Today appears to be turning into a bloodbath for various high-profile cryptocurrencies. Indeed, investors watching as crypto tanks today may be wondering what the root cause of this price action is.
After all, many expected today to be a relatively strong one in the crypto world. Today marks the first day Bitcoin (CCC:BTC-USD) will be accepted as legal tender by a sovereign nation. El Salvador has become the first country to fully integrate a cryptocurrency into the country’s official monetary system.
However, Bitcoin, as well as its mega-cap peers Ethereum (CCC:ETH-USD), Ripple (CCC:XRP-USD), Binance Coin (CCC:BNB-USD) and Dogecoin (CCC:DOGE-USD), are all down dramatically today. Over the past 24 hours, each of these tokens is down between 10% and 17% at the time of writing.
This price action may certainly be a head-scratcher for many crypto enthusiasts. After all, these high-profile cryptocurrencies have been on quite the run in recent weeks. Accordingly, questions of whether today is just a healthy correction from recent highs, or the start of another major decline, are permeating today.
Let’s dive into two key drivers of this price action today.
Why Is Crypto Tanking Today?
The first key driver of today’s decline appears to be the El Salvadorian move toward adopting Bitcoin as legal tender. What was supposed to be a catalyst appears to be driving uncertainty in crypto markets today.
Well, the government’s pre-loaded Bitcoin wallet with $30 for every El Salvadorian citizen, Chivo, hasn’t gotten off to a great start. The government was forced to disconnect this wallet earlier today due to technical issues. Various tests are being run, and the government is looking to get this program started as soon as possible.
However, this certainly isn’t a good first impression. Users in El Salvador who already may have been skeptical about Bitcoin may be less likely to use this wallet. Accordingly, investors bullish on Bitcoin’s ability to truly replace fiat money will have to wait to see how this plays out.
Additionally, various market pundits are calling today’s price action in the crypto world a “flash crash.” Accordingly, concerns around how protracted this crash may be are circulating. Most crypto enthusiasts expect this flash crash scenario to be corrected in short order. However, time will ultimately tell where crypto valuations go from here.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.