El Salvador Makes a U-Turn, Abandons Bitcoin for IMF Deal
BTC/USD Bounces at 50 MA and Turns Bullish but for How Long
As part of a loan deal with the International Monetary Fund (IMF), El Salvador decided to ditch Bitcoin as a legal tender and to limit its exposure. Bitcoin will still be a recognized asset but the new reform to the Bitcoin Law, which was approved by El Salvador’s Legislative Assembly, severely limits the usability of Bitcoin throughout the country.
Merchants are no longer required to accept BTC payments, although they still can do so if they wish. So, from now on, the use of Bitcoin will be voluntary and still possible as long as the two parties (buyer and seller) agree to it. The difference is that before the reform if the buyer wanted to pay in Bitcoin, the seller had to accept it.
Furthermore, it will not be possible to pay taxes with Bitcoin and the state will no longer provide infrastructure for BTC payments, such as the Chivo wallet and BTC to USD conversions.
All these changes were made to smooth a $1.4 billion loan from the International Monetary Fund (IMF). It looks like a win for El Salvador, especially because, according to studies, just 8% of Salvadorans used Bitcoin for transactions throughout 2024.
However, El Salvador does not plan to ditch Bitcoin completely, as the country increased its BTC reserves. Also, Tether (the company behind USDT) recently moved to El Salvador and reportedly Rumble is considering a relocation there.
Chart Analysis – BTC/USD
Bitcoin is currently changing hands just above $104K after a false break of $99,800 earlier in the week. The entire week has been very volatile, ranging between a low of $97,750 and a high of $106,440.
Although the false break of the support at $99,800 and the bounce at the 50-day Moving Average are bullish signs, Bitcoin failed to break the previous high. The candles are starting to show long wicks and smaller bodies, which indicates that indecision is setting in.
Bitcoin has been resilient to the Fed’s hawkish rate stance so there is underlying strength and the uptrend may continue but the speed has definitely slowed down. The current ATH is just a few hundred dollars above the previous one and the RSI on a Weekly chart is showing bearish divergence.
That being said, we are still in an uptrend but beware of moves below significant support levels such as $100K or the 50-day Moving Average.
