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For the first time in the world, Bitcoin has become the official currency

El Salvador is the smallest country in Central America by area, it is washed over by the Pacific Ocean and often called the land of lakes and volcanoes.

An otherwise unremarkable nation went down in history by taking an unprecedented step and adopting bitcoin as legal tender, as announced by President Nayib Bukele on Twitter. The law was passed by the Salvadoran Congress, with 62 members out of 84 votes in favor of the decision.

In 2001, El Salvador’s adopted the USD as its official currency, abandoning the Salvadoran colón. The adoption of bitcoin as legal tender means that in El Salvador, it is now illegal to refuse payments for goods and services in BTC or USD.

The country's economy is largely based on remittances from foreign workers and the export of food products. The adoption of bitcoin will help citizens transfer funds from abroad.

President Bukele says he no intention to de-dollarize the country since the move would not bring any benefits. Rather, he plans to increase El Salvador's GDP, which currently is $8,000 per capita per year (according to the 2019 data). Simultaneously, the president announced the initiative to provide residence permits to individuals owning at least three bitcoins. Bukele has also suggested building a bitcoin mining farm that would use the energy of the numerous volcanoes of El Salvador.

Against the backdrop of the news coming from El Salvador, the market’s reaction has been quite positive. Today, the BTCUSD rate has been rising above Tuesday's lows of around $31,000. Notwithstanding, the overall situation on the cryptocurrency market remains negative due to the bearish breakout (see fig. 1) of the consolidation zone (see fig. 2).

This article represents FXOpen Markets Limited opinion only, it should not be construed as an offer, invitation or recommendation in respect to FXOpen Markets Limited products and services or as financial advice.

Cryptocurrency CFDs are not available to trade in all jurisdictions.

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Greg Nilson

Greg Nilson

Financial Analyst

FXOpen

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24 Jul 2018

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Charlestown

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