El Salvador's Bitcoin Experiment Off To Rocky Start

Cryptocurrencies plunged on Monday as the rally in prices stalled below the highs from earlier in the year. Bitcoin was last trading at $47,320, down 8.8%, while ether traded at $3,525, a decline of 10.5%.

Both cryptocurrencies surged over the past seven weeks, partially recovering their massive losses from May and June. But the recovery rally seems to have petered out below the all-time highs.

For instance, bitcoin peaked at nearly $65,000 in April, but only made it up to $53,000 on Monday. Ether topped out at more than $4,300 in May, but fell just shy of that level on Monday, reaching around $4,000.

Bitcoin

Ether

El Salvador News Not Helping

For bitcoin, news that the cryptocurrency had officially become legal tender in El Salvador did little to stem the selling. The country—the first to adopt a cryptocurrency as an official currency—now has two forms of legal tender: bitcoin and the U.S. dollar.

El Salvador’s president, Nayib Bukele, tweeted that the country had purchased 350 bitcoins over the past two days, bringing its total holdings up to 550 coins.
 

Volatility Hanging Around

While a significant milestone, the news of bitcoin becoming legal tender in El Salvador wasn’t a surprise, as the law to make it so had passed three months ago. El Salvador is also a small country, with GDP of around $25 billion.

Today’s drop in crypto prices seems to be a routine occurrence in a highly speculative market. Over the past few months, there has been a mania in parts of the crypto ecosystem, particularly in nonfungible tokens, which has driven up the price of cryptocurrencies native to smart contract platforms like Ethereum and Solana.

The latter has been one of the most outstanding performers recently. The Solana token rocketed higher from around $25 in July to $185 on Monday, bringing its market cap above $50 billion for the first time. That compares to a market cap of more than $400 billion for ether.

Email Sumit Roy at [email protected] or follow him on Twitter @sumitroy2