Bitcoin becomes an official currency and crashes

Bitcoin

El Salvador’s reserves now include Bitcoin.  El Salvador bought 400 Bitcoin, approximately $20.9 million a day before it made history by becoming the first country to make Bitcoin a legal currency.  The buzz around El Salvador’s wallet app, Chivo has many Salvadorans signing up to collect their $30 worth of Bitcoin.  The early price action over the weekend helped Bitcoin make a run towards $53,000, but prices have turned negative.

Bitcoin is lower on a “buy leading up to the big event, sell the fact” reaction to El Salvador’s historic moment embracing Bitcoin.  What accentuated this moment was MicroStrategy CEO and prominent Bitcoin proponent Michael Saylor’s encouragement for cryptocurrency traders to buy $30 in BTC in solidarity with El Salvador.  Social media platforms were very cautious over the weekend that a plunge could occur following El Salvador’s big day.

New interest from Steph Curry, one of the greatest NBA shooters of all time shows interest is still brewing in the cryptoverse, but we could be at a tentative euphoria stage, which means volatility could swing in either direction.

Extreme froth in the NFT market is also another red flag for the entire crypto space.  NFTs are here to stay, but this second round of explosive growth will draw some hesitancy that these surging valuations will hold.

Bitcoin crashed early in New York to $43,109 but has rebounded back towards $46,800.

Bitcoin’s fundamentals remain intact, as prices iron out a new trading range between the $46,000 and $53,000 levels.   Until the Fed releases its paper on digital currencies, Bitcoin will likely remain rangebound.

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya