Massage stones help scientists uncover role of prefrontal cortex in sensory perception

Peer-Reviewed Publication

UNIVERSITY OF TORONTO

 

IMAGE: UNIVERSITY OF TORONTO STUDY MEASURED PERCEPTION BASED ON A VARIETY OF VISUAL AND AURAL INPUTS. view more 

CREDIT: ISTOCK

TORONTO, ON – An image of a beautiful beach conjures up certain sensations – one can imagine the warmth of the sun as it caresses the skin, and the sound of the water as waves break on the shore. But how is it that the human brain produces these impressions even when an individual isn’t actually standing on a beach, basking in the sun’s rays and listening to the sound of the waves?

Scientists at the University of Toronto (U of T) exploring this mystery found that the brain’s prefrontal cortex – a region known primarily for its role in regulating behaviour, impulse inhibition, and cognitive flexibility – produces such general sensations based on information provided by various senses. The findings provide new insights into the poorly understood role of the prefrontal cortex in human perception.

Using a combination of photographs, sounds and even heated massage stones, the researchers investigated patterns of neural activity in the prefrontal cortex as well as the other regions of the brain known to be responsible for processing stimulation from all the senses and found significant similarities.

“Whether an individual was directly exposed to warmth, for example, or simply looking at a picture of a sunny scene, we saw the same pattern of neural activity in the prefrontal cortex,” said Dirk Bernhardt-Walther, professor in the Department of Psychology in the Faculty of Arts & Science at the U of T, and coauthor of a study published in the Journal of Neuroscience describing the findings. “The results suggest that the prefrontal cortex generalizes perceptual experiences that originate from different senses.”

To understand how the human brain processes the torrent of information from the environment, researchers often study the senses in isolation, with much of prior work focused on the visual system. Bernhardt-Walther says that while such work is illuminating and important, it is equally important to find out how the brain integrates information from the different senses, and how it uses the information in a task-directed manner. “Understanding the basics of these capabilities provides the foundation for research of disorders of perception,” he said.

Using functional magnetic resonance imaging (fMRI) technology to capture brain activity the researchers conducted two experiments with the same participants, based on knowing how regions of the brain respond differently depending on the intensity of stimulation.

In the first, the participants viewed a series of images of various scenes – including beaches, city streets, forests, and train stations – and were asked to judge if the scenes were warm or cold and noisy or quiet. Throughout, neural activity across several regions of the brain was tracked.

In the second experiment, participants were first handed a series of massage stones that were either heated to 45℃ or cooled to 9℃, and later exposed to sounds both quiet and noisy – such as birds, people, and waves at a beach.

“When we compared the patterns of activity in the prefrontal cortex, we could determine temperature both from the stone experiment and from the experiment with pictures as the neural activity patterns for temperature were so consistent between the two experiments,” said lead author of the study Yaelan Jung, who recently completed her PhD at U of T working with Bernhardt-Walther and is now a postdoctoral researcher at Emory University.

“We could successfully determine whether a participant was holding a warm or a cold stone from patterns of brain activity in the somatosensory cortex, which is the part of the brain that receives and processes sensory information from the entire body, while brain activity in the visual cortex told us if they were looking at an image of a warm or cold scene,” said Jung.

The patterns were so compatible that a decoder trained on prefrontal brain activity from the stone experiment was able to predict the temperature of a scene depicted in an image as it was viewed.

“It tells us about the relationship between someone feeling warmth by looking at a picture versus actually touching a warm object,” Jung said.

Similarly, the researchers could decode noisy versus quiet sounds from the brain’s auditory cortex and pictures of noisy versus quiet scenes from the visual cortex.

“Overall, the neural activity patterns in the prefrontal cortex produced by participants viewing the images were the same as those triggered by actual experience of temperature and noise level,” said Jung.

The researchers suggest the findings may open a new avenue to study how the brain manages to process and represent complex real-world attributes that span multiple senses, even without directly experiencing them.

“In understanding how the human brain integrates information from different senses into higher-level concepts, we may be able to pinpoint the causes of specific inabilities to recognize particular kinds of objects or concepts,” said Bernhardt-Walther.

