El Salvador Off to a Rocky Start: Bitcoin Market Crashed

This year Bitcoin rates faced a major drop in the chart for a few months, post-February. However, investors witnessed the Bitcoin rate at its highest in the last three months. It was nearly between $52,000 and $53,000. As El Salvador made its first step in making Bitcoin an official legal tender in the country, simultaneously the Bitcoin rates plunged in massive proportion.

El Salvadorians who are crypto detractors also took it to the streets, to protest regarding this official act.

El Salvador’s Bitcoin Adaption as a Legal tender Started with a Jolt

September 7, 2021, is the date is marked in the historical calendar of El Salvador. The first country in the whole wide world to officially put bitcoin on its balance sheet as a legal tender and hold it as an asset for reserve. 

Bitcoin faced a major bearish market, as its rates dropped by 17% after Monday. The pressure on the cryptocurrency market came at such a time when El Salvador made the largest cryptocurrency the official legal tender alongside the United States Dollar. Now it rallied up to some extent, but still down by almost 9%: it is currently exchanged at $46,401.10 according to Coinbase. Many crypto detractors went to the street to protest against the adaption of Bitcoin as a legal tender. This is also a reason for the market crash.

On the day of El Salvador’s official adaptation of Bitcoin as a legal tender, the government announced that they were adding almost 21 million dollars worth of Bitcoin to its balance sheet. That is when the rates touched their peak market price. This is an event in which people on either team of this initiative (i.e. crypto enthusiastic community and the ones who are in opposition to this proposition) are looking forward to how events turn out in the case of cryptocurrency transactions.

Also Read: $150M In Fund For Bitcoin Adoption In El Salvador

Not only Bitcoin, but the entire crypto market faced a bearish rundown. Ethereum rates dropped by 12%, along with the entire cryptocurrency portfolio turned into red down signs.

According to data from CNBC, crypto adjacent stocks rates such as MicroStrategy and Coinbase also plunged by 9% and 4% respectively.

“Coinbase users were experiencing delayed or canceled transactions at elevated rates,” noted CNBC. Although the issues were looked after and sorted by noon, many investors lost funds in this glitch. Other major cryptocurrency exchange platforms were also facing similar issues.

Source: Twitter

On Tuesday, the President of El Salvador tweeted at 7:00 am announcing that the national crypto wallet – Chivo would be “temporarily disabled”. This was performed to “increase the capacity of the server”, the official adaptation of Bitcoin as legal tender gave rise to the citizens downloading the application in a heavy rush. This caused technical inconvenience to new installers. President Nayib Bukele also tweeted to help his people deal with the technical problem. He pointed that “it is a relatively straightforward issue but it cannot be resolved while the system remains connected to the server.”

The CEO of Valkyrie Investments, Leah Wald opined on CNBC regarding this entire scenario. 

She said, “When this move was first announced, it didn’t have nearly as big of an impact on price as some may have expected it might, possibly because El Salvador’s population is less than New York City’s,  but also because the announcement was light on details and people were on the fence about how this was going to be implemented.”

She further added, “Transaction fees, processing times, and other hurdles also make this feel more like a beta test rather than a solution to many of the problems plaguing the country’s poor.”

Hence, this experiment is such a captivating moment for everyone, considering that El Salvadorians are not equipped with the best facilities in the US. Many possess extremely limited knowledge about cryptocurrency and Bitcoin. So, if this turns out to be a success…El Salvador, besides being the first country to issue Bitcoin as a legal tender will also become a pioneer for many other countries.

Also Read: Nayib Bukele Says Bitcoin Won’t Be Forced on El Salvador