Bitcoin price slumps as El Salvador makes it legal tender

Wall Street saw bitcoin prices plunge on the day that central American country El Salvador adopted the cryptocurrency as legal tender. Meanwhile, technology stocks drove the Nasdaq to a new record high.

Key points:

  • Bitcoin plunges by nearly one fifth, to around $US43,119
  • The Dow Jones index has lost 0.8pc, to 35,100 points, the S&P 500 has lost 0.3pc, to 4,520 and the Nasdaq Composite has risen 0.07pc, to 15,374
  • The Australian dollar is trading around 73.85 US cents and the ASX SPI 200 index is down 0.4 per cent, to 7,503

El Salvador's sovereign bonds fell as much as 6 percentage points in secondary market trading, to 87.11, as the price of bitcoin dropped sharply.

Bitcoin prices dropped as much as 18 per cent, to around $US43,119, a low not seen since mid-August, according to financial markets news service Refinitiv Eikon.

At 7:25am AEST, Bitcoin was down 1 per cent, to $US46,343, according to Refinitiv.

Market traders have said the sharp sell off was also caused by a Supreme Court ruling allowing El Salvador's President, Naib Bukele, to serve two consecutive terms.

In June, markets reacted negatively when El Salvador said it would become the first country to accept the cryptocurrency as legal tender.

Wall Street mixed

Meanwhile, the Nasdaq reached a new record high, driven by IT giant Apple and streaming service Netflix.

The S&P 500 closed lower as investors balanced worries about the slowing pace of economic recovery with expectations that the Federal Reserve would maintain its accommodative monetary policy.

Apple rose almost 1.6 per cent and Netflix added 2.7 per cent, both hitting record highs.

Globalt Investments senior portfolio manager Tom Martin said investors were gravitating towards Big Tech.

"As people feel a bit uncertain about how COVID will play out, you don't have your reopening worries with those companies," he said.

The rest of the market was less optimistic.

Of the sub-indices, eight of the 11 traded lower, with economy-sensitive sectors such as industrials, utilities and real estate indices all dropping.

The Dow Jones Industrial Average fell 0.8 per cent, to end at 35,100 points, while the S&P 500 lost 0.3 per cent, to 4,520, and the Nasdaq Composite climbed 0.07 per cent, to 15,374.

The S&P 500 remains up about 20 per cent, year to date, and the Nasdaq is up about 19 per cent.

Boeing dropped 1.8 per cent after Ireland's Ryanair said it had ended talks with the plane-maker over the purchase of 737 MAX 10 jets worth tens of billions of dollars, due to differences over price.

Commodites were sold off with spot gold down 1.6 per cent to $US1794 an ounce, while Brent crude lost 0.9 per cent to $US71.60 a barrel.

ASX set to fall

At 7:30am AEST,  the Australian dollar had dropped below 74 US cents and was around 73.85 US cents.

The ASX SPI 200 index fell 0.4 per cent, to 7,503, which indicates the local sharemarket will fall on opening after a lacklustre day yesterday.

ABC/Reuters

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