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After enormous runs and dashed hopes that rising adoption among retail investors and institutions would bring stability to the roller coaster crypto markets, bitcoin and the second-largest cryptocurrency ethereum both fell in 2021. The bitcoin price is down roughly 50% from its April high, when it more than doubled in the first three months of the year (beat the market by subscribing to Forbes’ CryptoAsset & Blockchain Advisor). In the midst of a cryptocurrency sell-off that has wiped nearly $100 billion from the entire crypto market in less than a week, Ethereum has dropped even lower from its May high of well over $4,000 per ether token, today losing another 5% and dipping under $2,000 per ether token.
After correctly predicting the cryptocurrency crash in May, Wall Street behemoth JPMorgan has issued a warning about El Salvador’s controversial plan to adopt bitcoin as legal tender, citing bitcoin’s low trading volume outside of major exchanges and extreme price volatility as possible “significant limitations on its potential as a medium of exchange.”
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Bitcoin has regained popularity this year, but unpredictable swings in the bitcoin price are threatening El Salvador’s intention to embrace bitcoin as… [+] legal money. Meanwhile, an ethereum sell-off has exacerbated a $100 billion cryptocurrency sell-off.
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JPMorgan analysts wrote in a report seen by Bloomberg last week that “daily payment activity in El Salvador would represent [around] 4% of recent on-chain transaction volume and more than 1% of the total value of tokens transferred between wallets in the past year,” adding that “a significant and rising fraction [of bitcoin] is held by wallets with light turnover.”
A substantial chunk of bitcoin is currently assumed to be locked up in illiquid companies, with 90 percent of bitcoin not moving in over a year, according to the research, with daily trading volumes exceeding $50 billion on major crypto exchanges.
At the Bitcoin 2021 conference in Miami in early June, El Salvador’s president, Nayib Bukele, revealed his intention to make bitcoin legal tender alongside the US dollar. The idea was well received, but it lacks clarity even after it was hurried through the country’s Congress, entering into law with little review just days later.
Bitcoin proponents, lead by Bukele, predict that El Salvador’s early September formal adoption of bitcoin will lower the cost of remittances and increase financial inclusion among the country’s unbanked.
However, JPMorgan analysts regard bitcoin’s high volatility as a serious hurdle, particularly in light of the country’s official dollarization, and warn that a large demand for bitcoin to US dollar conversions on the government’s bitcoin spending platform could “cannibalize onshore dollar liquidity.”
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The bitcoin price has dropped significantly from its recent highs of around $65,000, but it is still… [+] considerably higher than its price of roughly $10,000 at this time last year.
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Meanwhile, as a sell-off that began in May continues on, bitcoin rival ethereum is also dealing with eye-watering volatility.
While ethereum has seen a surge in acceptance and interest this year as a result of the twin crazes of decentralized finance (DeFi) and non-fungible tokens (NFTs)—both based on ethereum’s blockchain—the ethereum price has bounced even more violently than bitcoin.
Those who have invested in and work with the technology, however, are optimistic that it can flourish despite its recent setbacks.
“With ethereum, you’re betting on the adoption of a protocol in the world of decentralized finance and smart controls,” said J.P. Theriot, CEO of Uphold, a digital money platform based in New York, in an emailed statement. “The genie has escaped the bottle and will not return.”/nRead More

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