The International Monetary Fund (IMF) raised a number of economic and legal concerns Thursday regarding El Salvador making bitcoin a legal tender, with equal footing with the U.S. dollar.
With the recent approval of the “Bitcoin Law” proposed by President Nayib Bukele, El Salvador has become the first country in the world to adopt bitcoin as legal tender.
Gerry Rice, an IMF spokesman, said during a scheduled press briefing in Washington:
“Adoption of bitcoin as legal tender raises a number of macroeconomic, financial, and legal issues that require very careful analysis so we are following developments closely and will continue our consultation with authorities. Crypto assets can pose significant risks and effective regulatory measures are very important when dealing with them.”
The spokesperson added that the IMF will meet with President Bukele later on Thursday to discuss the recently passed bitcoin law. El Salvador has been in discussions with the IMF seeking a near $1 billion loan.
Following the adoption of the bill to make bitcoin legal tender, El Salvador announced that it will be mining bitcoin using energy from volcanoes. “I’ve just instructed the president of La Geo (our state-owned geothermal electric company) to put up a plan to offer facilities for bitcoin mining with very cheap, 100 percent clean, 100 percent renewable, 0 emissions energy from our volcanos. This is going to evolve fast,” said President Bukele.
Bitcoin Reaches Highest Level Since May as Chartists Eye $50,000
After a volatile weekend, Bitcoin has once again surpassed $40,000, reaching its highest level in more than two weeks.
The world’s largest crypto gained as much as 4.5% Monday to $41,020, extending its rally to a second day. The coin has rallied roughly 9% since Friday. The wider Bloomberg Galaxy Crypto Index, which tracks some of the major cryptocurrencies, also advanced, adding as much as 7.7% at one point.
With Bitcoin crossing the $40,000 threshold, many chartists are looking at $42,500 as its next important level to breach. That number roughly represents its 200-day moving average and topping it could mean the coin rallies toward $50,000.
“Bitcoin is always going to be volatile and the manic run-up we had was never sustainable. The question is where do we settle? What is the new floor in Bitcoin?,” said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. “In order for Bitcoin to resume that rally, I think you’re going to need to see more widespread legitimate adoption.”
Cryptocurrencies have been under pressure in recent weeks, with Bitcoin losing about 30% since mid-April, when it hit a record of almost $65,000. The recent selloff has been exacerbated by a public rebuke from Tesla Inc.’s Elon Musk, who criticized the amount of energy used by the servers underpinning the token and reneged a previous offer to allow customers to buy his cars using the cryptocurrency. Increased Chinese regulatory oversight has also soured the mood.
But prices got a boost at the start of the week after veteran hedge fund manager Paul Tudor Jones — who said last year Bitcoin could be a good hedge against inflation — re-endorsed the coin in a television interview.
“I like Bitcoin as a portfolio diversifier,” Tudor Jones of Tudor Investment Corp. said in an interview with CNBC. “Everybody asks me what should I do with my Bitcoin? The only thing I know for certain, I want 5% in gold, 5% in Bitcoin, 5% in cash, 5% in commodities.”
Meanwhile, over the weekend, Musk once again roiled the market, saying via tweet that Tesla would allow transactions in Bitcoin once it is mined with more clean energy. The mogul said he wants miners, who have come under the spotlight in recent months, to use about 50% clean energy. The Cambridge Center for Alternative Finance has estimated that 39% of crypto mining is powered by renewable sources, mainly hydroelectric.
Bitcoin’s peers, including Bitcoin Cash, Dash, and Ether also gained on Monday.
Bitcoin Mining Difficulty Drops 5% After Xinjiang’s Miner Shutdown
Bitcoin’s mining difficulty fell by 5.3 percent on Sunday night UTC on the back of a recent drop-off in hash rate. On-chain data shows the network’s mining difficulty dropped to 19.8 trillion, a level not seen since early January.
The mining difficulty is how the network aims to keep blocks being produced at an even rate, despite a wildly fluctuating hash rate. Every two weeks it makes the mining process easier or harder, in order to accommodate the varying hash rate.
After the previous difficulty adjustment on May 30, the network’s hash rate remained steady. But on June 9, miners in Xinjiang’s Zhundong Economic and Technology Development Zone received orders to close operations — a result of the China State Council’s high-level comment about cracking down on bitcoin trading and mining activities. Following this news, major Chinese bitcoin mining pools saw a notable plunge in hash rate by over 20 percent on average.
From the last adjustment to June 9, Bitcoin’s average block production interval was around 9.9 minutes, close to the intended 10-minute-per-block interval, data shows. But due to the hash rate plunge, the average block production interval between June 9 and 14 was extended to more than 12 minutes.
The difficulty drop may be welcome news for miners who are still online as their share of the total block subsidies over the next two weeks will increase. Meanwhile, bitcoin’s price has jumped above $39,000 again, nearing the $40,000 level.
Bitcoin’s price started to see a notable breakout also around Sunday night UTC time following Tesla founder and CEO Elon Musk’s tweet denying that he manipulated the cryptocurrency’s market movements.
“This is inaccurate,” he replied to CoinTelegraph’s tweet about an article with comments that accused him of market manipulation.
“Tesla only sold ~10% of holdings to confirm BTC could be liquidated easily without moving market. When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions,” Musk said on social media.
Bitcoin’s price increased by over $1,500 within hours after Musk’s reply, which came just a month after Musk said Tesla suspended the bitcoin payment option out of environmental concerns.
Tesla Will Resume Taking Bitcoin as Payment Once Miners Go 50% Green, Musk Says
Tesla Inc (TSLA.O) Chief Executive Officer Elon Musk tweeted on Sunday that the electric carmaker will resume allowing bitcoin transactions when miners who verify transactions use more renewable energy.
Tesla will resume accepting bitcoin as payment once the cryptocurrency’s power-hungry miners go halfway green, CEO Elon Musk tweeted.
Musk halted Tesla’s months-old crypto foray in mid-May citing environmental concerns. But “when there’s confirmation of reasonable (~50%) clean energy usage by miners with the positive future trend, Tesla will resume allowing Bitcoin transactions,” he said in the tweet.
It is unclear how Musk will fact-check miners‘ clean energy usage as there is widespread debate over where the industry currently stands. Even so, the comments provide a first benchmark for reinstating bitcoin payments at Tesla.
Musk’s tweet also reiterates his defense of having sold 10 percent of the electric vehicle maker’s bitcoin stash in Q1 and would also seem to indicate the company hasn’t sold anymore.
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