A Bitcoin (BTC) bet in El Salvador has backfired somewhat, with the best cryptocurrency currently trading at a 70% discount from its highest price. As the Latin American country struggles with its debt, Morgan Stanley issued a buy call for troubled eurobonds.
Simon Weaver, global head of sovereign credit strategy for emerging markets at Morgan Stanley, told investors in a note Tuesday that El Salvador’s bonds are being excessively penalized by market conditions, even though the country has better financial metrics than many of its peers, Bloomberg reported. The note to investors stated:
“Obviously markets are pricing in a high probability of a self-sustainment scenario in which El Salvador defaults, but no restructuring.”
Weaver noted that the country’s debt should not trade less than $0.437 on the dollar, even in cases of default, but he also acknowledged that the level is impossible to achieve in the current market conditions due to the tightening of global liquidity.
Related: El Salvador Postpones Bitcoin Bonds to September: Report
A note on Tuesday assessed that El Salvador should have no problem repaying debt for the next 12 months due to the primary surplus, plus it has lower maturities than other troubled countries such as Argentina, Egypt and Ukraine.
El Salvador submitted a legal tender for BTC in September 2021, and things seemed to be working out well for the small nation as the bull market peaked. The country has bought nearly $56 million in BTC since September and used the profits to build schools and hospitals. However, the country lost a significant portion of its investment once it entered the bear market.
There have been discussions about the issuance of volcanic Bitcoin bonds after the failure of a $1 billion aid request to the International Monetary Fund. However, the bond, which was touted alongside Bitcoin City, has experienced many delays with no specific launch date yet.