JP Morgan predicts that Bitcoin could suffer from a lack of liquidity, which could hurt it as a means of payment. The investment banking firm believes that El Salvador’s economy could be in serious trouble.

The Assembly of El Salvador approved adopting Bitcoin (BTC) as a legal tender on June 9^th. According to financial firm JP Morgan, this decision could pose challenges for both the country and the cryptocurrency.

A recent report from the aforementioned international bank describes the payments with BTC in El Salvador. The authors estimate that it could be 4% of the transactions on the Bitcoin network worldwide. That represents more than 1% of the total value of BTC transfers between wallets in the last year.

The investment firm believes that could cause a lack of liquidity on Bitcoin that would limit it as a medium of exchange.

JP Morgan explains that Bitcoin’s trading volumes commonly exceed USD 40 billion to USD 50 billion per day. However, they report that major exchanges absorb most of that capital.

Furthermore, the report says that so-called “liquid entities” keep a large part of Bitcoin locked up. It notes that more than 90% of the coins remained in the same hands for more than a year. A significant and growing fraction was in low-turnover portfolios, according to the publication.

Challenges for the Adoption of Bitcoin as Legal Tender

According to JP Morgan, the Bitcoin law would harm not only the cryptocurrency but also El Salvador.

The financial firm said that El Salvador must overcome several challenges to adopt Bitcoin as legal tender. For example, recent surveys suggest that there is skepticism in much of the population.

JP Morgan also highlights the great challenge that the high volatility of Bitcoin poses in El Salvador’s bi-monetary system.

There is a persistent imbalance in demand for Bitcoin and the US fiat currency, say experts at JP Morgan. There could be “cannibalization of US dollar liquidity” as well as fiscal and balance-of-payment risks.

Skepticism About the Adoption of Bitcoin in El Salvador

Although El Salvador received majority support to legalize Bitcoin, many people still express skepticism and criticism. The International Monetary Fund (IMF), the World Bank and the Inter-American Development Bank (IDB) joined JPMorgan to address the issue.

IDB President Mauricio Claver-Carone criticized the adoption of Bitcoin (BTC) in El Salvador as a legal tender. He stated the cryptocurrency would not allow boosting the economy and warned about volatility risks in its price.

The executive believes that Bitcoin is not the solution if El Salvador seeks to facilitate transactions and trade transparently and securely.

The World Bank refused to offer technical assistance to El Salvador to adopt Bitcoin. They argued that mining harms the environment and the pioneering cryptocurrency lacks transparency.

El Salvador Becomes the First Bitcoin Nation

Following a majority decision of the Assembly, El Salvador is the first country to adopt Bitcoin as legal tender.

President Nayib Bukele said that those who invest Bitcoin in the nation’s economy would receive nationality. Furthermore, the head of state announced plans to use geothermal energy in Bitcoin mining.

Bitcoin could help bring 70% of El Salvador’s unbanked people into the formal economy. Besides, the cost of sending remittances would be much lower due to the adoption of Bitcoin as a legal tender.

By Alexander Salazar

The authorities stopped issuing permits to mining companies due to environmental concerns, but MPB uses renewable energy sources. The old plant mines Bitcoin rather than sell its energy, which the sectors against the activity reject.

In New York, there is an old hydroelectric power plant that now mines Bitcoin with its surplus electricity. However, the authorities of the city stopped issuing permits to mining companies due to environmental concerns.

The representatives of Mechanicville Power Station (MPB) are not worried about that as they use renewable energy sources. In recent months, a sharp controversy arose in New York due to the reactivation of the Greenidge plant to mine cryptocurrencies. It was formerly a coal-powered plant before ceasing operations, but a mining company adapted it to natural gas exclusively for Bitcoin.

The directive board of MPB remains positive because of the energy sources that they produce. Besides, they explain that Bitcoin mining allows them to make three times more money than selling electricity for other purposes.

Importance of an Old Hydroelectric Power Plant Mining Bitcoin

Old plant MPB now mines Bitcoin rather than sell its energy, which it produces from renewable sources. According to some local media, the most prominent aspect of the plant is its capacity. Besides being more profitable thanks to mining, it also contributes to keeping the environment clean.

The cryptocurrency mining business has been the victim of fierce attacks due to the alleged environmental pollution it causes. The price of Bitcoin dropped by more than 50% when Tesla said they would stop accepting Bitcoin as payment for its electric cars. Its CEO Elon Musk strongly criticized the mining activity for harming the environment with its CO2 emissions.

Additionally, the Government of China has strictly banned Bitcoin mining on its territory since May. The authorities of the Asian nation have made various accusations against this activity. They include environmental pollution and the danger that crypto assets pose to the economic and financial stability of the country.

Amid that context, old New York hydroelectric power plant MPB has continued its plans to focus on Bitcoin mining.

New York Authorities Have Not Allowed the Plant to Continue Mining

In New York, there is a law that prohibits granting permits to new Bitcoin mining projects. Some environmental groups receive support from political sectors to struggle to ban the mining activity for three years.

Although the legislative body dismissed the latter, the pressure to impose this prohibition increasingly rises. The old hydroelectric power plant mines Bitcoin rather than provide its service for other purposes. The sectors that warn about the excessive growth of the activity in the area do not welcome this situation.

The board of directors of the plant states that they conduct their mining projects in a testing phase. However, the authorities are the ones who will have the last word.

Bitcoin plays an essential role in the economy worldwide, which has led many companies to venture into mining. The authorities of many countries have attacked mining for polluting the environment, but many miners now use renewable (green) energy sources.

