Remember, remember the 7th of September — Bitcoin, El Salvador, and the crypto drop

Remember, remember the 7th of September — Bitcoin, El Salvador, and the crypto drop
The crypto market world over crashed on September 7 after El Salvador's new Bitcoin Law kicked in to actionBI India
  • El Salvador declared Bitcoin to be legal tender on September 7 after which the crypto market came crashing.
  • The cryptocurrency market crashed by more than 15% within the span of an hour with Bitcoin’s price still down by more than 8% as of 6:00 pm Indian Standard Time (IST).
  • El Salvador’s President Nayib Bukele chose to ‘buy the dip’ attributing the crypto flash crash to the International Monetary Fund (IMF).
  • The country’s national crypto wallet ‘Chivo’ was also facing ‘technical difficulties’ at the time of launch with Bukele asking citizens to download the wallet from the Huawei App Store instead.
  • The volatility led to some of the world’s leading crypto exchanges facing trading delays and other glitches as investors looked to either sell or ‘buy the dip’ like Bukele.

September 7 was one for the history books with the Central American country of El Salvador going live with its law declaring the world's oldest cryptocurrency, Bitcoin, as legal means of exchange — at par with the US dollar within its economy.
Remember, remember the 7th of September — Bitcoin, El Salvador, and the crypto drop
El Salvador's president, Nayib BukeleTwitter/@nayibbukele

It is officially the first ever sovereign nation to declare Bitcoin as legal tender. Many thought this would further bolster Bitcoin’s rally that was headed towards the $54,000 mark.

What no one saw coming on the first-ever ‘Bitcoin Day’ was the crypto flash crash that followed. Virtual currencies went for a nose dive with Bitcoin falling more than 8.5% as of 6:00 pm Indian Standard Time (IST) — Ethereum, Cardano, and others in the top 10 cryptocurrencies were doing no better.

Even Solana, which quadrupled in value over the last month, was unable to buck the trend after a long hold out.

El Salvador ‘buys the dip’


The volatility in the crypto market led to trading delays on many of the leading cryptocurrency exchanges around the world including Coinbase, Kraken and Gemini.

El Salvador’s president, Nayid Bukele, however, took the opportunity to ‘buy the dip’. The country bought up another 150 Bitcoin to add to their existing reserve of 400 Bitcoin.

According to him, the massive dip of a whopping 15% to less than $43,000 — which is one of the worst daily performances of the cryptocurrency so far this year — was a ploy of the International Monetary Fund (IMF).

The launch of El Salvador’s ‘Bitcoin Law’ was not flawless

While the reasons behind the fall across the crypto market is still being speculated, with some saying it was the central banks, IMF and World Bank while others pointing the finger at individuals like Michael Saylor — the CEO of MicroStrategy, a business analytics software provider which is the largest corporate investor of Bitcoin in the world — El Salvador had its own issues back at home.

The country's national Bitcoin wallet, Chivo, saw ‘technical difficulties’ within the initial hours and was unavailable for download in the Google Play Store. The government was instead recommending that citizens download Chivo through Huawei’s App Gallery — a third party store that doesn’t have the best track record when it comes to security and transparency.

Even before the launch, there were reports of public unrest and flaws in the implementation process. According to a survey conducted by the Central American University (UCA), nearly 70% of the population disagreed with using the cryptocurrency as legal tender —- most did not even know that Bitcoin is a cryptocurrency to begin with. However, it should be noted that the population of the island nation is 6.5 million and the sample size for the poll was only 1,281 people.

Local media reports alluded to the people being against Bitcoin as legal tender. One of the protesters told Reuters that the primary reason for this is the cryptocurrency’s reputation of being used as a tool for money laundering.

Nearly 24 hours later, the crypto market seems to be recovering.

Locals share their first-ever Bitcoin experiences online

Even though reports indicated public push back, some of the experiences shared online after implementation of El Salvador’s Bitcoin Law seem to be positive mostly around the fact that food chains like McDonalds, Starbucks, and Pizza Hut are accepting Bitcoin as payment.

It is too soon to tell whether Bukele’s ambitious experiment will be a hit or a flop but it certainly got off to a banging start. Even Panama’s proposal of a new law to recognise Bitcoin and Ethereum as payment was unable to move the spotlight off of El Salvador.

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