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El Salvador’s Bitcoin detractors: Opposition groups gather as crypto law rolls out

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The year 2021 will probably go down the history books as one of Bitcoin’s (BTC) most interesting years, given its recent uptake by billionaires and adoption by mainstream institutions, not to mention El Salvador’s move to make it legal tender

In El Salvador’s case, it almost seems as if the whole world is watching this experiment to see whether it will be a success or a total failure for the Central American nation.

With Sept. 7 marking the official implementation of Bitcoin as a legal tender in El Salvador, a wave of protests in the country against the move has roused suspicions and uncertainty over how the new law will be enforced. 

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From the arrest of individuals criticizing the Salvadoran government over the new law, to the wave of citizens across the country protesting Bitcoin’s legal status, the seminal crypto is facing some headwinds.

How Bitcoin became legal tender 

It all began in early June after Salvadoran president Nayib Bukele announced in a tweet that the country’s legislative assembly had passed a bill making Bitcoin legal tender. The law was set to be implemented on Sept. 7 and would see the country’s 4.5 million citizens able to make purchases with Bitcoin at stores nationwide. 

In his announcement, Bukele said that once an official bill to make Bitcoin legal tender was passed, “Chivo ATMs” — Chivo being the name of the official BTC wallet for El Salvador — would eventually be “everywhere” in the country. This would allow El Salvadorans to withdraw Bitcoin in cash without incurring any commissions on their holdings, as is the case with services such as Western Union. 

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Moreover, Bukele assured citizens that no one will be forced to use Bitcoin. In a statement, the 40-year-old president said that “someone can always queue up at Western Union and pay a commission.”

“What if someone doesn’t want to use Bitcoin? [Well] don’t download the app and continue living your normal life. Nobody is going to take your dollars,” he said. 

The first wave of resistance

Following the announcement, a group of protestors called the Popular Resistance and Rebellion Block (BRRP) block emerged to protest against the Bitcoin law.

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“President Nayib Bukele passed the law making the cryptocurrency legal tender in the country without proper consultations with the people,” one activist said.

Although the protest group highlighted complexities such as Bitcoin’s volatility as reasons for caution, their main claim is that the law mainly serves large businesses linked to alleged money laundering to the benefit of corrupt officials.

“Bitcoin only serves some large businessmen, especially those linked to the government, to launder ill-gotten money,” one protestor said.

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A letter from the BRRP group said that “entrepreneurs who put their capital in Bitcoin will not pay taxes on their earnings and the government would spend millions worth of taxes to execute the whole campaign.”

Indeed, the bill to make Bitcoin legal tender includes some interesting proposals such as a zero capital gains tax on BTC. The bill also promised investors permanent residency in the country with a three BTC investment in El Salvador. 

The arrest of Mario Gómez

As the controversial Bitcoin bill became a law on Sept. 7, both supporters and detractors continue to emerge with the latest in events around the law being the arrest of Mario Gómez.

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According to several local news outlets in El Salvador, Mario Gómez — a computer and crypto expert as well as an avid critic of the government — was arrested by local police and held for a few hours before being released.

Gómez has been known to regularly post on social media opposing the government’s move to make Bitcoin legal tender. Observers such as Steve Hanke — an economist from Johns Hopkins University — criticized Gómez’s arrest as an “authoritarian police tactic in action.”

Hector Silva, a counselor of the mayor’s office in San Salvador, said, “the arrest of Mario portrays the fragility of the government in terms of the implementation of the Bitcoin law but confirms something even more dangerous.”

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“They are willing to manipulate whatever institutions are necessary to push critical voices out of the way,” added Silva. 

Although the police released a statement saying that Gómez was detained as part of a financial fraud investigation, news reports claimed that he was arrested without a warrant and an attempt was made to take possession of his phone and computer. 

The citizens’ protest

Right before Gómez’s arrest, some retirees in El Salvador took to the streets to protest, worried about the government using the cryptocurrency to pay their pensions.

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While speaking to reporters, one demonstrator from the crowd — which included veterans, disability pensioners, workers and retirees — said, “we know this coin fluctuates drastically. Its value changes from one second to another, and we will have no control over it.”

While Bukele has promised that the use of Bitcoin in the country will be optional and that salaries and pensions will still be paid in United States dollars, the protestors still highlighted a lack of knowledge of the technology.

