Bitcoin price fell Tuesday after breaking the $ 52,000 mark late Monday, reaching its highest level since May.
The price action will take place on the day El Salvador will be the first country to introduce the largest cryptocurrency by market capitalization as legal tender. Bitcoin fell as high as 16% on Tuesday morning. It was last down about 10% and was trading at $ 46,860, according to Coin Metrics.
Microstrategy and Coinbase, which are adjacent to cryptocurrencies, also fell about 6% and 3.5%, respectively. Coinbase users experience delayed or canceled transactions at “increased prices,” the crypto exchange said in an update on Twitter.
Early in the day, the country disabled Chivo, its government-run Bitcoin wallet, to increase the capacity of its servers, preventing new users from installing it, El Salvador’s President Nayib Bukele announced in a tweet around 7:00 a.m. EST at.
“Any data you enter at this point will result in an error,” he said. “This is a relatively simple problem, but the connected system cannot fix it.”
The market move isn’t surprising, according to Leah Wald, CEO of Valkryie Investments, who said the news was largely priced into the market “a while ago”.
“When this move was first announced, it didn’t have nearly as big an impact on the price as some might have expected, possibly because El Salvador’s population is smaller than New York City’s, but also because of the announcement contained few details and people weren’t sure how to do it, “she said, noting that much of El Salvador lives in poverty and has no internet or smartphone access necessary to participate in Bitcoin Network is required. “Transaction fees, processing times and other hurdles also make this seem more like a beta test than a solution to many of the problems plaguing the country’s poor,” she added.
As part of the new law, businesses will have to accept Bitcoin for goods and services, although merchants who are technically unable to accept Bitcoin will be exempt. The government has set up 200 Bitcoin ATMs around El Salvador. It also bought 400 bitcoins worth about $ 20 million and loads Chivo wallets with $ 30 worth of bitcoins for Salvadorans who register.
Some traders say on social media that at 3:00 p.m. EST, they will buy $ 30 worth of bitcoin in their local fiat currency to commemorate and support El Salvador’s new law. But Bitcoin prices slipped into the afternoon anyway.
“It is most worthwhile to pay attention to whether neighboring countries in Latin America or elsewhere in the world are also introducing Bitcoin as their national currency,” said Wald. “Should that happen, we could see a parabolic upward movement as the momentum gained by many millions more people with immediate access to crypto should lead to more adoption, more HODLing and higher prices.”
Bitcoin proponents have long believed that there are strong arguments for Latin American markets to use cryptocurrency as a medium of exchange, for remittances, and even for central banks that are experiencing high currency devaluation.
On Monday, the Panamanian politician Gabriel Silva presented the “crypto law”, which “aims to make Panama a country that is compatible with the blockchain, crypto assets and the Internet,” he said on Twitter. “This has the potential to create thousands of jobs, attract investment and make government transparent,” he added.