Although El Salvador officially adopted cryptocurrency as fiat currency, selling pressure on Bitcoin continued to weaken on Wednesday after suffering the biggest losses in the months a day before its volatile start.
Bitcoin was trading at $ 45,798 on a coin basis at 5:09 am New York time on September 8. This was down about 13% from the nearly four-month high of $ 52,956 the day before El Salvador officially adopted cryptocurrency as fiat currency alongside the United States. Dollar. This is the sharpest decline in Bitcoin, as Bitcoin fell by about 19% in the two days from May 18th to 19th.
Analysts said the withdrawal was due to investors who bought rumors that the El Salvador move is currently selling facts.
“I think there were some expectations before the event. [El Salvador]Henrik Andersson, Chief Investment Officer of Apollo Capital, a crypto assets fund in Melbourne, Australia, told Reuters:
El Salvador’s President Nayib Bukele, a strong supporter of cryptocurrencies, said that Bitcoin prices fell on Tuesday. Said on twitter His government was “buying dips” and was buying an additional 150 coins worth about $ 7 million. The country’s Bitcoin holdings now reach 550 coins.
El Salvador’s Bitcoin adoption experiment was compromised by technical glitches that prevented its use on Tuesday, causing street protests by distrustful citizens in the country.
Opposition politician Johnny Lightsol Told the BBC The plunge in prices has exposed volatility, which is a major risk for Bitcoin.
“It was a very bad day for President Bukele, his government, and his Bitcoin experiment,” Wright told Outlet. “The majority of the population knows very little about cryptocurrencies. What we know is that it’s a very volatile market. Today it’s certainly clear,” he said. I added.
Bitcoin was adopted in Central American countries because a lawmaker in El Salvador passed the legal tender in June, made it a legal tender with the US dollar, and then the law came into effect on September 7.
Under the new law, businesses must accept Bitcoin to settle transactions, which Salvadorians can use to pay taxes.
To facilitate adoption, El Salvador has released a Bitcoin wallet app called Chivo. It allows users to register with a Salvador national ID number and is preloaded with $ 30 worth of cryptocurrencies. According to the BBC, the surge in user registration has taken the server offline and more than 1,000 protesters have opposed the adoption of cryptocurrency as fiat currency outside the state’s Supreme Court.
According to a survey, public opinion among Salvadorians has been divided by the move to make Bitcoin a legal tender, with nearly 68 percent of the country’s citizens disagreeing with its adoption ()pdf) According to Central American University. Polls also showed that only 4.8% of those surveyed correctly identified Bitcoin as a cryptocurrency, and two in ten had never heard of it.
Bukele previously said that the benefits of the experiment would come to fruition over time, but he sees hiring as a bold step into the future.
“The #Bitcoin process in El Salvador has a learning curve. Every step into the future is like this, and we can’t achieve it all in a day or a month,” Bukele said. Written on twitter.. “But we have to break through the paradigm of the past.”
El Salvador officials hope that the move to adopt Bitcoin will save money on remittance fees, or money sent from abroad to home. According to the World Bank, remittances to El Salvador totaled nearly $ 6 billion in 2019, accounting for about one-fifth of GDP.
The government also hopes that creating a fiat currency for Bitcoin will facilitate financial inclusion in El Salvador. In El Salvador, according to the new Bitcoin law, about 70% of citizens do not have access to traditional financial services.
Proponents and critics alike need to closely monitor deployments and monitor recruitment and use.
The El Salvador move “for the majority of Bitcoin holders, we just want to be a stunt that completely blocks transactions and a store that is worth holding,” said a London School of Economics researcher. One Carsten Sorensen said. Told Bloomberg.. “If individual countries try to fiat overnight, the network will easily suffer because of already problems with transaction rates.”
The International Monetary Fund (IMF), which provided emergency loans to El Salvador last year and is negotiating another lending round, has stated that it is reluctant to adopt Bitcoin as fiat currency.
IMF Prime Minister Cristalina Georgieva said fluctuations in Bitcoin prices made it difficult for authorities to make rational fiscal decisions.
“How do you know what to collect with taxes when Bitcoin goes up and Bitcoin goes down? How do you plan your spending? Bitcoin hits $ 65,000 in April Recall that we dropped nearly half of that after we crossed it. It’s a problem the Ministry of Finance addresses, and it’s not an easy task, “said IMF Prime Minister Cristalina Georgieva in late July.
July 29 Blog post The IMF has released two policy documents on digital currencies, acknowledging that digital forms of money are “immeasurable,” including the ability to promote cheaper transactions and financial inclusion.
“Local craftsmen can receive payments from potentially foreign customers cheaper and instantly. Large financial conglomerates can settle asset purchases much more efficiently. Friends pay cash. You can split the invoice without having it. Those who do not have a bank account can save it securely, create a transaction history and get a micro loan. Money can be programmed to serve only a specific purpose, It’s seamlessly accessible from financial and social media applications. Governments can tax revenues and redistribute them more efficiently and transparently, “says the author.
At the same time, they point out many risks, including their impact on domestic economic and financial stability, the most widespread being the impact on the stability of the international monetary system.
“The least stable of the lots that are rarely qualified as money are crypto assets that are unsubstantiated and are affected by the whims of market power (such as Bitcoin),” the author warned.
Reuters contributed to this report.