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Bitcoin Faces Losses after the El Salvador Glitch

Bitcoin was down on Wednesday after a disastrous deployment of the world’s largest cryptocurrency as legal tender in El Salvador. As of 11 a.m. in Singapore, the virtual coin was trading for around $47,100, after falling as much as 17 percent the day before trimming some of the losses. The downdraft affected Ether, Dogecoin, and the Bloomberg Galaxy Crypto Index, among other tokens. Edward Moya, the senior market analyst at Oanda Corp., said, “Social media platforms were very cautious over the weekend that a plunge could occur following El Salvador’s big day.”

He believes that several speculators bought in anticipation of the country enacting its Bitcoin regulation on Sept. 7 and then “sell the fact.” El Salvador’s trial with  the most comprehensive demonstration of the token’s real-world utility — got off to a shaky start due to technical issues with the official digital wallet, which was eventually overcome. Nevertheless, president Nayib Bukele announced on Twitter that the country now has 550 Bitcoin after purchasing them at a lower price.

The selloff on Tuesday is the most dramatic pause in a rally that has raised Bitcoin about 75% since late July. According to cryptocurrency tracker CoinGecko, the overall market value of cryptocurrencies has dropped by around $280 billion in the last 24 hours. In addition, according to Bybt.com, Bitcoin liquidations totaled $3.7 billion during the same period. These occur when exchanges close leveraged positions due to a failure to meet margin requirements.

Mike Novogratz, the billionaire CEO of Galaxy Digital Holdings and a long-time cryptocurrency bull, said the market for digital coins had been robust for the previous eight weeks and had become overbought. While the rollout in El Salvador may have been a direct cause of swings, other factors could be at play in the notoriously volatile cryptocurrency market. The potential of reduced Federal Reserve stimulus, in particular, poses a challenge for speculative assets such as digital tokens.

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