Crypto newsletter: El Salvador could become first country to use Bitcoin as legal tender

• El Salvador president plans to make Bitcoin as legal tender
• Yellen comments weigh on cryptocurrencies
• China steps up crackdown on Bitcoin

Last seven days were relatively calm for the cryptocurrency market. Prices of major coins began consolidating on May 28 and slid into a tight range ever since. Bitcoin struggled to move higher as comments from U.S. Treasury Secretary Janet Yellen and further restrictions in China overshadowed El Salvador President Nayib Bukele plans to adopt the leading cryptocurrency as legal tender. Bitcoin's dominance dropped to 40.8%. The capitalization of all digital assets in circulation fell to 1.67 trillion, while an average daily trading volume is registered at $83 billion.

Bitcoin market dominance again fell sharply in recent days. Source: Coinmarketcap.com

During a video address at last week’s Bitcoin Conference 2021 event in Miami, Nayib Bukele, El Salvador's  president, confirmed plans to submit a legislative approval that, if and when passed, would grant bitcoin the status of legal tender in his home country. Since then, he's tweeted about turning the country into a bitcoin paradise. However, a new round of crypto social media censorship in China and US Treasury Secretary Janet Yellen’s latest comments on interest rates have curbed the gains.

Yesterday, Yellen told Bloomberg that President Joe Biden’s $4 trillion spending proposal would be positive for the country, even if it leads to a rise in interest rates. “If we ended up with a slightly higher interest-rate environment, it would actually be a plus for society’s point of view and the Federal Reserve’s point of view,” Yellen said. Higher interest rates undermine the attractiveness of assets perceived as a hedge against inflation such as bitcoin and gold.

Meanwhile China stepped up its crackdown on bitcoin trading and mining over the weekend. More than two dozens of “key opinion leaders” on Weibo found their accounts suspended by the Chinese social media company Saturday in what appeared to be a targeted censorship effort.

Also, the number of short trades on major exchange Bitfinex is raising concerns. As popular Twitter account Fomocap noted on Monday, a rise in shorts has historically coincided with major volatility — usually to the downside.

Bitfinex shorts vs. BTC/USD annotated chart. Source: Fomocap/ Twitter

Bitcoin price bounced off the lower limit of the triangle formation during today’s session which coincides with major support at $34.500 and is currently testing  50 SMA ( green line). However as long as the price sits below major resistance at $42,000 further downward move is the base case scenario. Should break below the aforementioned support occur, then declines could deepen towards next support at $29,000. Source: xStation5

Ethereum – buyers managed to halt declines at the lower limit of the triangle pattern and price is slowly approaching major resistance at $3000.00 which coincides with upper limit of the formation, 50 SMA ( green line) and the 50.0 Fibonacci retracement of the recent downward wave. Source: xStation5