Charting Bitcoin, Ethereum and Dogecoin Volatility
The prices of major cryptocurrencies – Bitcoin, Ethereum, and Dogecoin fell on Tuesday morning after hitting new highs on Monday. Bitcoin dropped roughly 11% while Ethereum and Dogecoin fell roughly 12% and 18%, respectively.
On Monday, crypto tokens were trading at their highest level since May, with bitcoin up 20% in the past month to more than $50,000, and Ethereum up 40% to more than $3,900.
But Crypto prices tend to ping pong around on the latest speculation, and the recent rise and fall were attributed to the decision by El Salvador to implement Bitcoin as a national currency. That decision turned into a crash course in crypto volatility. The currency’s price dropped by an unexpected 17% in mid-morning yesterday, wiping out $400 billion in minutes—at the time of writing, it’s just above $46,300.
Charting Bitcoin, Ethereum, and Dogecoin Prices
On Tuesday morning, Bitcoin hit its highest price level since May at $52,000. Ethereum had traded close to $4,000 on Monday night, while Dogecoin at one point hit over $0.31 per token.
But after hitting local highs north of $52,800 on Monday, Bitcoin’s price plunged to $42,900 in Tuesday trading, according to Cointelegraph Markets Pro. Peak to trough, the flagship cryptocurrency plunged nearly 19% over the previous 24 hours. Ethereum and Dogecoin fell roughly 12% and 18%, respectively.
El Salvador makes Bitcoin legal tender
The price drops came as El Salvador adopted Bitcoin as legal tender, making it the first country to make Bitcoin a national currency. The adoption means that citizens in the country can choose to use Bitcoin as payment and businesses must accept it in exchange for goods and services. In addition, citizens will be able to pay taxes in Bitcoin, Bitcoin exchanges will not be subject to capital gains taxes, and the price of Bitcoin will be tied to the dollar exchange rate. In preparation for the new law, the El Salvador government had purchased roughly $20 million in Bitcoin and installed 200 Bitcoin ATMs across the country. Government-run Bitcoin wallets will be loaded with $30 worth of Bitcoin for citizens who register. Reuters reported that the El Salvador government “had to unplug a digital wallet to cope with demand,” as citizens register for the wallets.
El Salvadoran President Nayib Bukele confirmed that his government bought the dip by snatching up 150 BTC during the depths of the selloff. As Cointelegraph reported, El Salvador made its first BTC purchase Monday on the eve of the Bitcoin Law coming into effect. The initial purchase of 200 BTC was valued at roughly $10.4 million.
Analysts believe the crash was inevitable, as the news surrounding El Salvador has already been priced in.
El Salvador first announced it will make Bitcoin legal tender a couple of months ago. Back then, the announcement did not have big of an impact on price as some may have expected, possibly because of El Salvador’s small population which is less than New York City’s. The announcement was also light on the details, and it was not clear how it will be implemented.
Transaction fees, processing times, and other hurdles make the adoption feel more like a beta test than a solution to many of the problems plaguing the country’s poor.
But if other Latin American countries begin accepting Bitcoin as legal tender, that could result in a “parabolic” move higher in crypto prices. Many experts believe Latin America could be ripe for adopting cryptocurrencies to help improve money transmission and for central banks that already deal with volatile currencies.
Other factors that led to recent volatility
Volatility is nothing new for the cryptocurrency market. The collective market capitalization of all coins was cut in half between May and July as a combination of technical trading, profit-taking and fear-inducing headlines dragged Bitcoin from a high near $65,000 back down to $29,000. The market has staged an impressive recovery over the past month, with Bitcoin reclaiming $50,000, Ether (ETH) hitting $4,000, and the total market cap climbing back above $2.4 trillion.
Other factors that excited the Bitcoin bulls include, a recent announcement by a Facebook executive that the social network could provide support for NFTs on its digital wallet, news that Crypto miners are powering back up after getting banned in China, and Elon Musk’s tweet that he owns bitcoin and some other digital assets and would like them to flourish.