Bitcoin Adopted by El Salvador: Cryptocurrency Fans Thrilled, Market Fearless

The adoption of Bitcoin as legal tender by El Salvador, the first in the world, has delighted many cryptocurrency enthusiasts for whom a historic milestone has been reached, even if it did not give new impetus during the recently flawed Bitcoin.

El Salvador’s parliament on Wednesday approved a law that should ultimately allow the use of bitcoins in many aspects of daily life, from buying real estate to tax deductions.

This is the first time that a highly volatile decentralized cryptocurrency has been recognized as a currency, while, on the contrary, many regulators in Europe, China or North America are arming against this market, which has surged in recent months.

“Larger and more powerful countries are trying to resist the inevitable movement towards limitless, global and digital currencies, but this small Central American country has adopted the largest of them,” says Nigel Green, boss of financial consulting firm deVere. …

It is only logical, he said, that countries such as El Salvador, which use their own currency, as well as the dollar as their official currency, are interested in an unrestricted alternative.

Indeed, Paraguayan MP Carlos Reiala Helman said on Twitter that his country should soon make an “announcement” on cryptocurrencies.

Like the President of El Salvador, he edited his profile picture to replace his eyes with laser beams, a sign of recognition among Bitcoin fans, symbolizing their drive for higher prices.

– Boring market –

“As the number of users grows, especially among the youngest and the less affluent, this could lead to a softening of the rules in the long term,” explains Charlie Erit, manager of cryptoassets by ByteTree to AFP.

More moderately than other cryptocurrency professionals, he speaks of “a small step in the right direction.”

In fact, the cryptocurrency market remains in a small form. Bitcoin is up 4.2% on Wednesday to over $ 35,000, recovering from close to $ 30,000 the day before, but the price is down 46% from its all-time high reached in mid-April at 64 870 dollars.

Why didn’t El Salvador’s announcement drive prices up when its gains in late 2020 and early 2021 were fueled by consistent announcements of decision-making by increasingly respectable financial firms?

“The effect of the announcement may have caused skepticism among investors. As Elon Musk has shown, if they change their minds, the backlash can be harsh, ”said Erit.

The head of carmaker Tesla regularly praised cryptocurrencies on his Twitter account in the first quarter, and his company announced that it accepts bitcoins as a form of payment and is also investing some of its money in cryptocurrency.

But since then, the capricious billionaire has changed his tone and is now swinging between support and criticism, which tends to exacerbate price volatility.

-Sino-American Problems-

But above all, “there is a risk that El Salvador will become an island in the global ocean of cryptocurrency skepticism,” fears Suzanne Streeter, financial analyst at Hargreaves Lansdown.

“Cryptocurrency transactions have already been banned in China and Beijing’s latest target is social media, with the suspension of several cryptocurrency accounts on Weibo,” she told AFP.

And in the United States, authorities announced earlier this week that they were able to confiscate some of the $ 4.4 million ransom paid in bitcoin following the Colonial Pipeline hack that damaged a critical pipeline for the American oil system.

“The buzz surrounding this ransom and seizure reinforces the idea that one of the main uses of cryptocurrencies is criminal,” the analyst adds.

“Known as a bitcoin paradise, a country already facing corruption allegations risks attracting inappropriate investments from criminal gangs seeking anonymity,” she concludes.

Back to top button