Bitcoin shaky on debut what comes next?
Tony Sycamore September 8, 2021 12:35 PM
A milestone overnight as Bitcoin officially became legal tender in El Salvador.
If day one is anything to go by, other countries who might have been considering treading the same path may now be having second thoughts as Bitcoin plunged due to a technical issue that forced the government to disconnect its digital wallet.
The adoption of Bitcoin is the brainchild of President Nayib Bukele and designed to draw more of the nation's impoverished citizens into the financial system and to make it cheaper to send remittances.
Facilitating its role as legal tender in El Salvador, 200 Bitcoin ATMs have been installed around the country to facilitate the exchange of Bitcoin for U.S. dollars. Furthermore, citizens are now able to pay for goods and services and pay their taxes in Bitcoin. All nice in theory.
However, today's debut also reinforces the argument that Bitcoin is not "money." Money, amongst other things, should be a reliable store of value without excessive volatility.
If a 17% overnight fall in Bitcoin isn't enough to reinforce the volatility inherent in the most prominent cryptocurrency, then perhaps Bitcoins 50% fall from its Aprils $64,895 high provides a better example. Should a fall of a similar magnitude occur today, it would halve the purchasing power and the wealth of El Salvador's citizens fully invested in Bitcoin.
The volatility that works against the idea of Bitcoin's widespread adoption as legal tender draws investors and traders to the space alike. Bitcoins daily close back above the 200 day moving average at $46,000 should settle frayed nerves along with the observation it held above the band of support, formerly resistance between $42,000 and $40,000.
Providing Bitcoin continues to hold above the support levels noted above, the bias is that Bitcoin has seen a short-term position flush/low and that after the dust settles, a recovery can begin.
However, if Bitcoin were to break and close below $40,000, it would likely suggest a deeper correction is underway.
Source Tradingview. The figures stated areas of September 8, 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
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