When people heard the small Central American country El Salvador was about to be the first country to make Bitcoin (BTC) a legalized currency, they were skeptical. Prior to the currency’s adoption, the government was warned that doing so could be risky due to the asset’s volatility.
Well, Tuesday was the big day for El Salvador as Bitcoin became legal tender and it’s been a rocky start. Ratings agency Moody’s downgraded the country’s debt rating while the country’s state-run Bitcoin wallet for citizens to use experienced technical problems. What’s more, as a promise to give all citizens free $30 in Bitcoin, the government bought 550 BTC in preparation. The markets don’t care for launch days, though, and especially Bitcoin markets as the currency dropped by 17% on El Salvador’s big day – ultimately hitting below $43k.
why it matters
It’s unclear whether the drop had anything to do with El Salvador, but the currency you just legalized experiencing unexpected volatility in its first few hours isn’t really a big confidence boost. Seems that Bitcoin’s volatility makes it a risky currency to use for daily transactions.