“Our results might help people with limitations in one sensory modality to compensate with another and reach the same or very similar conceptual representations in their prefrontal cortex, which is essential for making decisions about their environment.”

Support for the research was provided by the Social Sciences and Humanities Research Council of Canada and the Natural Sciences and Engineering Research Council of Canada.

Scene categories for sensory perception study - U of Toronto (IMAGE)

UNIVERSITY OF TORONTO

CAPTION

Subjects viewed an assortment of images from four scene categories (A) labeled as warm or cold (temperature) and as noisy or quiet (sound level), and rated temperature and sound level properties for each (B).

CREDIT

Jung et al., 2021, JNeurosci, 41 (34) 7234-7245.

---

JOURNAL

JNeurosci

DOI

10.1523/JNEUROSCI.2816-20.2021 

METHOD OF RESEARCH

Experimental study

SUBJECT OF RESEARCH

People

ARTICLE TITLE

Neural Representations in the Prefrontal Cortex Are Task Dependent for Scene Attributes But Not for Scene Categories

ARTICLE PUBLICATION DATE

25-Aug-2021

COI STATEMENT

The authors declare no competing interests

 

One size does not fit all in Antarctica: climate change will impact Antarctic seals differently

Climate change may impact seals in one of the most remote ocean regions in the world, the Weddell Sea

Peer-Reviewed Publication

POINT BLUE CONSERVATION SCIENCE

 

IMAGE: ICE IN THE WEDDELL SEA view more 

CREDIT: PHOTO CREDIT: MIA WEGE

A New Zealand-led international study published today in Global Change Biology, reveals how climate change may impact seals in one of the most remote ocean regions in the world, the Weddell Sea.

With funding from Pew Charitable Trusts, the University of Canterbury-based team engaged thousands of citizen scientists over a few years to search for Southern Ocean seals– crabeater and Weddell seals – using satellite images. “We found that Weddell and crabeater seals breed close to where they can find food,” said says Dr Mia Wege, lead author previously based at UC, but now a lecturer in Zoology at the University of Pretoria in South Africa.

The interesting part of their findings relates to how climate change will affect these breeding locations differently. “Because of climate change, crabeater seals will be increasingly challenged to find a place to rest and raise their young, in addition to having less food available to them. Very surprising of these results are that in the Weddell Sea, Weddell seals, on the other hand, are expected to be minimally affected in the near future, which is the opposite from what is happening elsewhere around Antarctica” adds Dr. Wege.

“Our ultimate goal was to use these two very unique datasets, created in New Zealand by UC scientists, as part of a set of monitoring techniques for marine protected areas in the remote and mostly ice-covered Southern Ocean to conserve seals and other wildlife,” continued Dr. Wege.   

The team’s results point to the specialist nature of the crabeater seals making them more vulnerable to climate change impacts. Crabeater seals prefer to breed on the unstable and short-lived ice that is drifting on the sea, called “pack-ice”. They raise pups on these ice floes in the middle of the ocean – if that platform melts away, that’s less space the seals would have to raise their young. Weddell seals breed on fast-ice, which is ice that is fastened to the Antarctic continent –a more stable breeding platform.

CAPTION

A Crabeater Seal on ice near the Weddell Sea

CREDIT

Photo Credit: Ursula Rack

Crabeater seals are picky eaters, the vast majority of their diet (>90%) consists of Antarctic krill.  If climate change also affects the seals’ prey available in the ocean, a reasonable assumption, it’s the crabeater seals who are more likely to suffer. Crabeater seals can’t switch to anything other than krill. Evolution has made them a very specialized predator. Their teeth are shaped so that they are perfect sieves for krill. The unstable ice floes and specialized diet put together are not a good sign for the future of the species. Though the Weddell Sea is not as harshly affected by climate change compared to the Antarctic Peninsula, current research shows that even in this relative “safe haven”, crabeater seals are already at risk of losing breeding and feeding habitat.

Weddell seals, on the other hand, are more flexible in their diet, eating fish, krill, and squid. Their presence is mostly influenced by non-climate related factors such as distance to the continental shelf where prey tend to aggregate. The Weddell Sea may still have enough food resources to sustain the current populations of Weddell seals.

