19th October 2021 > > El Salvador.

tl;dr

The BTC revolution in El Salvador

Market Snap

Market Wrap

The Rolling Stone magazine famously described Goldman Sachs (GS) as “The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”.

Putting aside that this terribly limited view of the world ignores the fact that capitalism is the sole cause of the relief of the many ills of poverty for most people on the planet, we know that GS does do a good job.

In a recent report GS noted that institutional investors around the globe are sitting on $19 TRILLION of cash.

To gain a sense of perspective, I refer you once again to this graphic:

https://pagetutor.com/trillion/index.html

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As cryptos become ever more accessible to institutional investors, if just 10% of this floating cash flows into cryptos, then BTC is over $100k.

Food for thought chaps and chapesses, food for thought.

Curious Cryptos’ Commentary – The US BTC exchange traded fund (ETF)

The ProShares Bitcoin Strategy ETF – based on futures – will start trading today with ticker BITO on the New York Stock exchange. I suspect most people expect a price rise for BTC.

As a long-term contrarian, I think there is a material probability that won’t be the case.

We will find out at 2pm UK time.

Curious Cryptos’ Commentary – El Salvador

In 2001 El Salvador made the decision to import their monetary policy from the US, by adopting the US dollar as the official currency.

There have been a few isolated examples (El Salvador being one of them) for which relinquishing control over domestic interest rates can work for a limited period.

There are many more examples where it goes horribly wrong.

The Asian crisis of 1997/1998 was caused by an unofficial but officially mandated importation of US monetary policy. There are of course more recent examples to which this principle applies for countries much closer to home.

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The International Monetary Fund (IMF) - lauded by those who maintain untrammelled faith in global institutions - has in the past been heavily critical of both El Salvador and Nigeria for their respective plans for crypto adoption.

No such criticism has been forthcoming from the IMF towards the US, the UK and France for their plans to adopt cryptos in the form of Central Bank Digital Currencies (CBDCs).

I wonder why that might be?

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Another vocal critic of El Salvador’s move to make BTC legal tender is Steve Hanke, Professor of Applied Economics at the John Hopkins University.

He justified his description of the decision to make BTC legal tender in El Salvador as “a very stupid one” by falling for a conspiracy theory:

“Dark forces clearly are behind this, that is the criminal element and the reason for that is the criminal element wants to be able to get in and actually obtain real legal tender.”

Does he mean USD? Which is surely the currency of choice for drug dealers?

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He goes on to claim that the fundamental value of BTC is zero, which is a charge that can be made against all currencies. Any means of exchange in value are only accepted if there is belief in that value. In this respect, gold (*), USD, GBP, EUR etc. are all the same.

I think Jamie Dimon, CEO of J.P Morgan, and Steve Hanke spend too much time together, reinforcing the walls of their own personal echo chamber.

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El Salvador is a notoriously underbanked country.

In the few weeks since the adoption of BTC as legal tender it seems that as much as 30% of the population are now using BTC.

President Nayib Bukele tweeted:

“2.1 million Salvadorans are ACTIVELY USING @chivowallet (not downloads).

Chivo is not a bank, but in less than 3 weeks, it now has more users than any bank in El Salvador and is moving fast to have more users that (sic) ALL BANKS IN EL SALVADOR combined.

This is wild!”

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BTC is bringing financial independence and financial options to some of the poorest people in El Salvador.

This can only be a good thing.

And in a similar vein to my comment the other day with regards to eNaira, the diaspora of El Salvador can now remit cash from overseas with vastly reduced fees by excluding the various blood sucking vampires who act as middlemen preying on the vulnerable (not Goldman Sachs by the way).

Gotta love cryptos. Their disruption and their enabling forces are greater than anything we have seen before now.

The crypto revolution will dwarf the impact that email and the internet have had on our lives.

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(*) I know that gold has a use in industrial applications (though very limited), and a widely known use in jewellery, but the sum of these two practical applications amounts to less than 2% of all gold mined from the earth to date.