2 min read.Updated: 08 Sep 2021, 10:19 AM ISTAgencies
El Salvador on Tuesday became the first country in the world to accept bitcoin as legal tender, despite widespread domestic skepticism and international warnings of risks for consumers
Bitcoin prices plummeted from more than $52,000 per coin, over 17% to $42,000, before recovering about half of that loss after El Salvador became the first country to adopt Bitcoin as legal tender on Tuesday. However, the rollout stumbled in its first hours and El Salvador President Nayib Bukele said the digital wallet used for transactions was not functioning.
Tuesday’s selloff is the most significant break in the rebound that had lifted Bitcoin almost 75% since late July. Overall cryptocurrency market value fell about $300 billion in the past 24 hours, according to tracker CoinGecko.
The world's largest cryptocurrency staged a small recovery as Bitcoin prices today were at around $46,757, down 11%. Meanwhile, other digital coins followed the lead with ether fell over 11% to $3,471 whereas dogecoin and cardano prices plunged 15% and 12% to $0.26 and $2.5 respectively. Stellar, XRP, Uniswap also crashed in the range of 15-20% over the last 24 hours.
“Social media platforms were very cautious over the weekend that a plunge could occur following El Salvador’s big day," Edward Moya, senior market analyst at Oanda Corp., wrote in a note, as reported by Bloomberg. Some investors likely bought in anticipation of the nation implementing its Bitcoin law Sept. 7 and then moved to “sell the fact," he said.
According to experts, bitcoin was still in the bull market as long the price stayed above the $43,000 level.
Billionaire Mike Novogratz, chief executive officer of Galaxy Digital Holdings and a long-time cryptocurrency bull, told Bloomberg the market for digital coins was running strong over the last eight weeks and became overbought. Interest from individual investors spiked on the back of large institutions jumping on board the crypto wagon, he said.
David Gerard, author of “Attack of the 50 Foot Blockchain," told the Associated Press that Tuesday’s Bitcoin volatility likely had little to nothing to do with El Salvador. “My first guess was shenanigans, because it’s always shenanigans," Gerard said via email to AP.
“Bitcoin basically doesn’t respond to market forces or regulatory announcements," Gerard said. “That sort of price pattern, where it crashes hugely in minutes then goes back up again, is usually one of the big guys burning the margin traders." Because Bitcoin is so thinly traded, it could also have been a big holder making a large sale to have cash, thus sending the market for a ride, Gerard said.