Bitcoin price: Why cryptocurrency dropped nearly 10 per cent

The price of bitcoin has crashed as the crypto became official legal tender in El Salvador, dipping below the critical $50,000 mark.

The price of bitcoin has plunged in minutes, wiping billions of dollars off the market.

The volatile cryptocurrency dropped from (USD) $50,257 to $43,351, before recovering some ground.

At 6am this morning it was trading at $47,048, having given up 9.11% in the past 24 hours.

The massive price crash came as El Salvador became the first country to introduce bitcoin as legal tender.

The price of bitcoin crashed overnight.

Other cryptos including ethereum have also suffered heavy losses.

“Horrible, horrible chart damage being done in $BTC and the rest of the #crypto market,” crypto trader and author Glen Goodman wrote on Twitter.

Trader and analyst Scott Melker blamed large-volume traders for bitcoin’s plunge.

“Leave it to whales to dump Bitcoin on the day that El Salvador makes it legal tender,” he wrote.

Horrible horrible chart damage being done in $BTC and the rest of the #crypto market. #Bitcoin just bounced cleanly off the previous resistance line. Is this a retest of that line or the start of something much worse? I hope everyone has set stops.... pic.twitter.com/EUGaSj3Y3d

— Glen Goodman (@glengoodman) September 7, 2021

Economist Peter Schiff wrote: “Welcome to #Bitcoin #ElSalvador.

“Your national ‘currency’ just lost over 15% of its purchasing power in under an hour. Get used to it. Just another perfectly orchestrated pump-and-dump by the Bitcoin whales. Too bad this time they had to sacrifice an entire nation to pull it off.”

The plunge wiped billions off the overall market, which is worth about $2.35 trillion.

El Salvador’s President Nayib Bukele, wrote he would be “buying the dip.”

Buying the dip 😉

150 new coins added.#BitcoinDay#BTC🇸🇻

— Nayib Bukele 🇸🇻 (@nayibbukele) September 7, 2021

The plunge was also caused by centralised exchanges liquidating more than $3 billion in long positions.

Liquidations often happen when trades cannot fulfill margin requirements for holding long or short positions, which can exacerbate market drops.

It “looks like it was a standard de-leveraging event,” Rahul Rai from crypto investment firm BlockTower Capital told CoinDesk.

Bitcoin becomes legal tender in El Salvador

Salvadoran consumers can now legally use bitcoin — along with the US dollar which has been the official currency for two decades — to pay for any good or service.

A woman protests against the circulation of Bitcoin in San Salvador on September 7. Picture: AFP

The rollout has been met by much scepticism and fear over the effect of currency volatility on the small Central American country’s ailing economy, and hundreds have taken part in anti-bitcoin protests.

Remittances account for a fifth of El Salvador’s GDP — over $5.9 billion in 2020 — and are vital to revive an economy that contracted 7.9 per cent in 2020 due in large part to the coronavirus pandemic.

Thousands of Salvadorans were already using bitcoin before Tuesday — many of them in the coastal town of El Zonte, where hundreds of businesses and individuals rely on the cyber currency for everything from paying utilities bills to buying a can of soft drink.

Mike Petersen, director of the El Zonte Bitcoin Beach project, said the cryptocurrency had changed the lives of locals.

“They are now able to do online payments, they are able to send money back and forth with family members even hundreds of miles away,” he said.

- with AFP