CAPTION

A Weddell Sea, one of the two seal species studied

CREDIT

Photo Credit: Michelle LaRue

Global leaders are considering protecting over 2.2 million square kilometers of the Weddell Sea this October when the Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR) annual meeting takes place. “Clearly, any planning to protect the Southern Ocean ecosystem should take into consideration these differences. There are no easy answers.” stated Dr Leo Salas, a collaborator from Point Blue Conservation Science, a non-profit organisation from California dedicated to developing climate-smart science for conservation.

These facts “evidence that different species will be exposed to impacts from climate change differently,” said Dr. Michelle LaRue, principal investigator of the study from the University of Canterbury, in New Zealand. “Our takeaway message here is that if we want to mitigate population declines for ice-loving seals as the climate continues to warm we need to be working now to set aside marine protected areas to ensure longevity of these species and their ecosystems.” Dr. LaRue concludes.

“Our findings shed light on how these marine predators respond differently to climate change based on their unique ecologies. Most importantly, our study once again shows how these species can provide information about the entire ecosystem, and how valuable they are as sentinel species, especially when we are thinking of ways to monitor the effectiveness of marine protected areas – they certainly are more than just cute faces," says Dr Wege.

The article: “Ice matters: life-history strategies of two Antarctic seals dictate climate change eventualities in the Weddell Sea” (DOI: 10.1111/gcb.15828), published 7 September 2021 in Global Change Biology can be read here: https://doi.org/10.1111/gcb.15828

For further information or to request an interview, please contact:

• Zach Warnow, Director of Communications, Point Blue Conservation Science (zwarnow@pointblue.org). +1 415 786 5285
• Marine predator ecologist Dr Mia Wege, Lecturer, Department of Zoology and Entomology, University of Pretoria, mia.wege@gmail.com, Phone: +27 (0)780023951
• Antarctic Marine Scientist Dr Michelle LaRue, Gateway Antarctica, School of Earth and Environment | Te Kura Aronukurangi, University of Canterbury, michelle.larue@canterbury.ac.nz, Phone: +64 3 3690639.

---

JOURNAL

Global Change Biology

DOI

10.1111/gcb.15828 

METHOD OF RESEARCH

Data/statistical analysis

SUBJECT OF RESEARCH

Animals

ARTICLE TITLE

Ice matters: life-history strategies of two Antarctic seals dictate climate change eventualities in the Weddell Sea

ARTICLE PUBLICATION DATE

7-Sep-2021

Animals are 'shape shifting' in response to climate change

Some warm-blooded animals are experiencing shifts in their body shapes, likely as a response to the pressures of climate change, according to a new review of existing research.

© Ryan Barnaby A red-rumped parrot, one of the bird species that has seen its bill size increase.

By Katie Hunt, CNN 

Animals are getting larger beaks, legs and ears that allow them to better regulate their body temperatures as the planet gets hotter, with birds particularly affected, said Sara Ryding, a researcher at Deakin University in Australia and one of the authors of the research that published on Tuesday in the journal Trends in Ecology & Evolution.

The biggest shifts in appendage size in the more than 30 animals they looked at in the review were among some Australian parrot species, which saw their beak size increase by 4% to 10% on average since 1871.

"It means animals are evolving, but it does not necessarily mean that they are coping with climate change. We can see that some species have increased in appendage size so far, but we don't know if they will be able to keep up as the climate crisis worsens," Ryding said via email.

"We also don't know whether these shape-shifts actually aid in survival (and therefore are beneficial) or not. This phenomenon of shape-shifting shouldn't be seen as a positive, but rather it is alarming that climate change is pushing animals to evolve like this, under such a relatively short timeframe."

She said that the changes were subtle and unlikely to be immediately noticeable but could be "functionally important."

While climate warming was a "compelling argument" as the driving force behind these changes in shape, the study said that it was difficult to "establish causality with confidence" given the multifaceted effects climate change has on the environment.

Smaller bodies, bigger appendages

Within an animal species, individuals in warmer climates have larger appendages, such as wings and beaks -- a pattern known as Allen's rule, with the greater surface area allowing the animals to control their temperature more easily, the study noted.

At the same time, body sizes tend to shrink, since smaller bodies hold onto less heat.

