Bitcoin Prices Fell Down Almost 10% As El Salvador Accepts It As Legal Tender

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Bitcoin prices fell on Tuesday after breaking through $52,000 late Monday to hit their highest level since May.

The price action took place on the day El Salvador became the first country to accept the largest cryptocurrency by market capitalization as legal tender. Bitcoin fell as much as 16% on Tuesday morning. The most recent drop was around 9.5% and was trading at $46,892.04, according to Coin Metrics. Air fell 12% to $3,441.21.

Crypto neighbors MicroStrategy and Coinbase also lost around 9% and 4%, respectively. Coinbase users experienced delays or cancellations of “interest-boosting” transactions in the morning, the company said in an update on Twitter, but the issue was addressed in the afternoon. Major cryptocurrencies Kraken and Gemini are also investigating delays and performance issues.

Tuesday morning, El Salvador temporarily disabled Chivo, the government-run Bitcoin portfolio, to increase server capacity preventing new users from installing it, President Nayib Bukele tweeted at around 7:00 a.m. EST.

“Any data you’re trying to enter at this point makes an error,” he said. “This is a relatively obvious problem, but one that cannot be solved with a connected system.”

The market action is not surprising, according to Leah Wald, CEO of Valkyrie Investments, who said the news was mostly in the market “a while back”.

“When this move was first announced it didn’t have as much impact on prices as some had expected, perhaps because El Salvador’s population is smaller than New York’s, but also because the message didn’t provide details and people were aware of how this would be implemented”, She told CNBC, noting that most of El Salvador live in poverty and don’t have access to the internet or smartphones to join the Bitcoin network.

“Transaction fees, processing times, and other hurdles also make this seem more like a beta test than a solution for many. a problem plaguing the country’s poor,” Wald added.

The new law requires companies to accept bitcoins for goods and services, although merchants who technically cannot accept bitcoins are excluded. The government has set up 200 Bitcoin ATMs around El Salvador. He also bought 400 bitcoins worth about $20 million and called Chivo’s portfolio of $30 bitcoins for Salvador’s registration.

Several traders said on social media that at 3 p.m. they would buy $30 worth of bitcoins in their local currency to mark and support El Salvador’s new law. ET. But the bitcoin price still slipped in the afternoon.

“It is worth noting whether neighboring countries in Latin America or around the world introduce Bitcoin as their national currency,” said Wald. “If that happens, then we could see a parabolic upward move as the momentum gained by the millions of people who have direct access to crypto will lead to more adoption, more HODL, and higher prices.” HODLing is crypto community jargon for buy and holds investment strategies.

Bitcoin proponents have long argued that there are strong arguments for Latin American markets to use cryptocurrencies as a medium of exchange, for remittances, and even for central banks experiencing high currency devaluations.

On Monday, Panamanian politician Gabriel Silva unveiled a crypto law, which “aims to make Panama a compatible country with blockchain, crypto assets, and the Internet,” he said on Twitter. “This has the potential to create thousands of jobs, attract investment, and make the government transparent,” he added.

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