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Why are Prices of Bitcoin and Other Cryptocurrencies Crashing

El Salvador shifted to the first country in the world to adopt bitcoin as legal money on Tuesday.
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El Salvador shifted to the first country in the world to adopt bitcoin as legal money on Tuesday, despite considerable internal skepticism and international warnings about consumer hazards. 

Why are prices of Bitcoin and other cryptocurrencies Crashing

Bitcoin prices fell by more than 17%, from more than $52,000 per coin to $42,000, before regaining about half of that loss after El Salvador became the first government to recognize Bitcoin as legal money on Tuesday. However, the deployment hit a snag in the early hours, with El Salvador President Nayib Bukele claiming that the digital wallet used for transactions was not operational.

The selloff on Tuesday is the most major hiccup in the rally that has raised Bitcoin over 75 percent since late July. According to tracker CoinGecko, the overall cryptocurrency market value has dropped by roughly $300 billion in the last 24 hours.


Bitcoin prices today were about $46,757, down 11% from the previous day, indicating a slight rebound for the world's largest cryptocurrency. Meanwhile, other digital currencies followed suit, with ether falling over 11% to $3,471 and dogecoin and Cardano falling 15% and 12% to $0.26 and $2.5, respectively. Stellar, XRP, and Uniswap have dropped by 15-20% in the previous 24 hours.

"Over the weekend, social media platforms were quite wary that a drop may occur following El Salvador's huge day," Edward Moya, senior market analyst at Oanda Corp., wrote in a note, as cited by Bloomberg. Some investors most likely bought in anticipation of the country enacting its Bitcoin law on September. 7 and then went on to "sell the reality, "He stated.

Experts believe bitcoin is still in a bull market as long as the price remains over $43,000.

Billionaire Mike Novogratz, CEO of Galaxy Digital Holdings and a long-time cryptocurrency bull, told Bloomberg that the market for digital currencies had become overheated in the last eight weeks. He claims that individual investor interest has risen due to major institutions coming on board the cryptocurrency bandwagon.


Author David Gerard of "Attack of the 50 Foot Blockchain," "According to the Associated Press, Tuesday's Bitcoin volatility had little to do with El Salvador. "My initial thought was shenanigans since it's always shenanigans," Gerard told the Associated Press in an email.


"Bitcoin doesn't respond to market forces or regulatory pronouncements," Gerard explained. "That kind of pricing trend, where it collapses massively in minutes and then rises again, is generally one of the major guys frying the margin traders." According to Gerard, because Bitcoin is so sparsely traded, it may have been a significant holding making a massive transaction to get cash, putting the market on a wild ride.

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