In the United States, a recent study of 70,716 migratory birds representing 52 species showed that they have been getting smaller over the past four decades, and their wingspan wider. The birds all died when hitting high-rise buildings in Chicago during migration and were collected by the city's Field Museum.

"Both of our studies look at how animals respond to climate change by altering their surface area to volume ratio," explained Ryding.

While most research on morphological change over time has focused on birds, the paper noted that shrews and bats have increased their relative ear, tail, leg and wing sizes.

It said that more research on different species and in different ecosystems was needed to determine how wide the phenomenon was and could help predict which species might shape-shift in the future.

"Previous studies have shown cases where shape-shifting is happening, but these have focused on individual species or groups. Our review paper combines all of these to show how widespread this phenomenon seems to be," Ryding said.

The warming climate is causing animals to "shapeshift"

Peer-Reviewed Publication

CELL PRESS

 

VIDEO: THIS VIDEO ABSTRACT DESCRIBES THE MAIN POINTS OF THE TRENDS IN ECOLOGY & EVOLUTION REVIEW "SHAPE SHIFTING: CHANGING ANIMAL MORPHOLOGIES AS A RESPONSE TO CLIMATIC WARMING." view more 

CREDIT: RYDING ET AL.

Climate change is not only a human problem; animals have to adapt to it as well. Some “warm-blooded” animals are shapeshifting and getting larger beaks, legs, and ears to better regulate their body temperatures as the planet gets hotter. Bird researcher Sara Ryding of Deakin University in Australia describes these changes in a review published September 7th in the journal Trends in Ecology and Evolution.

“A lot of the time when climate change is discussed in mainstream media, people are asking ‘can humans overcome this?', or ‘what technology can solve this?'. It’s high time we recognized that animals also have to adapt to these changes, but this is occurring over a far shorter timescale than would have occurred through most of evolutionary time,” says Ryding (@zuuletc). “The climate change that we have created is heaping a whole lot of pressure on them, and while some species will adapt, others will not.”

Ryding notes that climate change is a complex and multifaceted phenomenon that’s been occurring progressively, so it is difficult to pinpoint just one cause of the shapeshifting. But these changes have been occurring across wide geographical regions and among a diverse array of species, so there is little in common apart from climate change.

Strong shapeshifting has particularly been reported in birds. Several species of Australian parrot have shown, on average, a 4%–10% increase in bill size since 1871, and this is positively correlated with the summer temperature each year. North American dark-eyed juncos, a type of small songbird, had a link between increased bill size and short-term temperature extremes in cold environments. There have also been reported changes in mammalian species. Researchers have reported tail length increases in wood mice and tail and leg size increases in masked shrews.

“The increases in appendage size we see so far are quite small—less than 10%—so the changes are unlikely to be immediately noticeable,” says Ryding. “However, prominent appendages such as ears are predicted to increase—so we might end up with a live-action Dumbo in the not-so-distant future.”

Next, Ryding intends to investigate shapeshifting in Australian birds firsthand by 3D scanning museum bird specimens from the past 100 years. It will give her team a better understanding of which birds are changing appendage size due to climate change and why.

“Shapeshifting does not mean that animals are coping with climate change and that all is ‘fine,’ says Ryding. “It just means they are evolving to survive it—but we’re not sure what the other ecological consequences of these changes are, or indeed that all species are capable of changing and surviving.”

###

The authors received financial support from the Australian Research Council Discovery Project, an Australian Research Council Future Fellowship, and a Natural Sciences and Engineering Research Council of Canada Discovery Grant.

Trends in Ecology & Evolution, Ryding et al.: “Shape-shifting: changing animal morphologies as a response to climatic warming” https://www.cell.com/trends/ecology-evolution/fulltext/S0169-5347(21)00197-X 

Trends in Ecology & Evolution (@Trends_Ecol_Evo), published by Cell Press, is a monthly review journal that contains polished, concise, and readable Reviews and Opinions in all areas of ecology and evolutionary science. It aims to keep scientists informed of new developments and ideas across the full range of ecology and evolutionary biology—from the pure to the applied, and from molecular to global. Visit: http://www.cell.com/trends/ecology-evolution. To receive Cell Press media alerts, please contact press@cell.com.

