- Bitcoin plunged as much as 17% to its lowest level in a month as El Salvador’s crypto rollout appeared to be faltering.
- There was plenty of froth in the cryptocurrency markets to begin with, but the disappointment of Bitcoin’s roll out as legal tender in El Salvador served as a major drag.
What happens when a new-age form of currency meets creaking infrastructure? Exactly what you would expect to happen that’s what.
Investors pricing in some sort of Bitcoin utopia from El Salvador’s decision to make Bitcoin legal tender may potentially have been ingesting, smoking or snorting some of the Central American country’s key exports.
To be sure, there was plenty of froth in the cryptocurrency markets to begin with, but the disappointment of Bitcoin’s roll out as legal tender in El Salvador served as a major drag.
Yesterday’s selloff is the most significant break in the otherwise relentless rebound in Bitcoin that has seen the benchmark cryptocurrency soar by almost 75% in the last month and a half.
An estimated US$300 billion worth of market cap in cryptocurrencies was shaved off in the past 24 hours alone, according to data from CoinGecko.
To be sure, the Bitcoin rollout in El Salvador was a mess from the start.
The El Salvador government had to take its Bitcoin wallet app temporarily offline as the price of the cryptocurrency plummeted.
The digital wallet app called “Chivo” – Salvadorean slang for “cool” stopped working as server capacity was increased.
Chivo was intended to offer Salvadorean citizens who downloaded it an initial US$30 of free Bitcoin, but crashed soon after it was launched.
Exacerbating the selloff, U.S.-listed cryptocurrency exchange Coinbase Global faced technical issues as Bitcoin started plummeting, delaying or even canceling some customer transactions.
And while the cryptocurrency faithful globally were applauding the use of Bitcoin as legal tender in El Salvador, ordinary citizens took to the streets in process, marching in various protests across the capital San Salvador ruing against Bitcoin as a vessel to steal the riches of the country.
For cryptocurrency proponents however, the bigger story is the prospect of helping El Salvadorans reduce remittance fees, estimated at a fifth of the country’s GDP, and the teething problems from the Bitcoin app, expected.
Even if El Salvadorans lose confidence in Bitcoin because of the early glitches, insofar as the El Salvador government persists in its efforts, it may yield long term results, not just in transforming its economy, but providing a precedent for other countries to follow.