Bitcoin steady as Reddit traders plan to buy en masse to mark El Salvador adoption

Starting 7 September, all businesses in El Salvador must accept payments in Bitcoin, except those lacking the technology to do so. Photo: AP
Starting 7 September, all businesses in El Salvador must accept payments in Bitcoin, except those lacking the technology to do so. Photo: AP

Bitcoin’s (BTC-USD) price hovered above the $50,000 (£36,184) mark on Tuesday morning as El Salvador becomes the first country in the world to make the cryptocurrency legal tender.

A growing movement online is calling for people to buy small amounts of bitcoin in support of El Salvador’s move but it did not manage to make a dent in the price.

The crypto ticked 0.7% lower, trading at $51,071. Earlier in the morning it had gone up to $52,853.

Users on platforms such as Twitter and Reddit discussed plans to each buy $30 worth of Bitcoin en masse on 7 September.

"Attempts to pump up the price of Bitcoin to celebrate its adoption as legal tender in El Salvador have fallen flat with the cryptocurrency deflating in value slightly over the past 24 hours," said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

The CEO of MicroStrategy (MSTR), one of the first publicly traded companies to invest significant treasury assets in bitcoin, Michael Saylor, was part of the online movement.

Some Reddit users even suggested that if all 3,316,862 community members were to buy $30 of bitcoin each on Thursday, $99,505,860 would be added to the cryptocurrency.

The amount of $30 appears to be linked to the El Salvador government digital wallet known as the "Chivo wallet."

The government has created a $150m fund to finance the conversion between bitcoin and US dollars. Citizens who download Chivo and link it to their ID number will receive $30 in Bitcoin for free.

This is meant to kickstart the use of the cryptocurrency.

The government has said it "will promote the necessary training and mechanisms so that the population can access transactions in bitcoin."

Bitcoin ticked lower on Tuesday morning. Chart: Yahoo Finance UK
Bitcoin ticked lower on Tuesday morning. Chart: Yahoo Finance UK

Bitcoin is still up by 65% since 20 July when it began its most recent climb, after losing more than half its value, after reaching a high of over $63,000 in April.

"It’s this volatility that has made many in El Salvador less than optimistic about the currency’s adoption. It is a huge gamble for the country’s payment system given that making transactions in the currency when the future price is so uncertain is risky," said Streeter.

Meanwhile deVere group CEO Nigel Green said El Salvador has made history, and other nations will soon follow suit.

"El Salvador is making history with a bold jump into the future of money... other countries, in particular other Central and South American nations, will be watching with great interest to see if the experiment works to shore up El Salvador’s shaky economy,” he said.

But he added that there are major risks attached to the decision made by the young president, Nayib Bukele.

Read more: Bitcoin becomes legal tender in El Salvador amid suspicion and protest

“These include that there is a possibility that El Salvador could run out of dollars and that institutions, such as the IMF, might not look favourably on a nation that has adopted bitcoin.”

Last week, media reports showed that protests around the move are growing amid fears that the government is moving too fast and that crypto’s volatility puts everyday investors at risk.

There have also been concerns about technological, financial and criminal challenges.

Watch: What are the risks of investing in cryptocurrency?