---

JOURNAL

Trends in Ecology & Evolution

DOI

10.1016/j.tree.2021.07.006 

METHOD OF RESEARCH

Literature review

SUBJECT OF RESEARCH

Animals

ARTICLE TITLE

Shape-shifting: changing animal morphologies as a response to climatic warming

ARTICLE PUBLICATION DATE

7-Sep-2021

A Climate Change-Induced Landslide Is Wreaking Havoc on Denali National Park

For decades, the rangers at Denali National Park in Alaska were easily winning their battle against a slow-moving landslide underneath the park’s only road. Now, due in part to the effects of climate change, they are losing very badly.

© NPS Photo/WeeBee Aschenbrenner Repairing the one road through Denali National Park after a rock slide in 2019.

Andrew R. Chow / Denali, Alaska 3 hrs ago

TIME

This summer, the National Parks Service has been frantically dropping 100 dump-trucks-worth of gravel every week on the top of the Pretty Rocks Landslide in an effort to keep up with its accelerating pace, which is the result of rapidly thawing permafrost in the country’s fastest-warming state. Two weeks ago, as the landslide hit unprecedented speed, causing the ground around it to undulate with each passing truck, the team conceded defeat and closed the back half of the park weeks earlier than anticipated. The closure is bad news both in the short term—with hundreds of camping and hotel reservations cancelled on a local economy that depends on tourism—and a scary omen for an entire state that rests on similarly thawing terrain.

“This is the canary in the coal mine for infrastructure disruption in Alaska,” says Simon Hamm, the owner of the lodge Camp Denali, who was forced to lead an evacuation of 70 guests and staff and shut down his business weeks early, resulting in potentially hundreds of thousands of dollars of loss in revenue. “If things continue on the path they’re on, it’s not going to just be Pretty Rock—it’s going to be half of the Alaskan highway system.”

© NPS Geology Team Time lapse of the Pretty Rocks slump, from July 21 to Aug. 25, 2021. In this time, the road displacement by about 21 feet. NPS Geology Team

Rapid deterioration

Denali National Park is one of the U.S.’s largest national parks at 6 million acres, and sits about four hours north of Anchorage. While the entrance to the park is certainly beautiful, many people prefer to hop on buses to access the park’s marquee attractions deep down its single 92-mile road: views of Mt. Denali (formerly Mt. McKinley), the highest peak in North America at 20,000 feet; the gleaming Wonder Lake; rolling mountainsides that contain an abundance of wildlife, including grizzly bears, moose, caribou and bighorn sheep.

About halfway along the road lies the Pretty Rocks Landslide, a slowly sliding section of earth that acts more like a glacier than a rockfall. Since the 1960s, permafrost deep below the earth’s surface has thawed, causing the soil and road on top of it—which snakes alongside a steep cliff—to develop cracks, soften and cave. For most of that time, the landslide only required minimal maintenance, says geologist Denny Capps, who joined the park’s team in 2011. “When I came, it was more of a ‘If you have time’ kind of thing. We had other more pressing issues,” he says.

But starting in the mid-2010s, the pace of the landslide started to exponentially increase. While the landslide had initially moved several inches a year, it was now moving several inches per week, causing severe dips in the road as well as other chaotic movement. Over the last two years, the department has been forced to close that stretch of road multiple times due to heavy rains, rockfall and mudslides, including an incident in August 2019 that left 300 people and 17 buses stranded for hours.

This summer has been even worse. “In the last few days, the road itself is moving at about 15 and a half inches per day,” Capps says. “When you’re coming around the corner, it just drops into a swell in the road that’s getting larger and larger. It gets so steep that the buses have literally dragged their bumpers through there.”

As a short-term fix, the Parks Service had been digging up gravel from the nearby Toklat River and dumping it by the ton onto the dipping spot in the road. But two weeks ago, as the ground continued to soften and the river’s resources began to deplete, the park’s leadership pulled the plug and instead shut down the road.

“Changing climate is driving frozen ground to thaw, resulting in unpredictable and increasing landslide movement rates at Pretty Rocks that are unprecedented in the history of the park road,” Don Striker, Denali’s Superintendent, wrote in a press release on Aug. 24. “We cannot safely keep up with the accelerating rate of landslide movement caused by permafrost thaw.”

