Bitcoin price plunges as El Salvador turns it into legal tender

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Bitcoin prices plunged the day the Central American country El Salvador adopted it as legal tender.

El Salvador’s sovereign bonds fell as much as 6 percentage points in secondary market trading in the United States on Tuesday (local time), to 87.11, as the price of bitcoin fell sharply.

Bitcoin prices fell 18% to around US $ 43,119 (A $ 57,980), a low since mid-August, according to financial market intelligence service Refinitiv Eikon.

In the United States, market traders said the massive sale was also caused by a Supreme Court ruling allowing El Salvador’s President Naib Bukele to serve two consecutive terms.

There were also startup issues in the South American country when the government had to unplug a digital wallet to keep up with demand.

Mr Bukele, who pushed El Salvador to adopt the cryptocurrency, called for help from users who had already downloaded the government-backed app, to test if it was working properly.

“Could you please try to subscribe and post in the comments if there are any errors or if the whole process is working fine?” He wrote on Twitter.

Mr Bukele said using bitcoin would help Salvadorans save $ 400 million (AU $ 541 million) per year in remittance fees while providing access to financial services for those who do not have no bank account.

Carlos Garcia, who visited a mall information booth on Tuesday to give advice on the new currency to learn more about how transactions work, was excited about the opportunities bitcoin could offer.

“El Salvador is taking a big step forward today,” he said.

However, the poorest may find it difficult to access the technology needed to make bitcoin work in El Salvador, where nearly half of the population does not have an internet and many others only have one. sporadic access.

“I’m going to continue to suffer with or without bitcoin,” said candy seller Jose Herrera, who said he struggled to access a cell phone.

Others said the move could fuel money laundering and financial instability.

It has already blurred prospects for more than $ 1 billion in funding El Salvador is seeking from the International Monetary Fund.

Mr Bukele, 40, is Latin America’s most popular leader, but has been accused of eroding democracy, notably by the administration of US President Joe Biden.

Mr Bukele blamed Apple Inc, Google and Huawei’s app download platforms for the delay.

“Release him! @Apple @Google and @Huawei,” he wrote in a tweet, accompanied by a red-faced “angry” emoji.

The wallet was then available from Huawei.

Google and Apple did not immediately respond to requests for comment.

Polls indicate Salvadorans are wary of the volatility of the cryptocurrency, which can lose hundreds of US dollars in a day.

Ahead of the launch, El Salvador bought 400 bitcoins worth around $ 20 million, Bukele said, helping to push the price of the currency above $ 52,000 for the first time since May. .

Hours later, however, bitcoin had weakened and was last trading down 8.84% to US $ 47,327.32.

Ethereum, another crypto currency, fell 10.52% to US $ 3,537.62, while crypto exchange Coinbase Global slipped 3.96% after reporting delays in some transactions on its platform .

This change means businesses must accept bitcoin payments alongside the US dollar, which has been El Salvador’s official currency since 2001 and will remain legal.

It is not yet known whether companies will be penalized if they do not accept bitcoin.

In the run-up to the launch, the government has installed ATMs that convert bitcoins into U.S. dollars and withdraw them commission-free from the digital wallet, called Chivo.

“Like all innovations, El Salvador’s bitcoin process has a learning curve,” Bukele tweeted.

“Not everything will be done in a day or a month.

“We have to break the paradigms of the past. El Salvador has the right to advance to the first world.

-with AAP