El Salvador's First Day of Bitcoin Legal Tender Adoption... Cryptocurrency Drops 17% (Summary)

Errors such as digital wallet access delays occur from day one
330,000 traders sell off $3.6 billion worth of cryptocurrency
"Sell-off due to expected peak"... Unstable Bitcoin experiment

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] El Salvador's experiment as the first country in the world to adopt Bitcoin as legal tender stumbled from day one. Technical errors combined with a massive sell-off caused the cryptocurrency's price to plunge as much as 17% at one point.

On the 7th (local time), Bloomberg reported that the El Salvador government’s digital wallet application 'Chivo,' introduced for Bitcoin charging and payments, experienced technical issues such as access delays. Authorities temporarily suspended server operations and resumed the service from noon that day.

Despite the majority of the population opposing the Bitcoin adoption, the government pushed it through but faced major chaos on the first day of implementation. Luis Membrano, an economic consultant in El Salvador, told foreign media, "It was a disaster itself," and warned, "It will lose citizens' trust."

Expectations that Bitcoin prices would surpass $60,000 due to El Salvador's positive move collapsed from day one. Investors liquidated their long positions in the cryptocurrency market, further driving prices down.

According to the cryptocurrency futures trading platform 'Bybt,' over the past 24 hours, approximately 336,000 traders liquidated their cryptocurrency long options, resulting in $3.6 billion worth of Bitcoin sales.

On the 7th (local time), a payment kiosk at a Starbucks store in San Salvador, the capital of El Salvador, displayed a message indicating that Bitcoin payment is available. [Image source=Reuters Yonhap News]

Bitcoin prices fell as much as 17% that day, dropping to the $43,000 range. According to CoinDesk, as of 10:30 AM KST on the 8th, Bitcoin was trading at $47,001, down 10.45% compared to 24 hours earlier.

Ethereum was down 10.52% at $3,499, and Cardano fell 10.37% to $2.52.

Dogecoin traded down 14.7% at 26 cents.

Edward Moya, an analyst at OANDA, said, "Some traders expected prices to peak due to El Salvador's Bitcoin adoption and thus started selling."

The Wall Street Journal (WSJ) reported, "The Bitcoin market experiences sharp price drops with even slight sell-offs," adding, "As prices showed signs of falling that day, traders liquidated positions, driving the crash."

El Salvador authorities stated that Bitcoin was adopted to increase citizens' access to financial services and attract foreign investment. The government also passed a law mandating Bitcoin payments at all businesses within the country.

To encourage citizens to use Bitcoin, the government decided to provide $30 worth of Bitcoin to everyone who downloads the Chivo app.

In fact, on major social media platforms that day, scenes of payments made with Bitcoin at restaurants like McDonald's and Pizza Hut were captured.

The international community is closely watching El Salvador's Bitcoin experiment, particularly focusing on how Bitcoin will affect El Salvador, a representative impoverished country in Latin America. If El Salvador's experiment succeeds, it could trigger a domino effect with neighboring countries adopting Bitcoin as well.

Gerrick Hileman of Blockchain.com, a cryptocurrency research center based in London, UK, said, "We are in uncharted territory. We can learn a lot from this Bitcoin experiment."

[Image source=Reuters Yonhap News]

On the other hand, international financial institutions pointed out that Bitcoin's extreme price volatility could cause economic risks and that Bitcoin could be used for money laundering. The International Monetary Fund (IMF) warned that El Salvador's economic instability would worsen, and Moody's downgraded El Salvador's sovereign credit rating from B3 to Caa1.

Some critics argued that this was a 'smokescreen operation' to tighten the government's authoritarian grip. On the 3rd, the Supreme Court ruled to abolish presidential term limits and allow up to three terms.

An analyst at Amherst Pierpont said, "The news that the Supreme Court opened the door for the president's re-election bid is more important," but added, "However, news about Bitcoin adoption dominated all headlines."

On the 7th (local time), protests by citizens opposing the adoption of Bitcoin took place in San Salvador, the capital of El Salvador. [Image source=Reuters Yonhap News]

El Salvador citizens are also opposed to Bitcoin adoption. In a local poll conducted last week, two-thirds of respondents said the Bitcoin adoption law should be repealed.

This content was produced with the assistance of AI translation services.