El Salvador’s Bitcoin Move Might Congest The Network
American multinational investment bank (JPMorgan)’s criticism of El Salvador’s bitcoin legal payment adoption keeps heating up. The bank’s latest criticism is a warning.
JPMorgan Experts Publish a Report
A Steve Palacio-led group of JPMorgan analysts have opined that El Salvador’s bitcoin adoption might congest the blockchain network. The group made its findings known in a report published on Bloomberg yesterday night.
The team disclosed that over 91% of bitcoin hadn’t changed hands in the last 12 months. Hence, the bitcoin’s activity volume is low as major exchanges internalize the trading volumes. Therefore, they concluded that El Salvador’s bitcoin adoption as a legal tender would severely limit the cryptocurrency’s ability to be used as an exchange medium which was the original intention.
The report further revealed that “El Salvador’s daily payment activities would be about 5% of current on-chain transaction volume. It would also represent over 1.5% of the total amount of tokens exchanged between wallets in the last 12 months.”
The bank’s analysts also said other consequences of El Salvador’s decision include the negative effect on the monetary system, especially official dollarization. There would be a bastardization of “onshore dollar liquidity” since there is a frequent imbalance in demand for converting bitcoin and the united states dollar. Consequently, there would be risks to fiscal and balance payments.
El Salvador’s Bitcoin Adoption
As previously reported on Tokenhell, El Salvador’s legislature approved its president’s proposal for bitcoin to be recognized as a legal tender early last month. The president, Nayib Bukele, further disclosed that it is now compulsory for businesses to start accepting bitcoin.
After the official announcement, several finance analysts and regulators criticized the move. Even the international monetary fund (IMF) warned that the country might be sanctioned legally and financially.
JPMorgan finance experts opined that the country’s bitcoin adoption won’t profoundly impact its economy and would even prevent the IMF and other top financial regulators from assisting them. Also, the main opposition party (Farabundo Marti National Liberation Front (FMNL)) recently took the government to court over its bitcoin adoption, citing un-constitutionalism.
The party referenced a recent survey carried out by the country’s chamber of commerce which revealed that 85% of the citizens would decline to receive bitcoin payments.
Bitcoin Fails to Produce Any Massive Price Movements
There wasn’t much activity with bitcoin this past weekend as it has been over the past two weekends. Hence, there was a multi-month low in trading volume, and the leading digital asset didn’t create any significant price movement positively or negatively. It was at $33K by the beginning of the weekend after a quick rally and even jumped over $34K. But the rally was brief as it eventually declined to about $33K shortly afterward.
But some bullish movements have caused it to move up to about $34.8K, which it attained earlier today. This is its highest in the last five days. Even though it has declined by a few hundred, it remains above the $34K price. There are suggestions that miners are no longer selling but have started accumulating again. Thus, it might be the reason for the bitcoin price rally.
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