Sep 8, 2021 - Economy

El Salvador's bitcoin experiment has rocky start after sell-off

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

It was a rocky start: Bitcoin suffered a disorderly sell-off on Tuesday, alongside most other cryptocurrencies, to mark the day on which it officially became legal tender in El Salvador, along with the more widely accepted U.S. dollar.

Why it matters: While a 17% daily swing is far from unprecedented for bitcoin, it's not the kind of thing most citizens want from their currencies. Neither is having a payments mechanism that can be unplugged by the government at will.

Between the lines: Chivo, the app that El Salvador developed for its citizens to transact in bitcoin, was unavailable for much of the day; President Nayib Bukele said the government had "temporarily unplugged it" in order to deal with demand, per Reuters.

  • While broad-based bitcoin adoption is still a distant pipe dream in El Salvador, the government has already spent some $25 million on buying up 550 bitcoin.

Go deeper: Felix explained in June why this move could be great for criminal enterprises.

  • Meanwhile, the Guardian's Sophie Elmhirst has a rollicking read about the implosion of a different crypto-fueled pipe dream, this one involving an 800-foot cruise ship designed by Renzo Piano.
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