On Tuesday evening, the world's most valuable digital currency, bitcoin (BTC), fell more than 10% in an hour, while ether fell more than 15%. El Salvador became the first country in the world to embrace Bitcoin as legal tender on the day of the flash crash.
The historic introduction of bitcoin as legal tender in El Salvador on Tuesday was marred by teething issues, including an angry protest by distrustful residents, technological malfunctions, and a drop in the cryptocurrency's value.
The Bitcoin Law in El Salvador mandates that bitcoin be accepted as a mode of payment throughout the country. The bill was passed by the nation's legislature barely three months after President Nayib Bukele introduced it, but it's unclear how much effort the administration has put into preparing the public for the law's implementation.
"It was a surprising move by bitcoin, we don't see any fundamental reasons tied up with this drop. But one possible reason could be the mass liquidation of bitcoin longs which resulted in a massive drop within few minutes. Bitcoin is currently trading above 46000$, and it will stay in the bull market as long the price stays above 43000$ on the daily timeframe.
But we can't rule out the possibility of bitcoin retesting its recent lows at 30,000$ as well. The chances for such a bearish scenario are minimal, but not of question," said Mr. Hitesh Malviya, founder, itsblockchain.
The largest cryptocurrency plunged as low as $43,050, plunging more than 10% in less than an hour after breaking past the carefully watched $50,000 threshold. The Bloomberg Galaxy Crypto Index, which monitors some of the major cryptos, has dropped as much as 19 percent, while lesser digital assets have also fallen in value. Dash and Ethereum Classic both lost around 20% of their value.
Both proponents and opponents of cryptocurrencies are keeping an eye on the experiment to determine if a large number of people want to transact with Bitcoin when it coexists with the US dollar, and if it improves the violent, impoverished Central American country.