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El Salvador Unfazed by Bitcoin’s Recent Price Drop

The price of Bitcoin went down sharply on Tuesday, plunging 19% from $52,956 to $42,900 yesterday, undoing the gains it made recently and wiping out more than $180 billion in market value. El Salvador, the country that officially adopted bitcoin as legal tender yesterday, appeared unfazed by the dip, and capitalized on it instead. The country simply purchased another 150 BTC as soon as the price was right.

According to analysts, the reason for the drop was clear. Investors were choosing to sell while the price was still high, after bitcoin had failed to rise above the significant limit of $ 53,000 recently. The digital currency had become 12% more valuable since the end of last month. In April, bitcoin reached an all-time record with $ 64,895.

El Salvador becomes the first country in the world to legally adopt bitcoin and accepting it as a legal tender. Every resident who opens an account in the government’s bitcoin wallet Chivo, receives a $ 30 bitcoin gift. The Central American country has recently bought 400 bitcoins for about € 17.5 million. Earlier on Tuesday, Salvadorans who were trying to download the Chivo digital wallet found that it was not available on the popular app stores. A later tweet from president Bukele mentioned that the government had temporarily unplugged it, to connect more servers to deal with the overwhelming demand.

Though many may have tried to open Chivo, most Salvadorians are not all running to the newly opened bitcoin machines to change their dollars to Bitcoin. Surveys have shown that Salvadorans are skeptical about the use the digital currency, mainly because they believe its value fluctuates too much. People are used to a very stable US dollar.

The fact that bitcoin’s value dropped so sharply on the first day, may not help generate the trust president Nayib Bukele is looking for in its citizens. And the mistrust in the digital currency reached a climax with more than 1,000 people marching in El Salvador’s capital San Salvador on Tuesday, to protest the adoption of bitcoin as a legal tender.

Companies in the El Salvador will have to accept the digital currency in exchange for goods and services. The government will also accept bitcoins for paying taxes. But protesters feel the poorest may struggle with the technology to make bitcoin accessible to them. Right now, nearly half the population has no internet connection, or has very spotty connectivity.

But president Bukele is full of trusts. “Like all innovations, El Salvador’s bitcoin process has a learning curve,” Bukele said in a tweet. “Not everything will be achieved in a day, or in a month.”

With bitcoins, it becomes cheaper for El Salvador residents working abroad, mostly in the United States, to send money to their families in El Salvador. It costs Salvadorian’s hundreds of millions of dollars in bank commissions every year to send their family members US dollars.

Regardless of the possible price fluctuations El Salvador plans to buy many more bitcoins, President Nayib Bukele said earlier on Twitter. In 2020, the small country had a gross domestic product of more than $ 24 billion. According to the World Bank’s most recent figures, 29% of the population lives below the poverty line. For the time being, the country will still accept US dollars too.

source: the blockchain web site

Big News From a Small Country – Bitcoin to become legal tender in El Salvador

A scoop for a small Central American country is worldwide news. In El Salvador it should soon be possible to pay for everything with bitcoin. On June 9, the 39-year-old President Nayib Bukele sent a bill to parliament to make bitcoin legal tender. The bill was passed by a vast majority. The Central American country is now the first country ever in the world to make Bitcoin legal tender.

The new law is good news for residents of the country. And the eyes of the world will surely be on this developement after this new law turns into practice in 90 days. bitcoin enthusiasts are happy, as they see it as a big step towards a world in which everyone can pay with digital currency. There are still many questions about how this will work out in practice.

The current currency in the country, the US dollar, will also remain valid, but soon everyone’s local greengrocer and supermarket will also have to accept payments in bitcoin, just like government agencies such as the tax authorities. The 90-day period is intended to prepare the country for the transition.

El Salvador is a very poor country, 70 percent of the population has no access to traditional payment services. Provided people have an internet connection, this will change very soon  The state also arranges courses for citizens who find the world of crypto too complicated. The government feels that digital skills should not be a reason to be excluded.

Many El Salvadorians earn their money in the United States. Part of their income is sent to relatives in the home country on a monthly basis. Those transfers are not free, as there are always commissions to pay. Workers abroad always see part of their hard earned cash disappear into the pockets of American banks that facilitate their transactions. With bitcoin, there is no commission, because cryptocurrency is decentralized, without the intervention of a bank.

But can a coin of which the value can fall or rise by 20 percent in one day actually work as a payment method? A bitcoin is now worth half of the record value in April (more than $ 60,000 then, compared to about $29,595 today). This would mean a retail seller who is paid his turnover in bitcoin, has to sell twice as much in the event of such a price drop in order not to suffer financially. President Bukele recognizes that risk. The national development bank keeps $150 million in a specially set up account to absorb exchange rate risks. Bukele’s government also guarantees that anyone can immediately exchange bitcoins for dollars if they wish. El Salvador is also negotiating a $1.3 billion bailout package to ease the burden of budget deficits and debt with the International Monetary Fund (IMF).

source: the blockchain web site