Cryptocurrency prices tumble and exchange trading falters as snags crop up

Cryptocurrency prices tumble and exchange trading falters as snags crop up

A representation of cryptocurrency Bitcoin is seen in this illustration taken August 6, 2021. REUTERS/Dado Ruvic/Illustration/File Photo/File Photo/File Photo/File Photo

NEW YORK, Sept 7 (Reuters) - The price of cryptocurrencies plunged and crypto trading was delayed on Tuesday, a day in which El Salvador ran into snags as the first country to adopt bitcoin as legal tender.

Shares of blockchain-related firms also fell as crypto stocks were hit by trading platform outages. But the major focus was on El Salvador, where the government had to temporarily unplug a digital wallet to cope with demand.

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Bitcoin, the world’s biggest and best-known cryptocurrency, tumbled more than 17% to $43,000 before paring some losses to trade down 9.20% at $47,140.27. Earlier bitcoin had hit a session high of $52,948.00.

Smaller rival ether , the coin linked to the ethereum blockchain network, fell 11.99%.

Major cryptocurrency exchanges Coinbase Global Inc (COIN.O) and Kraken said they faced delays in some transactions on their platforms.

Coinbase said some transactions were delayed or canceled at “elevated rates” and that “our apps may be experiencing errors.” The exchange later said issues with Coinbase card swipes were resolved and that transactions were going through normally.

The Gemini exchange said it temporarily entered a full-maintenance period to address an exchange-related issue that caused performance trouble.

Coinbase (COIN.O) shares slid 4.02%.

Anything related to cryptocurrencies appeared to suffer. Cryptocurrency miners Riot Blockchain (RIOT.O) fell 7.38% and Marathon Digital Holdings (MARA.O) slipped 7.76%.

Shares of MicroStrategy Inc (MSTR.O), a BTC buyer and business intelligence software firm, fell 7.64%.

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Reporting by Herbert Lash in New York, additional reporting by Saikat Chatterjee in London and Aaron Saldanha in Bengaluru; editing by Sujata Rao and Rosalba O’Brien

Our Standards: The Thomson Reuters Trust Principles.

Why Bitcoin, Ethereum, and Dogecoin Are Falling Today

What happened

The price of most cryptocurrencies fell on Tuesday morning after some hit new highs on Monday night. The price of Bitcoin (CRYPTO:BTC) had dropped roughly 11% as of noon EDT, while the prices of Ethereum (CRYPTO:ETH) and Dogecoin (CRYPTO:DOGE) had fallen roughly 12% and 18%, respectively.

The fall in prices seemed to be attributed to market volatility commonly associated with the cryptocurrencies, and as El Salvador looks to implement a law today that will see Bitcoin accepted as legal tender.

So what

Just before falling this morning, Bitcoin hit its highest price level since May at $52,000. Ethereum had traded close to $4,000 on Monday night, while Dogecoin at one point hit over $0.31 per token.

The price drops come on the day that the Latin American country El Salvador is set to adopt Bitcoin as legal tender, making it the first country to do so. What this means is that citizens in the country can choose to use Bitcoin as payment and businesses must accept it in exchange for goods and services. In addition, citizens will be able to pay taxes in Bitcoin, Bitcoin exchanges will not be subject to capital gains taxes, and the price of Bitcoin will be tied to the dollar exchange rate.

In preparation for the new law, which is set to go in effect at 3 p.m. EDT today, the El Salvador government has purchased roughly $20 million in Bitcoin and installed 200 Bitcoin ATMs across the country. Government-run Bitcoin wallets will be loaded with $30 worth of Bitcoin for citizens who register. Reuters reported this morning that the El Salvador government “had to unplug a digital wallet to cope with demand,” as citizens register for the wallets.

Despite the issues, Leah Wald, CEO at the cryptocurrency and alternative asset management firm Valkryie Investments, said she was not surprised by the market’s reaction today, as the news surrounding El Salvador has already been priced in.

“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,” Wald 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 that if other Latin American countries begin accepting Bitcoin as legal tender, that could result in a “parabolic” move higher in crypto prices. Many experts believe Latin America could be ripe for adopting cryptocurrencies to help improve money transmission and for central banks that already deal with volatile currencies.

Now what

While the situation in El Salvador will be interesting to watch, I do not see anything that would change my view on certain cryptocurrencies.

I still feel quite bullish on Bitcoin and Ethereum. I am less bullish on Dogecoin, but can acknowledge that the cryptocurrency will likely move in tandem with the broader crypto market, and that it could move higher as stakeholders continue to update the network.

Bitcoin falls as El Salvador’s cryptocurrency gamble stumbles

Bloomberg/Getty

Number go up, number go down. After climbing to just under $53,000 on Monday, Bitcoin fell precipitously on Tuesday. The price briefly dipped to just over $43,000, but at time of writing stands at $46,925. Other currencies like Ethereum and Dogecoin saw similar falls.

Cryptocurrencies are decentralised and notoriously volatile, so it’s often difficult to precisely pinpoint the cause of such sharp price movements. In this case, however, it appears to be tied to El Salvador, where Bitcoin officially became legal tender on Tuesday.

El Salvador’s government created a digital wallet for its 6.4 million citizens to use, which would come with $30-worth of Bitcoin preloaded. (That’s about 0.0007 Bitcoin.) At first, the wallet wasn’t available through Apple and Huawei app stores. After President Nayib Bukele pressed all online app ecosystems to add the Chivo app, the digital wallet was overwhelmed with traffic and had to briefly be taken offline.

Bukele, who at 40 years old is an unusually young world leader, went on to joke about the Bitcoin price drop on Twitter. “Buying the dip,” he tweeted with a winking Emoji, a quip commonly made by cryptocurrency traders exposed to sharp price drops. He said El Salvador bought 150 Bitcoin this morning, bringing its total to 550. (At current price, that’s $25.7 million-worth.)

APHOTOGRAFIA/Getty

Many El Salvadorians shared videos of Bitcoin being accepted at Starbucks, McDonald’s and other retailers – videos Bukele gleefully retweeted. Bitcoin enthusiasts around the globe pledged to buy $30 worth of the cryptocurrency on Tuesday, dubbed “Bitcoin Day,” in support of Bukele.

The adoption of Bitcoin has been poorly received among many other citizens, however. Over 1,000 gathered in San Salvador to protest the move, which they say won’t help the country’s poorest residents. “This is a currency that’s not going to work for pupusa vendors, bus drivers or shopkeepers,” a resident told Reuters.

President Bukele, whose political party is literally called “New Ideas,” hopes that the mass adoption of Bitcoin will spur forward-thinking foreign investment in the country, and also lower the cost of remittance payments, which currently make up 24% of El Salvador’s GDP, according to World Bank data.

Global financial institutions have warned El Salvador against the move. “Adoption of bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis,” said a spokesman for the International Monetary Fund in June. Meanwhile, a World Bank spokesperson told the Washington Post in June: “While the government did approach us for assistance on Bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings.”

Bukele, sometimes called Latin America’s first millennial president, has rebuffed the criticisms. When influential economist Steve Hanke called it a “crackpot” plan, Bukele replied: “Who is this Boomer?”

“We should break the paradigms of the past,” Bukele tweeted just prior to the law going into effect. “El Salvador has the right to advance toward the First World.”