The ongoing downturn in Bitcoin prices is taking its toll not only on individual crypto enthusiasts but also on entire nations staking their finances on digital currencies. El Salvador stands at the forefront of this trend, with the state’s Bitcoin holdings suffering significant losses in recent months. As the country doubled down on its crypto policies by adopting Bitcoin as legal tender, its economic fate has become closely tied to crypto market volatility and global debt dynamics.
Steep Decline in El Salvador’s Bitcoin Holdings
According to the Bitcoin Office under the Ministry of Finance, El Salvador currently holds a Bitcoin reserve totaling 7,560 coins, valued at around $503.8 million. At its peak in October 2025, the portfolio soared to nearly $800 million. The subsequent four-month slide has erased almost $300 million from the nation’s digital treasury, eroding both public confidence and government ambitions tied to cryptocurrency profits.
President Nayib Bukele, a longtime and vocal proponent of Bitcoin, has pursued a consistent strategy of daily purchases. Yet, this approach has only increased the country’s exposure to wild market swings, compounding risks associated with such concentrated holdings.
In stark contrast, Bhutan recently offloaded $22.4 million worth of Bitcoin as a response to mounting mining expenses. The nation had reaped over $765 million in profits from crypto mining activities dating back to 2019 but has since reined in its exposure following the most recent Bitcoin halving in 2024 and its ensuing cost spikes. El Salvador, by comparison, remains steadfast in expanding its holdings for the long run.
Nevertheless, Salvadoran officials have signaled an intent to diversify assets. The government executed a $50 million gold purchase amid growing global economic uncertainty, seeking stability in safer havens as questions over Bitcoin’s reliability intensify.
IMF Tightens Scrutiny on Crypto Policies
El Salvador’s ongoing crypto gamble has become a flashpoint in negotiations with the International Monetary Fund. Prolonged Bitcoin buying and delayed pension reforms are hindering the progression of the country’s financial assistance agreement with the IMF, raising fresh concerns about macroeconomic stability.
The IMF has flagged the potential risks of Bitcoin to fiscal stability, even as El Salvador’s bonds have registered nominal returns over 130% in the past three years. Any disruptions in the IMF program could make it tougher and more costly for the country to borrow on international markets, experts warn.
Christopher Mejia, an emerging markets analyst at T Rowe Price, noted, “The IMF may be uneasy about loan funds channeled into Bitcoin purchases, while falling Bitcoin prices are heightening market anxiety.”
The Fund approved a 40-month, $1.4 billion Extended Fund Facility for El Salvador on February 26, 2025. Following an initial review in June, a $231 million tranche was disbursed. However, the second review remains on hold since September, delayed by the government’s failure to release a comprehensive analysis of pension system reforms.
Despite repeated IMF warnings, El Salvador continued to increase its Bitcoin holdings throughout this period. A third IMF review is scheduled for March, with each round of assessment determining the release of further credit installments.
Jared Lou, head of the Emerging Markets Debt Fund at William Blair, suggested, “Persistent Bitcoin acquisitions could complicate IMF oversight, and a withdrawal of IMF support would likely spark negative market reactions.”
Meanwhile, bond market indicators point to heightened fears over El Salvador’s creditworthiness. The country’s credit default swap rates—measuring default risk—have climbed to their highest in five months. With $450 million in bonds maturing by the end of this year and $700 million more due next year, the interplay between El Salvador’s crypto strategy and its IMF talks will remain central to assessing market confidence.
