El Salvador allocates $150 million to Bitcoin trust ahead of crypto law coming into effect

El Salvador has approved a $150 million trust fund ahead of the country’s move to make Bitcoin a legal tender, set to take effect on September 7. This fund will support the $30 in BTC bonus once citizens in the country sign up for the digital currency wallet Chivo.

$500 million loan repurposed for Bitcoin law 

For the El Salvador government to handle the exchange between Bitcoin and dollars, a trust fund has been dedicated to the currency exchanges. 

President Bukele explained that the government would purchase Bitcoin from those who choose to receive the greenback and protect their earnings from the volatility of the leading cryptocurrency’s price. 

In preparation for Bitcoin to become legal tender on September 7, the country has launched a wallet called Chivo, which supports transactions between BTC and its national currency, the US dollar. 

El Salvador received a $500 million loan from the Central American Bank for Economic Integration (CABEI). $150 million would be used as the Bitcoin Trust, while $53.3 million would be used for the plan’s execution, $23.3 million of which would be used for the Chivo cashpoint kiosk and ATMs. 

In addition, Bukele previously announced that each citizen in the country would receive $30 in Bitcoin if they signed up to use the Chivo wallet. $30 million has been allocated for BTC bonus as a result.

The Latin American country estimates that there are about 50,000 Bitcoin users today and is expecting to see the number skyrocket to around 4 million after the bellwether cryptocurrency becomes legal tender.

However, with the new Bitcoin law coming into effect soon, it has sparked protests in the country as some believe that it would facilitate corruption in the country known for lack of transparency in its policies.

Bitcoin price loses key foothold

Bitcoin price appears to be retracing while some altcoins have been recording new highs. The leading cryptocurrency has lost a key support level and could correct further toward $45,353.

On the 4-hour chart, Bitcoin price is forming a symmetrical triangle as indecision mounts. Currently, BTC is hovering around the lower boundary of the chart pattern as it struggles with securing support at this level.

The immediate line of defense for Bitcoin price is at the 50% Fibonacci extension level, coinciding with the base of the triangle. 

Should the buyers fail to sustain prices above $46,711, the leading cryptocurrency may be vulnerable to a fall toward the 200 four-hour Simple Moving Average (SMA), which acts as the next support at $45,335.

BTC/USDT 4-hour chart

Although lower prices are not expected until Bitcoin price demonstrates clear weakness from a strike below the prevailing chart pattern, should BTC lose the aforementioned footholds, further support may arise at the support line given by the Momentum Reversal Indicator (MRI) at $44,163.

To reverse the period of sluggish performance, Bitcoin price would need to surge above the first resistance level at $47,730, coinciding with the 100 four-hour SMA. Further buying pressure may incentivize BTC to rise to the 50 four-hour SMA before tagging the upper boundary of the symmetrical triangle at $48,859.