Bitcoin plunges below $43,000 as El Salvador makes it legal tender

abdelaziz Fathi

Bitcoin price plunged 17 percent to near $42,000 at one point on Tuesday, triggering a major sell-off in the cryptocurrency markets that followed a massive bull run earlier this week. The cryptocurrency hasn’t traded at those levels since early August.

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Major crypto exchanges, including Coinbase and Kraken, experienced outages as a result of the selloff.

The world’s largest, and most recognized, cryptocurrency hit as low as $42.900 as the selling intensified afternoon before paring some of those losses. Bitcoin rebounded as the day went on, now trading back above $46,500 at the time of writing.

The sharp drop means bitcoin had temporarily erased all its gains following El Salvador’s announcement that it will be the first country in the world to make the cryptocurrency legal tender.

Bitcoin prices jumped earlier today to a peak of $52,900 after El Salvador’s President Nayib Bukele said that his country held 550 bitcoins. The Central American nation has kicked off a radical monetary experiment that could see other countries follow suit and adopt bitcoin as a national currency.

In preparation for the major event, El Salvador’s parliament voted to establish a $150-million fund to facilitate conversions from bitcoin to US dollars.

Other cryptocurrencies also had substantially larger losses earlier in the session. Ether, which powers the Ethereum blockchain, was down more than 12% at $3,447.38 per unit, according to industry data aggregator Coinmarketcap.

Today’s free fall is the worst since China announced fresh plans to crack down on the cryptocurrency industry within its borders. At the end of June, a broad crypto crash wiped out about $1 trillion in market value after Beijing authorities ordered a halt to mining operations across various provinces.

China’s crackdown came in part to boost a state-backed initiative to launch a digital version of the yuan, which authorities are piloting on a limited scale so they can keep money flows under their strict oversight.

Alongside bitcoin’s fall, shares in payments company Square and intelligence firm MicroStrategy were trading down. Square, founded and run by Twitter CEO, posted $45 million in bitcoin-related impairment losses as a result of the cryptocurrency’s massive crash in the second quarter.

MicroStrategy, Bitcoin’s largest corporate investor, also posted a $424.8 million impairment loss on its crypto investment for the Q2 2021, during which the cryptocurrency’s prices plummeted more 40 percent.

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