Dozens of campers who had set up their tents deep into the park were gradually bussed out; campers who had scheduled stays in the following days at Wonder Lake were relocated to closer campgrounds, while many more cancelled altogether. Adding to the chaos at the park was a bear attack on a camper, who was mauled by a protective mother bear and treated for puncture wounds, and a snowstorm that arrived ahead of schedule, forcing the road to close for all incoming visitors.

Now, the back half of the park is closed for the winter—and without the remedial gravel hauled in, the area around the landslide will deteriorate rapidly. The situation is extremely worrying to the surrounding community, which relies heavily on Denali tourism. Given that the landslide has been accelerating every year, many are skeptical the road will be passable at all next season. “The economic impact is in double digit millions of dollars—and for a population of 2,000 people, it’s really significant,” Vanessa Jusczak, the executive director of the Denali Chamber, says. “It’s almost immeasurable what this could do to the local economy, and especially on the heels of COVID, where so many businesses are cutting services and hours. To have this incredible unknown for another season makes business owners very hesitant to invest in growth in any way.”

At Camp Denali at the end of the road, Hamm had to cancel two full weeks of bookings, amounting to 15% percent of his total operating season after a blank 2020 cancelled by the coronavirus. He is reluctantly considering a business model for a future in which all guests and resources would be flown in. “There’s a whole lot of stuff that has to get reimagined,” he says.

Looking toward an uncertain future

Help may be coming: Alaska’s House of Representatives passed a resolution last year pleading for help from the federal government for a long-term fix to combat the landslide. Alaskan Senator Lisa Murkowski has been particularly active in stumping for robust construction, and in December, she helped guide an omnibus bill through congress that included funding for a physical bridge over the landslide that may serve as a useful temporary fix, as well as a requirement for the National Park Service to propose a more lasting solution.

“We know it will be an expensive fix. But outside of seeing glaciers and hoping to see a moose or a bear, what every tourist who comes to Alaska wants to be able to see is to see Denali,” Murkowski said last year during a Senate Appropriations Committee hearing.

While Capps says that a bridge could be helpful, he and other scientists foresee problems that go far beyond this one spot in the road. Geologists have identified more than 100 other unstable areas along the road corridor. A 2014 study asserted that while 75% of the park was covered in shallow permafrost in the 1950s, that number will drop to 6% by the 2050s. And in the surrounding land around the park and across Alaska, a similar thawing is occurring, triggering all sorts of underground movement and infrastructure disruption.

“Permafrost is ice-rich, and when that thaws, it contributes water to the ground, which is one of the main contributors to landslide activity,” Capps says. “Ice literally knits the ground together, and when you take that away, it decreases the stability of the ground. That is also impacting some of our other utilities: roads, pipes, powerlines, buildings.”

Meanwhile, the effects of climate change and extreme weather are being felt all over the world: there have been landslides in Canada, exploding craters in Siberia, wildfires in western U.S. and hurricanes in the tropics. Last week, the National Forest Service closed every national forest in California due to wildfire risk while Hurricane Ida battered states ranging from Louisiana to New York.

“Alaska has always been a difficult place to live and do business, but we’ve managed to do that thus far,” Capps says. “Nonetheless, I think we need to kind of take this as a lesson for what can happen. This is a microcosm for some of the bigger questions we’re having to ask ourselves around the globe these days.”

El Salvador’s bitcoin experiment
has already gone wrong

Eric Johansson

7th September 2021 

APHOTOGRAFIA / Getty Imag

El Salvador’s experiment with bitcoin as legal tender is not off to a great start. Mere hours after the central American nation made the cryptocurrency its new official currency, it seems as if the government-backed Chivo digital wallet has already run into some issues. As this is written, Chivo appears to have been briefly unplugged.

“For a few moments Chivo wallet will not work, we have disconnected it while increasing the capacity of the image capture servers,” president Nayib Bukele tweeted (translated via Google Translate). “The installation problems that some people had were for that reason. We prefer to correct it before reconnecting it.”

