Bitcoin and El Salvador
How El Salvador making Bitcoin a legal tender will be a game changer.
Today, August 3rd, 2021, we are seeing a crypto market that is trading sideways. After ending the month of July of 2021 with 9 consecutive days on the rise, we see little movement (around 4%) in crypto prices. Most of the time we experience a positive movement after the sideways trading effect, most of the times after a sqeeze in tradign like this, whales and institutional investors see it as an opportunity to gather and enter the market more aggressively.
Check this paragraph From nasdaq.com - Over $1 billion worth of crypto short positions were liquidated in a 24-hour span amid Bitcoin's rally over $40,000 this week.
According to Bybt, more than 887,000 derivatives traders liquidated positions valued over $1 billion, with 92% of the liquidated positions being short. While investors who had placed long bets on the cryptocurrency saw massive gains, the instant price action also left short sellers with one of the largest total magnitudes of losses in dollar terms.
On Binance, the spread between Bitcoin futures and the spot price reached $8,000. The BTC/Tether perpetual futures contract surged to $48,000 from $38,000 on Sunday.
The price of Bitcoin in the following weeks depends on many variables such as the strength of the economy, the sentiment of the assets at stake, liquidity, and in the case of cryptocurrencies, regulation. Another factor to consider is the strength and reliability of the miners who have had to leave China due to this nation’s regulations and settle in neighboring countries to continue their operations.
We deeply believe that the industry will change a lot as of this September 7th, starting that day, El Salvador will make Bitcoin a legal tender in this Central American nation. Bitcoin will start circulating like the Dollar, the official currency of El Salvador since 1992. El Salvador is by far the pioneer country in this regard, no other nation has opened its financial doors for Bitcoin in the way that El Salvador has. Bitcoin will be accepted in banks, all kinds of businesses, and even in government institutions. Something never seen before !!!
The whole world will be paying close attention to the economic health of this Spanish speaking nation and we will be monitoring what is happening day by day in El Salvador. Accepting a crypto currency as a national currency and as completely legal tender in an entire nation, sends a strong message to the rest of the world that this government trusts the crypto industry despite its volatility, and despite the regulations that other nations have imposed on the market. And despite the fact that many people (and institutions) do not fully understand it, nor wish to engage with it.
At the same time, this is an experiment in a country that, for historical reasons, have had to accept different types of FIAT currencies controlled by different countries in order to operate, but in general this foreign FIAT adoption has never worked for them in the way that the government and local banks have hoped. Welcome to a new beginning!!!
Another important facet of this financial decision is the impact that it will have on the remittance market. In 2019 $1.5 billion of dollars in BTC were sent as remittances globally. In 2020 this figure doubled to $3 billion. It is much easier and faster to send cryptocurrencies to our loved ones and friends than it is to send regular money. This can be great news to Bitcoin ATM operators as well. By using cryptocurrencies we bypass several intermediaries who charge fees for sending and take several days to deliver. El Salvador is one of the countries that receives one of the highest amounts of money in remittances in the world and turning Bitcoin into a completely open currency to circulate at the national level could create a massive increase in the remittance market in El Salvador and other countries.
We will keep you informed.