El Salvador has become the first country to adopt bitcoin as a legal currency like the dollar, and digital currency has fallen 17% to its lowest level in a month. The value of the currency recently fell by about 10% after crossing the $ 50,000 mark this week, trading at $ 46,860. Bitcoin is known for its wild volatility, which has led critics to point out that it is not suitable for functioning as an official currency.
The Bloomberg Galaxy crypto index reported that Bitcoin lost up to 19%, and other digital currencies like the Dash and Ethereum Classic fell about 20% each.
Microstrategy and Coinbase also fell by about 6% and 3.5% respectively. At the same time, there have been reports of delays or cancellations in Bitcoin transactions. Kraken, another large crypto exchange, said at about the same time that it was investigating delays and failed payments.
El Salvadoran president Nave Bukla tweeted earlier that the country had shut down Chibo, the government-run bitcoin wallet, to increase server capacity. “Any information they are trying to enter at this point will give them an error message,” he said. “This is a relatively simple fault, but cannot be fixed when the system is connected.”
This is not surprising, at least according to Leah Weld, CEO of Valkryie Investments: “When this move was first announced, it had almost no impact on the price of the currency as one would expect if a similar move were announced in New York. She further noted that much of El Salvador lives in poverty and does not have access to the internet or smartphone to take part during Bitcoin. “The transaction fee, processing times and other obstacles will not lead to a solution to many of the problems that plague the poor of the state,” she added.
El Salvador’s economy is run mainly on cash, as about 70% of people do not have bank accounts or credit cards. Transfers of money sent home by immigrants make up more than 20% of the country’s gross domestic product.
As part of the new law, businesses will be required to accept Bitcoin for goods and services, although businesses that are unable to accept the currency due to a technological failure will be exempt from the law. The government has installed 200 Bitcoin ATMs across El Salvador. She also bought 400 bitcoins worth about $ 20 million and made sure to pre-load Chibo wallets with bitcoins worth $ 30.