The country’s adoption of BTC as legal tender wasn’t enough to keep the cryptocurrency near $50K in September.
El Salvador buys in
In June, El Salvador President Nayib Bukele, announced that bitcoin would become legal tender, making his country the first to make that move, which also meant no capital gains taxes for bitcoin holders there.
Bitcoin rose about 70% from a low of around $30,000 toward a high of nearly $50,000 in early September as traders reacted to the news from El Salvador – seen by many fans of the 12-year-old digital asset as a long-awaited validation of its potential to serve a global currency. El Salvador’s bitcoin’s law went into effect in September.
When the law actually took effect, bitcoin’s price began to sell off – a classic “buy-the-rumour, sell-the-fact” scenario. (A similar thing had happened earlier in the year when the big cryptocurrency exchange Coinbase held its direct stock listing on the Nasdaq exchange.)
Bukele tweeted that El Salvador was ready to buy on price dips even as BTC continued to fall. A growing number of users on social media platforms, including Twitter and Reddit, called for people to buy small amounts of bitcoin in support of El Salvador’s bitcoin policy, Bloomberg reported. Many investors were already betting the news could give the oldest cryptocurrency a price boost.
On Sept. 13, software company MicroStrategy purchased an additional 5,050 BTC for about $242 million in cash. Still, BTC continued lower.
BTC declined from $50,000 to $40,000 and ended September on a down note.
Concerns were growing over a possible credit default by the Chinese property developer Evergrande Group, shaking speculative assets including equities and cryptocurrencies; lower risk appetite among investors also contributed to bitcoin’s September slump.
The takeaway for crypto traders from the July-August price action was that El Salvador’s decision to make BTC legal tender wouldn’t be enough to keep the cryptocurrency’s price elevated at $50,000. Bitcoin’s correlation with stocks increased along with the credit concerns in China.
Still, the nearly 7% BTC drop in September looked far less severe than the 50% price crash in April and May. After some ups and downs, bitcoin’s price had again stabilized at well above 2020 levels as some traders began to anticipate a $100,000 BTC price by year-end.
Bitcoin (BTC): $47,239, -1.0%
Ether (ETH): $3,7234, -2.5%
S&P 500: +0.1%
Gold: $1,805, -0.3%
10-year Treasury yield closed at 1.553%, up 0.07 percentage point.