The El Salvadoran leader followed up the tweet by arguing that while Chivo digital wallet will be down until engineers have installed new servers, the plan is to make the digital wallet available for Salvadorans around the world, especially in the States.

As this report is being filed, the government is seemingly carrying out an extended test on the new servers in the country.

El Salvador and its cryptocurrency project

Despite his bullishness, this is not a great start for Bukele’s new cryptocurrency project. He personally pushed the new legislation through parliament in June.

Since then the initiative has been marred by scepticism from Salvadorans, with polls showing that as many as 67.9% of El Salvadorans disagree or strongly disagree with the use of bitcoin as legal tender. Just over 32% agreed with using the cryptocurrency, according to a poll from UCA, a Jesuit university based in El Salvador.

Many of those concerned about the issue were worried about bitcoin’s volatility. The cryptocurrency went through a massive bull run during the pandemic, reaching a $64,863 high in April just as US exchange Coinbase went public. The price of the cryptocurrency fell dramatically during the summer to a $29,608 low in July, but has recovered since.

Others have lamented El Salvador’s bitcoin project because of its environmental impact.

“The news that El Salvador has become the first country to accept bitcoin as legal tender is worrying for the environment,” said Joe Baguley, VP and CTO EMEA of VMware. “It is a timely reminder of the fundamental mistake the founders of bitcoin made by building the cryptocurrency on a proof-of-work blockchain, which consumes an incredible amount of energy.”

It’s true that bitcoin uses more energy than altcoins like ethereum that mine coins using proof-of-stake. Nevertheless, as Verdict has reported before, the environmental impact of bitcoin is negligible compared to almost anything else.

Of course, those woes don’t seem to have extended to the members of the worldwide bitcoinati who have welcomed El Salvador’s initiative en masse.

Michael Saylor, founder and CEO of Microstrategy and a well-known cryptocurrency evangelist, was one of the people who encouraged investors to buy $30 worth of bitcoin head of the start of El Salvador’s cryptocurrency experiment. El Salvadorans who download the Chivo digital wallet get $30 in BTC to spend from the government.

On Tuesday, the price jumped by 2.58% from $51,393 to reach $52,722, partly due to enthusiasm from investors like Saylor. However, the enthusiasm and attempts to inflate the blockchain-based currency didn’t help and on Tuesday afternoon the price of bitcoin had shrunk to $50,856.

Spotty internet

Another concern is how using the cryptocurrency would actually work given that internet coverage in El Salvador is spotty at best. In January, internet penetration in El Salvador only stood at 50.5%, according to Datareporatal.

But even though the nation is still only working on expanding 4G and 4.5G at the moment – whereas other parts of the world are busy rolling out 5G and have even started to contemplate what 6G may entail – a recent GlobalData thematic research report suggests that El Salvador is committed to bridging the technological divide in the next decade.

“El Salvador is promoting a digital economy by expanding connectivity and promoting digital solutions under the National Digital Agenda 2020-2030,” the report said. “The policy focuses on five core areas: Digital Government, Digital Identity, Modernization of the State, Innovation, Education, and Competitiveness. The initiative is aimed at improving international fibre optic access, promote deployment of mobile technologies, and promote digital literacy.”

Still, the current lack of coverage doesn’t bode well for the people who want to use bitcoin just as they use physical money.

In the run-up to the 7 September launch, Bukele’s government has installed ATMs compatible with its Chivo digital wallet that will allow the cryptocurrency to be converted into dollars and withdrawn without commission. The president has, however, warned that “not everything will be achieved in a day or in a month.”

And there are ways to skirt the rules. Ian Bradbury, CTO of financial services at Fujitsu UK, notes that “a crucial get-out clause for local traders” enables them to not “take bitcoin as legal tender if they do not have the technology to support it.”

So buying coffees with the cryptocurrencies may not be a reality for all El Salvadorans yet. Still that wasn’t really the point of the new national currency.

Instead, Bukele has argued that introducing the new national currency is to help El Salvadorans save the $400m spent annually in commission on remittances sent home by Salvadorans working abroad, mostly sent from the United States.

Last year alone remittances to El Salvador amounted to almost $6bn. That represents roughly 23% of the nation’s gross domestic product, one of the highest ratios in the world.