Citizens have also complained that there has been too little explanation from officials about the pros and cons of Bitcoin. “We don’t know the currency. We don’t know where it comes from. We don’t know if it’s going to bring us profit or loss. We don’t know anything,” one Salvadoran added.

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In response, Bukele’s administration has stated that the use of Bitcoin is not mandatory and that necessary training and other alternatives to Bitcoin will be provided. 

Mixed opinions

Although President Bukele enjoys incredibly high approval ratings, recent polls concerning the Bitcoin law show a widespread lack of support for the measure. A recent poll conducted by El Salvador’s Universidad Centroamericana José Siméon Cañas shows that up to two-thirds of respondents are inclined toward a move to repeal the law, and more than 70% prefer the U.S dollar over Bitcoin.

International institutions like the International Monetary Fund have also warned about macroeconomic, financial and legal issues brought about by El Salvador’s adoption of Bitcoin.

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Siobhan Morden, head of Latin America Fixed Income Strategy at Amherst Pierpont, said that “the plans for Bitcoin under an increasingly autocratic regime will likely only compound concerns about corruption.”

On the flip side, others remain optimistic that the new law will eventually benefit Salvadorans given that the country’s economy is heavily reliant on remittances sent home by migrants overseas. Last year alone, the country’s remittances totaled $6 billion, accounting for a fifth of gross domestic product.

“El Salvador’s adoption of Bitcoin as legal tender by law offers the country some optionality in financial matters and sovereignty,” said Alexander Blum, managing director of Two Prime. 

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His sentiments were echoed by Alberto Echegaray Guevara — an artist and entrepreneur — who said, “President Bukele’s Bitcoin Law is not only trying to make international money transfer cheaper and easier for 70% of his unbanked population but also creating a new economic hub and new remittances platform in Central America.”

Adrian Pollard from HollaEx told Cointelegraph, “It is typical for new technology rollouts to have bugs and apposition but that’s exactly why it was made voluntary.”

“I suspect there will be more bumps along the road for El Salvador but it will be worth it long term. In fact, I believe other South American nations aren’t far behind and will follow,” added Pollard.

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Expert calls El Salvador’s Bitcoin volcano bonds, ‘Michael Saylor playbook for a country’

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El Salvador’s “Bitcoin City” and the proposed $1 billion Bitcoin volcano bond have ignited a range of reactions across the world. These are ambitious plans, no doubt, but they come as the crypto market is seeing a downturn and major economies are fighting inflation.

During an episode of the What Bitcoin Did podcast, host Peter McCormack spoke to macroeconomist Lyn Alden about El Salvador’s Bitcoin volcano bonds and whether they make sense.

Fire up the oven

To be issued in 2022, the first volcano bond will have a BTC booster coupon rate of 6.5% and a decade-long duration. Interestingly, $500 million will reportedly be used for Bitcoin mining, while the other $500 million is ideally for buying BTC, which will be stored for five years. If it goes up in value, investors stand to make gains.

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Alden called the volcano bonds the “Michael Saylor playbook for a country,” and said,

“It’s a very similar play to what a lot of entities do with real estate, where you never sell the real estate, you just keep refinancing it over time as it goes up in value. And, Bitcoin is basically a more volatile version of that. Obviously, it’s got less track record – 13 years. But the potential gains, if you’re right, are massive.”

However, Alden stressed the need for experts in the Bitcoin mining process. She said,

“Now, my understanding is that obviously, geothermal is very attractive energy to use. The climate [in El Salvador] is not super ideal for Bitcoin miners. And, so overall, you generally would want to have experts there who make sure that it makes financial sense at the end of the day…”

But what if…

McCormack asked if generating $65 million per year was enough to pay investors. For her part, Alden was cautious and reminded viewers to consider credit risks, interest payments, and the market’s reaction. However, she noted,

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“And this is kind of the game theory of, say, different countries, where El Salvador has less to lose in some sense. They, you know, they basically..have already had economic issues.”

McCormack and Alden agreed that the success of the volcano bond hinged on Bitcoin rallying for the next five years.

Bitcoin below $60,000

El Salvador’s President Nayib Bukele might be bullish, but the market has been seeing bearish momentum, as Bitcoin fell to $54,729.53 at press time. What’s more, the market was hovering around the fear or neutral territory for several days.

