitcoin to consolidate between $80,000 and $90,000 before resuming its bull run, citing strong demand from ETFs, sovereign buyers like El Salvador, and institutional holders absorbing sell pressure. Unlike past crashes, Bernstein notes this correction has been relatively shallow, with long-term holders’ sales fully absorbed by new institutional inflows.