by Bogdan Giulvezan
After a few weeks of recovery and bullish action, Bitcoin and the entire crypto market went through a flash crash. The apparent reason: Bitcoin’s bumpy rollout as legal tender in El Salvador. According to CoinMarketCap, the crypto market wiped out about $330 billion in just 2 hours, dropping to a total market cap of $1.95 trillion.
Soon after the crash, the market recovered about $170 billion but Bitcoin dropped from approximately $52,000 to just below $43,000 and is currently trading at $46,000, thus it still has ways to go until it can patch the gap.
Bitcoin’s historic rollout in El Salvador was accompanied by technical glitches and public protests by skeptical citizens. At the start of the rollout, El Salvador’s President Nayib Bukele complained about the unavailability of the government-backed Bitcoin app/wallet on multiple platforms such as Apple or Huawei. After Bukele’s intervention via Twitter, the Chivo app/wallet was made available on most platforms but unfortunately, it underperformed and was soon unplugged by the government to add more servers to maximize capacity.
Despite the bumpy start, financial institutions in El Salvador are trying hard to comply with the new status quo. Bancoagricola, the largest bank in the country, is among the first to offer Bitcoin-friendly technology solutions and to adapt its infrastructure for Bitcoin adoption, thanks to a partnership with digital payments firm Flexa.
According to Carlos Mauricio Novoa, COO of Bancoagrícola, “We are excited to be the first financial institution in El Salvador to enable bitcoin access for our customers across our entire suite of financial products and to enhance financial inclusion”. The bank will support Bitcoin loans, credit cards, and other services, but it also means that Salvadorans will have Bitcoin-to-fiat compatibility even if they don’t use the government’s wallet Chivo.
Technical Outlook – BTC/USD
The massive drop certainly destroyed any hopes for the flagship cryptocurrency to stabilize above the key $50,000 level, at least for the time being. However, there are some positives in all of this: the initial drop halted at the confluence zone created by $45,000 and the 50 days Moving Average, which shows that we are dealing with strong support there.
Some market participants may see the current price as a discount. According to President Bukele (via Twitter), El Salvador bought 150 Bitcoins after the crash and it’s likely that more institutional investors will take a similar course of action.
However, for the last 3 days, Bitcoin has been stagnant, hovering very close to the support at $45K and this behaviour is likely to come to an end sooner rather than later. Despite the latest mishap, BTC is still on a bullish path and is showing rejection at $45K, which increases the probability of a new test of $50K during the next week. Of course, a break of $45K support would invalidate this scenario.