Soon after El Salvador, a country of Central America adopted bitcoin as legal tender, the cryptocurrency market saw a dip after the rollout due to certain technical glitches. Many citizens protested and expressed their anger.
More than 1,000 people participated in the protest in San Salvador against the adoption of bitcoin on Tuesday by burning tires and fireworks in front of the Supreme Court.
Bitcoin was trading around $46,150 at 6.31 a.m. in New York. The plunge was around 17%. It led to a sharp fall in the virtual coin in the past 24 hours.
Tuesday’s fall was quite significant. It led to a sudden break in the sharp rise of Bitcoin by 75% since July. According to CoinGecko, the overall cryptocurrency market fell about $300 billion in just 24 hours.
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Senior Analyst at Oanda Corp expressed that many social media platforms were quite cautious amid El Salvador’s decision. Many traders and investors had bought the virtual coin in anticipation that the nation would implement the law on 7th September and then sell-thoff.
The bold decision initially faced issues when President Nayib Bukele raised red flags when bitcoin backed by the government was not available on various internet platforms such as Apple and Huawei.
Bukele expressed his concerns on Twitter and urged online stores or digital wallets such as Chivo and Huawei to make the app available. Later the app was unable to cope with the user registrations. The government made an effort to connect it to more servers in order to increase the capacity.
Billionaire, Mike Novogratz, CEO of Galaxy Digital Holdings, a known cryptocurrency bull stated the crypto market was quite bullish for eight weeks and became overbought.
This correction was expected. But many experts believe the fundamentals and trend are still intact. The virtual coin will trade between $46,000 – $53,000.
From the circumstances, it seems that the El Salvador rollout decision was the primary cause for the plunge and volatility in Bitcoin. But there are other factors too that may have played a role in the volatility of the cryptocurrency market.
As the cryptocurrency market saw a plunge, the government purchased additional 150 bitcoins worth around $7 million. As a nation, many citizens will struggle to use bitcoin as half the population has no internet access and many have poor connectivity.
Many believe that the adoption of bitcoin may lead to illegal and illicit transactions. Further it may lead to financial instability. The news of El Salvador seeking help from the IMF has raised concerns.
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Before the launch, El Salvador bought 400 bitcoins for around $20 million. It increased the price above $52,000.
Later, bitcoin and another cryptocurrency Ethereum also saw a dip up to 10%. This change indicates that businesses may accept bitcoin along with U.S dollars. US dollars were the official currency of El Salvador since 2001.
It is still unclear that if businesses that do not accept bitcoin will they be penalized for it or not. The government has also installed ATMs that enable the conversion of dollars into bitcoin. It is also a concern that Moody, a credit rating agency has downgraded the creditworthiness of El Salvador.