• Bitcoin's plunge has slashed the value of El Salvador's holdings by roughly $300 million, exposing the risks of President Bukele's crypto bet and shaking the country's debt markets.
  • Despite the losses, Bukele keeps buying Bitcoin, alarming investors and complicating talks over a $1.4 billion IMF loan.
  • With major debt payments looming, Bukele's Bitcoin gamble is now colliding head-on with the country's fiscal stability.

El Salvador's Bitcoin holdings have suffered significant losses amid a 50% Bitcoin price crash from its October 2025 peak of $126,000 to around $63,000 by early February 2026, slashing the value by roughly $300 million and raising concerns over fiscal stability and a $1.4 billion IMF loan. Despite this, President Nayib Bukele continues daily Bitcoin purchases, complicating IMF talks that demand reduced crypto exposure, while public skepticism persists despite Bukele's 91.9% approval rating.

The plunge triggered $775 million in leveraged liquidations and record $3.2 billion realized losses on February 5, 2026, with Bitcoin hitting lows near $60,000 before a modest rebound to $71,000 by February 8; total crypto market cap fell 6.4% to $2.49 trillion. Holdings devaluation exposes fiscal risks, with looming debt payments and volatile bonds; continued buys amid the crash have spiked credit risk. Bitcoin mirrors traditional risk assets like tech stocks, entering a potential accumulation phase in its four-year halving cycle, with analysts eyeing $38,000-$60,000 near-term support before consolidation.

Bukele's strategy includes daily one-Bitcoin purchases despite IMF pressure to scale back; only 2.2% of Salvadorans view it as successful. IMF loan negotiations ($1.4B) are imperiled by crypto bets and delayed reforms; U.S. Treasury Secretary Scott Bessent criticized unregulated crypto advocates, suggesting they "move to El Salvador" while pushing U.S. oversight like the CLARITY Act.

Investors face shaken debt markets and higher credit risk; pension reforms are delayed, threatening fiscal pillars; bondholders and global lenders alarmed by volatility. Bukele's security-driven 91.9% approval contrasts with Bitcoin skepticism (2.2% success rate per NS3.AI); retail Bitcoin sentiment "extremely bearish" with high chatter.

El Salvador adopted Bitcoin as legal tender in 2021 under Bukele, amassing holdings as a treasury reserve despite volatility; this crash echoes the FTX collapse (Nov 2022) with steep one-day losses and $2.6B liquidations, fitting Bitcoin's repeatable four-phase halving cycle (post-peak despair to accumulation).

Further downside to $38,000-$60,000 possible (Feb-Apr 2026) with elevated volatility and failed rallies; IMF deal at risk if buys continue. Cycle bottom by Oct 2026, then consolidation; sovereign adoption (e.g., El Salvador, MicroStrategy) supports resilience, but macro risks like Fed policy loom. CoinShares notes deteriorating sentiment; 21shares sees "realized price" as multi-year support; Ledn CEO defends liquidations as non-capital destructive.

$2B+ liquidations since early Feb, including "Black Sunday II" ($2.2B on Feb 1); altcoins like Ethereum (- to $2,068), XRP (-19%). Wall Street's $188M bitcoin-loan bond (Ledn/Jefferies) hit by 27% BTC drop, forcing 25% loan liquidations but proceeding Feb 18. Bessent pushes regulation amid China/HK digital asset tests; ETF net selling in 2026.