Volatility in bitcoin eased but trading remained subdued on Wednesday, a day after El Salvador adopted the crypto asset as legal tender but the threat of a US lawsuit against crypto exchange Coinbase Global underscored the rocky road ahead for cryptocurrencies.
The Securities and Exchange Commission issued Coinbase with a Wells notice, indicating the US regulator will sue if the crypto exchange goes ahead with the launch of its interest-bearing “Lend” product for crypto assets. Coinbase said it would delay the launch until at least October. Shares of Coinbase last traded down 3.50 per cent at $257.43.
Trading in bitcoin was subdued after suffering its heaviest losses in 2-1/2 months on Tuesday, when it hit a near four-month high of $52,956 before ending the day down 11.1 per cent, its largest plunge since June 2.
At one point on Tuesday, the digital currency fell as much as 18.6 per cent, wiping out more than $180 billion in market value. Bitcoin was trading down 1.61 per cent at $46,088.18 until 9 pm IST on Wednesday.
Tuesday was a historical day for bitcoin as El Salvador’s decision to make the digital currency legal tender got off to a bumpy start.
Technological glitches hampered its use while street protests by mistrustful citizens broke out in the Central American country.
As bitcoin wobbled, Salvadoran President Nayib Bukele said his government purchased an additional 150 bitcoins on Tuesday, worth around $7 million.
“That has underscored the difficulty in trying to protect the value of bitcoin as its own currency,” said Nana Otsuki, chief economist at Monex Securities. “The buying didn't seem to be effective in halting its fall.”
“High volatility in a medium of exchange corresponds to high volatility in the macroeconomy. Users who hold bitcoin will now see wild swings in their savings,” Viswanath-Natraj said.
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