El Salvador's First Day of Adopting Bitcoin, Why Did the Price Fall?

On Monday, September 6, 2021, El Salvador officially adopted bitcoin as a legal tender in the country.

Thus, businesses will be required to accept bitcoins as payment for goods and services.

To support this policy, the government has installed 200 bitcoin ATMs all over El Salvador.

The government has also purchased 400 bitcoins worth about $20 million, and is providing a $30 bitcoin airdrop for every El Salvadoran who signs up.

On social media, some traders said they would buy $30 worth of bitcoins in local fiat currency to support this policy.

However, on the same day as the adoption of bitcoin by the government of El Salvador, the price of bitcoin actually fell from $52K to $44K.

Leah Wald, CEO at Valkyrie Investments explained that the El Salvador government's new policy has little effect on bitcoin price movements.

Here are some reasons:

El Salvador's population is small, that is, less than New York City.
Most of El Salvador's population lives in poverty.
And do not have internet or smartphone access required to participate in the bitcoin network.
Announcements regarding this policy are not very detailed.
People are still unclear on how this will be implemented.
There are still many other constraints such as transaction fees, processing time, etc.

Thus, El Salvador's new policy has not been able to significantly affect the price of bitcoin.

The story might be different if other neighboring countries also followed in El Salvador's footsteps to adopt bitcoin.

Together these will be the decisive factors to inflate the price of bitcoin to go to moon.