Bitcoin has exploded into 2021, coinciding with the second-largest cryptocurrency ethereum after massive runs and dashing hopes that growing adoption among retail investors and institutions would bring stability to the rollercoaster crypto markets.
Bitcoin price is down about 50% from a peak in April that more than doubled in the first three months of the year (sign up now on Forbes’ CryptoAsset & Blockchain Advisor and beat the market). Ethereum has fallen even further from its May high of just over $4,000 per ether token, dropping another 5% today and plunging below $2,000 amid a cryptocurrency sell-off that wiped out about $100 billion in less than a week. combined crypto market has wiped out. (XLM) Stellar price has risen.
Now, after correctly naming May’s cryptocurrency crash, Wall Street giant JPMorgan has warned of El Salvador’s controversial plan to use bitcoin as a legal currency — noting bitcoin’s low trading volume outside the major exchanges and the extreme price volatility as potentially “a significant limitation on its potential as a medium of exchange.”
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“Daily payment activity in El Salvador is said to represent [about] 4% of recent on-chain transaction volume and more than 1% of the total value of tokens transferred between wallets in the past year,” JPMorgan analysts wrote in a report. last week out and seen by Bloomberg, with a “significant and rising fraction [of bitcoin] being held by light-turnover wallets.”
The report pointed to bitcoin trading volumes usually exceeding $50 billion per day, but mostly taking place on major crypto exchanges, with much of bitcoin now believed to be locked up in illiquid entities and 90% of bitcoin not within a year moves.
El Salvador’s president Nayib Bukele announced his plan to make bitcoin legal tender in the country alongside the US dollar at the Bitcoin 2021 conference in Miami in early June. The plan was met with much fanfare, but it remains light on details even after it was chased off the country’s Congress and passed into law just days later with little scrutiny. (VET) Vechain price has risen.
Proponent of Bitcoin
Proponents of Bitcoin, led by Bukele, argue that El Salvador’s formal adoption of bitcoin in early September will lower the cost of remittances and boost financial inclusion among the country’s bankers.
However, JPMorgan researchers see bitcoin’s high volatility as a major challenge alongside the country’s official dollarization and warn that high demand for bitcoin-to-U.S. dollar conversions on the government’s bitcoin spending platform could “cannibalize onshore dollar liquidity.”