After bitcoin crossed the $50,000 in early September, it appeared that the bulls were back in control. The mood among crypto investors was positive, not least because of El Salvador’s bitcoin integration, which got underway on Sept. 7.
That optimism was interrupted when the bitcoin rally turned into a sell-off yesterday and bitcoin corrected by nearly 20% to as low as $43,000. The bitcoin price has since recovered some of those losses but it remains below $50,000 for now. Long-term investors are used to the volatility, but newcomers might be just getting a taste of their first bitcoin dip.
Lennard Neo, head of research at Stack Funds, published a report that might ease the worries of investors. Neo points to one tool known as the Puell Multiple, which is a reflection of bitcoin supply via miners and the revenues they generated. This indicator is looking bullish despite the market sell-off. Neo explains,
“Despite the recent bitcoin flush, [the] Puell Multiple remains strong with bitcoin potentially able to breach its $65,000 highs before the indicator reenters the sell-zone.”
In his analysis, Neo points to bitcoin’s “resilience” at the start of September after the leading cryptocurrency broke $50,000 more than once before the downturn. Bitcoin remains “relatively well supported,” he says, above its 200 day moving average. Neo continues,
“The pullback should not come as a surprise, as we anticipated headwinds in our prior report. However, we believe this to be a temporary retracement as leverage longs are flushed with funding rates reset and expect bitcoin to continue trading in an upward channel.”
McDonald’s Accepts Bitcoin in El Salvador
In addition to the technical indicators, Neo also observed bitcoin’s fundamental strength. This includes the acceptance of bitcoin as a legal currency by El Salvador. The country has scooped up 500 bitcoins in recent days and is not done yet.
Locals who downloaded the Chivo bitcoin wallet were gifted with $30 worth of bitcoin, which they were free to spend at merchants, which in turn are expected to accept the cryptocurrency as a payment method.
Bitcoin Magazine journalist Aaron van Wirdum put it to the test, walking into a McDonald’s in the city of San Salvador to buy breakfast with bitcoin. He documented how not only did the restaurant accept his bitcoin, but they used the Lightning Network to complete the transaction. Select El Salvador merchants are using Flexa-fueled Lightning payments for speedy bitcoin transactions.
Just walked into a McDonald’s in San Salvador to see if I could pay for my breakfast with bitcoin, tbh fully expecting to be told no.
But low and behold, they printed a ticket with QR that took me to a webpage with Lightning invoice, and now I’m enjoying my desayuno traditional! pic.twitter.com/NYCkMNbv7U
— Aaron van Wirdum (@AaronvanW) September 7, 2021
El Salvador’s bitcoin debut may have been soured by the market sell-off, but based on the latest technical and fundamental analysis, it might not be long before the bulls are back in charge.