Bitcoin shaky on debut what comes next?

A milestone overnight as Bitcoin officially became legal tender in El Salvador.

Crypto 2

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. 

Bitcoin Daily Chart

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

More from Bitcoin

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account