El Salvador Buys the Dip As BTC Declines to $42,500, What Caused the Bitcoin and Altcoins’ Drop?

After logging recent highs of $48,825 on Sept. 18, Bitcoin (BTC) price fell further on Monday as a lack of bullish momentum sparked new lows at $42,501.

Bitcoin’s price plunged on Sept. 20 from highs of 47,358 to mark fresh lows near the $42,500 mark, according to Tradingview data. Peak to trough, the lead cryptocurrency plunged nearly 10% before rebounding slightly to its present price of $44,066.

Altcoins didn’t fare better, with most in the top 100 recording losses between 7%-11% while the largest Altcoin, Ethereum (ETH) shed 8% at a current price of $3,155. However, Cosmos (ATOM, +5.38%), Celo (CELO, +15.24%) managed to trade in green amid the market drop.

BTC/USD Daily Chart

Salvadoran President Nayib Bukele in a tweet confirmed that his government bought the dip by snatching up 150 BTC during the depths of the selloff. Stating on Sept 20: ”We just bought the dip…150 new coins! El Salvador now holds 700 coins”.

Alongside, El Salvador’s official Bitcoin wallet is presently been fixed as Salvadoran President Nayib Bukele stated in the prior week “The technical errors of the Chivo wallet have been 95% fixed. In the next few days it will be working at 100%”. He also noted that El Salvador’s 200 Bitcoin ATMs currently “work perfectly,” as well as 50 Chivo-supported ATMs in the United States.

Chivo, El Salvador’s official Bitcoin wallet had temporarily disabled new registrations and halted app downloads for new smartphone models due to ongoing issues with the app.

Is the U.S. Dollar Responsible for Bitcoin Drop?

Worth noting, the sudden drop in Bitcoin and Altcoin prices coincided with a sharp spike in the U.S. dollar index (DXY). A stronger United States dollar had weighed on investors’ appetite for hedging assets.

US. Dollar Currency Index

The index, which measures the dollar’s strength against a basket of top national currencies, rose by 0.14% to 93.40 on Monday and continued climbing to mark its third consecutive day in the green since lows of 92.42 on Sept. 15. The speculation that the US government would deem stablecoins a threat to the financial system in the wake of the China Evergrande crisis is contributing to the market’s uneasiness. 

Mixed Outlook Until FED Meeting

Analysts at Standard Chartered expect the Fed to announce the taper this week after the Federal Open Market Committee (FOMC) meets. The 22 September FOMC will likely signal a tapering decision at the next meeting, providing few details. How Bitcoin decides to react to this may be quite essential.

Fed chair Jay Powell in August had indicated that the central bank’s policy-setting committee could soon begin winding down its pandemic-era stimulus programs on two conditions: “substantial progress” is made towards maximum employment and an average 2 percent inflation rate.

In the meantime, $44,000 and $48,000 form the support and resistance levels to watch for a continuation up and down. For crypto analyst Rekt Capital, $44,000 remains important, forming the lower boundary of a “demand area” among buyers.

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