Bitcoin: El Salvador on the brink

Investing.com – It’s been more than a year since El Salvador became the first country in the world to accept it as legal tender. After a difficult start, it seemed that President Bukele’s initiative would be successful. Meanwhile, the situation seems to be reversed, not only due to the fall in the price of bitcoin, but also according to the emerging information about the country’s BTC program.

The launch of Chivo-Wallet, commissioned by El Salvador and serving as a central point for BTC payments, went off without a hitch. Wallet developer Athena Bitcoin Global had to hire an outside company to fix existing bugs. Texas-based software company ROI Developers/Accruvia took on the task. According to this company, Athena Bitcoin Global failed to pay an invoice of more than $80,000, which led to the lawsuit.

According to No Fiction, this lawsuit revealed disturbing details. The target set by President Bukele of 50,000 registrations in Chivo on the day of launch has failed. ROI told the court that the established verification service had already failed during the first 150 registrations. However, verification was important because each new user received a start-up credit of $30 worth of bitcoins from the government.

The operator would have decided to disable the KYC process to avoid damaging the presidential campaign. It seems that there was no verification of the real existence of already registered users. According to ROI, users created fictitious profiles with photos depicting potted plants, which was enough to get the $30 gift. The resulting damage is expected to be in the millions of dollars.

Some Chivo users have also found the wallet ideal for daily trading. According to ROI, the BTC price was updated only once per minute, opening the way for profitable arbitrage trading. It was enough to compare the price in the Chivo wallet with the current price of the data provider. Within a minute we knew where the bitcoin price of the portfolio was and whether it was better to buy or sell. It is also said to be a proven case of a user increasing their wallet from $2,000 to $400,000. The amounts obtained in this way had to be deducted directly from the state budget.

Later, a bug was fixed that allowed a 1:1 exchange rate. Market hunters made 3,600 transactions worth $180,000. However, the real cost was more than $10 billion, which “immediately bankrupted the government.” $250,000 in ROI left the system before payments stopped.

All this ended when Athena Bitcoin Global stopped working on the Chivo wallet in December 2021. Instead, iFinex was tasked with taking over the administration of Chivo. At that time, President Bukele had already announced that he had established “Bitcoin City” and issued “volcanic bonds” worth $1 billion to realize this project.

According to No Ficcion, this is why iFinex now operates the Chivo wallet. iFinex is the parent company of stablecoins and Bitfinex cryptocurrency exchange. It seems that this is an ideal mix to make Bitcoin Citiy and Volcanic Bonds a “success story” similar to the insane number of registrations when the wallet was launched.

Last month, Bukele introduced a bill that would give Tether rights similar to legal tender Bitcoin. The volcanic garden was already planned to go on the market last spring, but was postponed due to the war in Ukraine. It’s being talked about again today, although interest from institutional investors is expected to be weak due to recent market turmoil.

However, No Ficcion does not expect the bond to be a sell-off, as iFinex has enough financial strength to thank the president for his “trust” in it through Tether. Tether has not yet released the collateral backing the stablecoin. A good bet to secretly buy a volcanic bond with 6.5 percent interest and strengthen its position in El Salvador.

Implementation may be imminent as El Salvador needs $667 million in January to settle overdue loan claims. The country does not seem to have these means and has already applied for help to the IMF, which has rejected it.

Bitcoin: technical indicators

Priced at $17,322, bitcoin is currently yielding 1.93 percent, with a weekly gain of 6.93 percent.

The cryptocurrency managed to break out of its last range today at $16,986 after several days of consecutive trading around the 23.6% Fibo retracement. Today’s bullish move is supported by the daily close above the aforementioned fibo retracement.

Thus, the door is open for a retracement test of the 38.2% Fibo at $17,841. If it manages to break this level sustainably, the next resistances will be the 55-day MA at $18,312 and the 50% Fibo retracement at $18,533.

Only if the bulls fail to defend the daily closing 23.6% Fibo retracement support, we should expect a move lower towards the November 28 level of $16,013.

By Marco Oehrl