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El Salvador Buys the Bitcoin Dip Amid “Black Friday Sale”

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El Salvador took advantage of the sell-off, adding more coins to the country’s treasury

El Salvador’s President Nayib Bukele has taken to Twitter to announce that the country has added 100 Bitcoin ($5.4 million) to its treasury.

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The Bitcoin price plunged by more than 9% earlier today amid the global market sell-off.  

The fact that the plunge took on Black Friday, the day retailers slash prices to attract deal-hunters and cause shopping bonanza, prompted many corny and tired jokes about Bitcoin being actually on sale. Hence, many holders are being encouraged to buy the dip. 

In late October, El Salvador bought 420 Bitcoin that was worth roughly $26 million at the time when the purchase was announced by Bukele on Twitter.

Earlier this month, the tropical country also announced its plan to build the first Bitcoin city in the world, which will be situated at the base of a volcano. It has partnered with blockchain company Blockstream in order to raise $1 billion via a “Bitcoin Bond” and fund the highly ambitious project.           

In early September, El Salvador made history by becoming the first country to adopt Bitcoin as its official currency.        

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Is Bitcoin Entering a Bear Market? Top Analyst Updates Outlook After Sharp Crypto Pullback

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Popular crypto strategist and trader Michaël van de Poppe is looking at where Bitcoin (BTC) might be headed as markets worldwide nosedive amid the discovery of a new coronavirus variant.

In a new strategy session, Van de Poppe tells his 148,000 YouTube subscribers that it’s a combination of concern about more lockdowns as well as a cyclical correction that has investors seeing red.

“Not only the crypto markets are showing weakness at this point, as also the European stock markets opened significantly red today… and also the US stock markets are going to open in the red. But there are certain fears about the coronavirus lockdowns coming again. But there are also discussions about tapering happening at this point, and actually, the markets were due for a correction too. We have been grinding up heavily while the actual impact of a potential lockdown was not visible yet.

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Right now we do see one, and we still have a very natural and healthy corrective move which we haven’t been seeing in the past few months. In September we’ve had one, but since then no real correction has been taking place.

So finally we’re getting it, and when the dollar is showing strength it would make sense that the equities are going to have some pain too. Bitcoin has been seeing this correction already. Equities are following suit in the past week now too.”

The analyst goes on to assess Bitcoin’s latest price dip, going so far as to conclude that while he doesn’t think BTC is entering a bull market, he’s doubtful about relying on traditional four-year models for predicting future price action.

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“I really believe the reason why Bitcoin is dropping right now is because of the macroeconomics taking place. But regardless of that, I’m still very sure that the markets are not going to have a bear market at this stage. I think we are still eager for continuation in a bullish manner, but I do realize that the lengthening cycle’s most likely going to take place. A healthy correction is also happening at this point, in which the question becomes, where is Bitcoin going to bottom out? And how are altcoins going to perform out of that?

We can throw away the four-year cycles, we can throw away PlanB’s stock-to-flow model with these predictions because it’s not valid anymore. We are in a different environment when it comes to the markets right now. Clearly, we are currently having a harsh corrective move… but it shows that the markets are not predictable and expecting Bitcoin to run in four-year cycles is just not the case.”

Moving on to specific BTC price analysis, Van de Poppe is eyeing $55,000 as an important support level, but also thinks the leading crypto asset could fall as low as $48,000 – without signifying an end to the bull run.

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Source: Michaël van de Poppe/YouTube

“When we’re looking at Bitcoin against [the US dollar], at this point we still have a very important support level [approximately $55,000] that we are acting on right now. The crucial thing when it comes to the daily time frame is that we are flipping this level with $66,000 as resistance and started to crack south.

Meaning that currently, we are into higher time-frame support, but definitely depending on how this daily’s going to close, this is going to be weak going into the weekend, and especially going into next week, it will probably cause some more pain across markets.

In that case, when we’re looking at levels that we should be watching, [$55,000 to $55,600] is the first real level that you should be looking out for. However, the crucial level to me is still this level around $48,000. Even if we get in that region, I still believe that we’re bullish in markets and we’re just having a very natural corrective move before we’re going to accelerate again in 2022.”

At time of writing, Bitcoin is down nearly 8% on the day and trading at $55,186.

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