First Day of Bitcoin in El Salvador, the Ups and Downs

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Some residents of El Salvador have experienced tumultuous times today as the country officially instated bitcoin as legal tender, but it’s not all bad news.

El Salvador became the first country in the world to accept Bitcoin as legal tender on Sept 7 — an event that made the news across the globe.

The move represents a milestone for the fledgling digital currency as it has finally become what it was intended by anonymous creator Satoshi Nakamoto a decade ago — decentralized money.

Not all Salvadorians were in agreement, however, as the day was marred by a number of technical glitches.

Technical problems on Bitcoin’s opening day

President Nayib Bukele’s grand vision of distancing from the U.S. dollar and adopting a second currency got off to a bumpy start. Tech giants such as Apple and Huawei saw servers overwhelmed with registrations for the government’s Chivo wallet according to the BBC.

The day marked the first time that a McDonald’s restaurant and a Starbucks accepted payments in bitcoin and Chivo started popping up across the Central American country.

The government-backed wallet accepts payments in BTC and USD so there is still a choice, though merchants must offer the ability to pay in bitcoin which some are not happy about.

Speaking to the BBC, Ed Hernandez who runs a family grocery shop in San Salvador said “during the pandemic, it will be nice not to use physical cash,” adding that it protects him against counterfeit banknotes.

Twitter user Jack Mallers demonstrated a transaction to his 164,000 followers, sending some BTC from the U.S. to a friend in El Salvador.

“My friend was then able to cash out at one of the many chivo wallet ATMs, walking away with cold hard cash.
Did he need a bank account? Nope.
Did we need WesternUnion? Nope.
Did he need to use a specific wallet or get specific permissions? Nope.
Were there fees? Nope.”

The biggest problem came when the markets did what they often do — flash crash. Opposition politician Johnny Wright Sol said that it was a very bad day for President Bukele, his government, and his Bitcoin experiment as the asset took a tumble.

Futures driven market crash

Events in El Salvador yesterday were not related to the market flash crash, though it was very unfortunate timing. A liquidation of over-leveraged futures contracts appears to have been the cause according to CryptoQuant analysts. A similar scenario happened in late May.

At the time of press, BTC has bounced back slightly above the $46,000 mark but is still down by 1.4% from the daily open. President Bukele was not worried, claiming to have bought the dip, adding a further 150 BTC to the total stash which is now 550 BTC.

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Martin has been covering the latest developments on cyber security and infotech for two decades. He has previous trading experience and has been actively covering the blockchain and crypto industry since 2017.

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