By Alexander Salazar

While a volatile breakout could approach from the top, a massive accumulation could lead Bitcoin higher. If the price breaks the resistance at USD 35,900, there will be purchases up to USD 40,100, a level that it must overcome to regain the medium-term trend.

While the pioneering cryptocurrency continues to move sideways, the volatility in the crypto market has fallen to lows. Although Bitcoin (BTC) has been a little bearish, nothing alarming has happened so far.

According to CoinGecko, Bitcoin is currently trading at around USD 33,204 and has lost about 2.1% in a week. That brought its market capitalization to above USD 622 billion.

Different analysts agree that the approach of a volatile breakout in the price of the cryptocurrency is increasingly likely. Odds suggest this could happen from the top.

According to cryptocurrency analyst William Clemente, a massive accumulation could lead Bitcoin to a bullish contraction. That happens when short positions have to close, adding more fuel to the bullish fire.

Also, the long-term price of Bitcoin remains solidly bullish, not just on the price chart.

According to the Crypto Quant chart, the point at which stocks are on exchanges is higher than in March 2020.

A clear bearish trend in this indicator facilitates the reading as a shortage leads to a higher price. Only if the direction becomes clear again will it be possible for increased supply to get back on track.

Bitcoin Price Technical Analysis as It Continues to Move Sideways

When the price of the pioneering cryptocurrency fell to USD 32,000 again, the whales accumulated many more coins, according to WhaleMap.

A support level has formed there while another is higher up at USD 34,497.

WhaleMap’s tracking map indicates that there is resistance at USD 35,901 and USD 37,431. Although those levels do not emerge from the technical analysis, they can help understand what is happening with the price of Bitcoin.

The daily chart shows support at USD 32,700, which coincides with the support zone that WhaleMap shows. Losing this level could lead to sales, which buying pressure above USD 30,000 can quickly hamper.

The Bitcoin price could lose support at USD 28,850 if a very negative market scenario emerges. That way, the runway would remain clear to USD 26,500, which is much less likely to happen.

At the top, there is strong resistance at USD 35,900, the same as WhaleMap shows. Breaking it would open the way to purchases up to USD 40,100, a level that Bitcoin would need to exceed to recover the medium-term trend.

The previous strong bullish trend, which good fundamentals support, and the extensive decline in recent weeks make the bullish scenario the most likely.

Bitcoin Is Moving Between Strong Hands and Weak Hands

Renowned analyst Willy Woo recently said that long-term holders are absorbing currencies like Bitcoin very quickly. He explained that data consistently indicates that an accumulation floor is forming.

Amid a further drop in the price to USD 20,000, Woo believes that fundamentals point to a bullish trend.

He stated that there could be a supply crisis, but the market is not aware of it. In other words, long-term holders are receiving the currencies that went from whales to speculators.

By AlexanderSalazar

The citizens of the Central American country want to clear their doubts about Bitcoin before the Law enters into force. They want to know how they should use cryptocurrency and how they can send remittances with it effectively.

On September 7^th, the Bitcoin Law that the Government of El Salvador introduced will go into effect. The inhabitants of that country can choose between cryptocurrency and the US dollar for their commercial activities.

The disinformation campaign around El Salvador’s Bitcoin Law could be the main barrier to its implementation. Salvadoran Felipe Escoto said that the population is scared because they know nothing, but he recognizes that it could be a great opportunity.

Many Salvadorans believe that Bitcoin is a complex payment system whose usefulness they do not understand beyond the existing alternatives. A part of the population expresses doubts about Bitcoin (BTC), but many questions remain without answers.

How to Get Started with Bitcoin

Before starting, users of the Bitcoin network should receive education to make appropriate decisions. They can opt for free PDF books and free courses available online to get up to date quickly. Several of these resources explain decentralization implementation, cryptocurrency mining operations, and Bitcoin storage.

Additionally, there are specialized glossaries online where they can find content to help clarify their doubts. Likewise, many guides and tutorials will allow them to use Bitcoin properly.

Education helps avoid mistakes and discover the different alternatives to manage Bitcoin holdings. Users must decide if they want to save Bitcoin, use it as a form of payment, or benefit from price fluctuations.

Where to Safeguard Bitcoin

There are different ways to safeguard and manage funds in Bitcoin with varying degrees of security and ease of use. Therefore, those who start should choose a hardware wallet to secure and protect the private keys of their crypto assets. However, if they want to pay for daily expenses, they should use Bitcoin wallet apps on their cell phones.

There are also exchanges where users can store their holdings to respond to price fluctuations. In addition to the custody service, these platforms offer the trading of crypto assets for national fiat currencies or other cryptocurrencies.

By depositing their assets on exchanges, they are not directly dealing with the Bitcoin network but with an intermediary. As their funds are in the wallet of those platforms, they lose their autonomy to this third party.

Cybercriminals can attack these platforms, putting the money of users at risk. Besides, the directors of exchanges could lose the keys or die without having taken proper precautions.

How to Send Remittances with Bitcoin

Bitcoin will allow Salvadorans to have a new alternative to send remittances. This mechanism does not require making long lines or going to a physical office, as with traditional systems. Users can make transfers any time every day, cheaply, with no restrictions on the amount to send.

They can send remittances with Bitcoin from any wallet by entering the recipient’s address and specifying the amount. This way requires a fee payment per transaction, which varies according to the congestion of the network.

Salvadorans will also be able to make and receive remittances using the Chivo Wallet of the Government, which requires no fee payment. Additionally, the remittances may be in Bitcoin or US dollars, depending on whoever sends or receives them.

Another alternative that Salvadorans have is to exchange the funds they receive for cash. They will be able to resort to any Chivo point of sale that the Government will deploy throughout the country.

By Alexander Salazar