Bitcoin Drops Almost 10% After El Salvador Adopted it as Legal Tender

The price of the world’s number digital currency, Bitcoin, took a fall on Tuesday by nearly 10% after El Salvador adopted it as a legal tender.

After breaking through $52,000 late Monday, reaching its highest level since May, the digital asset pulled back on Tuesday following the news.

El Salvador has officially adopted the largest cryptocurrency by market cap as legal tender, becoming the first country to do so.

Bitcoin was last down about 9.5% and trading at $46,892.04, according to Coin Metrics. Ether fell 12% to $3,441.21.

Crypto adjacent stocks MicroStrategy and Coinbase were also down roughly 9% and 4%, respectively.

Coinbase users were experiencing delayed or canceled transactions at “elevated rates” in the morning, the company said in an update on Twitter. The issues had been resolved by the afternoon however.

El Salvador temporarily disabled Chivo on Tuesday morning. Chivo is the country’s government-run bitcoin wallet. The move was done to increase the capacity of the servers, which were hindering new users from installing it, President Nayib Bukele announced in a tweet at about 7:00 a.m. EST.

“Any data they try to enter at this time will give them an error,” he said. “This is a relatively straightforward problem, but it cannot be fixed with the system connected.”
The market action is unsurprising said Leah Wald, CEO at Valkyrie Investments.

“When this move was first announced, it didn’t have nearly as big of an impact on price as some may have expected it might, possibly because El Salvador’s population is less than New York City’s, but also because the announcement was light on details and people were on the fence about how this was going to be implemented,” she told CNBC.

“Transaction fees, processing times, and other hurdles also make this feel more like a beta test rather than a solution to many of the problems plaguing the country’s poor,” Wald added.

“What is most worth looking out for is whether or not neighboring countries in Latin America, or those elsewhere around the world, begin to adopt bitcoin as their national currency as well,” Wald said. “Should this occur, that is when we could see a parabolic move higher, as the momentum gained from many millions more people having instant access to crypto should result in more adoption, more HODLing, and higher prices.” HODLing is crypto community slang for the buy-and-hold investment strategy.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.