El Salvador Adopts Bitcoin as Legal Tender, BTC Price Sky Rockets But Didn't Last For Long

El Salvador Adopts Bitcoin as Legal Tender, BTC Price Sky Rockets but Didn't Last For Long
El Salvador is the first country to adopt Bitcoin or any cryptocurrency as an official currency. Laws state that the crytpo can be used to purchase goods as well as pay for taxes. Salvadorans can use the app "Chivo Wallet" to perform these transactions. Photo : MARVIN RECINOS/AFP via Getty Images

The country of El Salvador becomes the first to adopt Bitcoin as an official currency. The largest cryptocurrency in the market skyrocketed after the news. However, BTC price later plunged, making it one of the most volatile days in istory since the crackdown on China Bitcoin mining earlier this year.

Bitcoin Legal Tender in El Salvador

In the South American country of El Salvador, President Nayid Bukele announced on Monday, September 6, that that the country was about to "make history" in a Tweet, The Verge reported.

The formal adoption of Bitcoin was sealed with a purchase of another 200 BTC, the country now holding 400 bitcoins worth close to $21 million, CNN said.

According to the law designating BTC as a legal tender, all "economic agents" shall accept the crypto as a form of payment and that tax payment can be made with BTC as well. Shops will display prices in both fiat currency and digital currency.

The government created the app "Chivo Wallet" for Salvadorans to use. A total of $30 worth of BTC will be delivered to people who promote its use. Digital finance company Strike worked with El Salvador to create the infrastructure to support the crypto transactions.

Both Bitcoin and the US dollar are acknowledged as legal tenders in El Salvador.

Reception of the the new technology for the economy has been mixed. Some find the Bitcoin transactions to be easy while others still prefer to payments to be made in cash. The adoption of Bitcoin has raised concern, especially with the volatile nature of the cryptocurrency and its market. Some think that the historical volatility could harm Salvadorans and risk economic stability, The Verge said.

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Bitcoin Prices Sky Rockets But Also Plummets

The news of El Salvador's tie with Bitcoin helped propel the cryptocurrency to reach the high of $52,960, making investors hopeful for a steady climb back to its established value. Experts said it is crucial for BTC to maintain at least on the $50,000 floor price for there to be any positive momentum, CoinTelegraph reported.

On Tuesday the same day it reached its almost four-month high, the dip in prices brought BTC down to $43,000. The devastating plunge was due to a large volume of sell-off of the cryptocurrency.

The insatiable nature of cryptocurrency has always been the point of contention for many experts and analysts. The independent and anonymous nature of cryptocurrencies as they stand alone in their respective blockchains is also a concern as this does not provide any accountability or structure in place to mitigate any volatile fluctuations in prices. Even Mark Cuban, the multimillionaire owner of the Dallas Mavericks, saw the need for better regulations of the cryptocurrency market after a round of erratic activity from the market lead to significant losses.

At the time of writing, Bitcoin has been able to recover slightly at $46,964. Back in April, BTC was able to hit a record high of $65,000. Notable financial figures and celebrities have shown support for Bitcoin and other cryptocurrencies recently. Despite being quite popular, it still has a long way to go before being completely accepted and integrated into the global economy.

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