Similarly, Venezuelan president Nicolás Maduro introduced the petro cryptocurrency in 2017  in a bid to skirt US sanctions prohibiting transactions to Venezuela.

Whatever the case may be, the adoption of bitcoin could be part of something bigger.

“Crucially, what comes next will be most important,” Bradbury says. “The El Salvador government may begin to use bitcoin for its own financial trading including receiving taxes, paying employee benefits and funding contracted services between businesses. It should be expected that the focus of trading will remain on stable currencies such as the US dollar. Consideration will also have to be taken towards the volatility in the bitcoin market.”

Tougher bitcoin regulations coming

El Salvador making a cryptocurrency its national currency bucks the global trend of regulators seeking to toughen up regulations around blockchain money.

This week, the chair of the UK Financial Conduct Authority (FCA), Charles Randell, called for stricter rules for cryptocurrencies.

“There are no assets or real world cashflows underpinning the price of speculative digital tokens, even the better known ones like bitcoin, and many cannot even boast a scarcity value,” Randall said. “These tokens have only been around for a few years, so we haven’t seen what will happen over a full financial cycle. We simply don’t know when or how this story will end, but – as with any new speculation – it may not end well.”

While recognising that regulating tokens is a great challenge, he argued that any “effective system of regulation” should require industry players to register and be regulated by the FCA.

In what seemed to be a thinly veiled jibe against the cryptocurrency exchange Binance, Randall added: “We are not going to award FCA registration or authorisation to businesses which won’t explain basic issues, such as who is responsible for key functions or how they are organised. That would be token regulation in the worst sense.”

In late June, the FCA issued a warning against Binance Markets Limited, a subsidiary of Binance. In the notice, the FCA accused the company of having failed to provide sufficient information about its business operations, corporate structure and how its customers used the product.

Similarly, the new chair of the US Securities and Exchange Commission (SEC), Gary Gensler, has also called for more powers to regulate the market. As part of the drive to tame the Wild West of cryptocurrencies, the SEC filed another lawsuit involving BitConnect, a defunct bitcoin exchange, making accusations of a $2bn fraud last week.

The People’s Bank of China has also imposed a cryptocurrency clampdown over the past few months.

Bitcoin plummets $10,000 on El Salvador's first day

 by Tim Copeland

September 7, 2021, 11:19AM EDT  ·  2 min read

THEBLOCK

Quick Take

• Bitcoin’s price has dropped sharply in the last hour.
• El Salvador’s president has ‘bought the dip’, picking up a further 150 bitcoins.

The price of bitcoin has dropped by $10,000 in a matter of hours, on the day that El Salvador officially accepted it as legal tender.

According to crypto exchange Binance, the price of bitcoin fell from highs of $53,000 to as low as $42,800 — while it dropped below $40,000 on crypto exchange Huobi.

The price of bitcoin dropped to $43,000 on Coinbase. Source: TradingView.

Since then the price of bitcoin has rebounded somewhat, back up to $46,000.

As a result of the crash, more than $2.65 billion has been liquidated in the last hour, according to data from The Block Research.

A breakdown of liquidations in the last hour on multiple exchanges. Source: The Block Research.

During the price drop, El Salvador's president Nayib Bukele tweeted that he is "Buying the dip," and has bought a further 150 BTC ($6.9 million)— on top of the 400 BTC ($18.4 million) previously purchased.

The market became overconfident

Over the last few weeks, bitcoin funding rates had started creeping back up, from lows of -0.20% to a high of 0.12%, according to Bybt. Similarly, ether and other altcoins saw funding rates rise even higher — with ether's approaching figures seen during its peak in May. This indicates that traders were going leverage long, exposing themselves to the risk of a downwards drop.

Ahead of the crash, the market saw a surge in options put buying, indicating bearish sentiment in derivatives. The sell-off was led by ether and other long-tail cryptocurrencies, triggering cascading liquidations.

Over the past hour, there's been a rise in funding rates, indicating a stabilization of the market, according to crypto financial services firm FalconX. "Perp funding rates have collapsed from just over 5bps at peak to ~1bp currently," said head of institutional sales Aya Kantorovich. "Market seems to be finding its footing."