Author: Dale Warburton

Dale is a former attorney turned passionate Bitcoiner with an interest in investments, macro, geopolitics, innovation, tech, nature, wildlife, MMA and Bitcoin (of course).

Categories
Bitcoin Crypto News Cryptocurrencies

“We’re Adopting Bitcoin for the Benefit of the People,” Says President of El Salvador

On 10 June 2021, El Salvador became the first country to adopt Bitcoin as legal tender. In an interview with Bitcoiner Peter McCormack on the “What Bitcoin Did” podcast, President Nayib Bukele provided additional context to the historic move, outlining how it would be implemented and how it would ultimately benefit Salvadorean citizens.

The Purported Benefits

In the discussion, President Bukele highlighted a number of key benefits to the newly enacted law, including:

  • Receiving remittances at the speed of light with almost no costs, compared to the slower and more costly fee structures of Western Union and the like. Importantly, personal remittances account for almost a quarter of El Salvador’s GDP
  • Providing financial inclusion to the 70% of the population who remain unbanked
  • Becoming less dependent on the output of new US dollars and resultant inflation due to an unprecedented increase in the money supply; in short, El Salvador wants to take back some control of its monetary system as it enjoys no benefit from the increased supply of US dollars, only the downside
  • Increased levels of financial investment and the attraction of global talent, particularly when coupled with forthcoming residency-by-investment laws.

Bukele noted that as the smallest country on the continent whose people had benefited little from the current system, it made sense for El Salvador to be at the forefront of an economic revolution by adopting a system that is open and free, rather than one dependent on another nation (referring to the US) which doesn’t necessarily consider the impact on countries such as El Salvador that use its currency.

The Roll-Out Plan and Government Wallet

The President is working towards having the law fully operational within 90 days, a target that is considered a stretch but achievable with requisite considerable effort.

El Salvador President Nayib Bukele

Within this aggressive timeline, government is also looking to roll out its non-mandatory government wallet which the President stressed would compete with free-market alternatives and existed simply to “fill in the gaps”. Specifically, the government wallet would provide transactional services (ie, free internet access) to those without reliable connectivity:

We don’t want a law that is only for the rich, not only for the middle class, we want a system that works for everybody … we want the most vulnerable economically to benefit from that.

Nayib Bukele

Is El Salvador the First of Many?

Since El Salvador adopted Bitcoin as legal tender and is potentially paying government employees in BTC, the question on everyone’s lips has been which country would be next. Following Bukele’s announcement, a slew of Latin American legislators adopted the Bitcoin laser-eyes on their Twitter profiles, signalling their intention to follow suit.

Reports suggest that Paraguay is likely to be next, but if we’ve learnt anything over the past 12 months in crypto, a lot and almost anything can happen in a very short space of time.

Categories
Bitcoin Crypto News

Michael Saylor Executes Corporate Treasury Strategy and Buys the Dip

Last week, MicroStrategy made headlines after it announced that it had closed a US$500 million offering in senior secured debt for the purpose of acquiring Bitcoin, in addition to raising $1.5 billion to buy even more. A short week later and the move has now officially been implemented.

Michael Saylor, nicknamed “Saylor Moon” by the Bitcoin community, made the announcement via Twitter:

Mixed Reactions

With MicroStrategy now holding over 0.5% of Bitcoin’s entire market capitalisation, the announcement has elicited the usual response from Bitcoin permabulls and permabears alike.

Cryptographer and Blockstream CEO Adam Back commented:

Diversification is for those without an investment thesis (paraphrasing Buffett).

Twitter

Others had a more humorous take:

Twitter

As Bitcoin’s price dropped on the news of China banning exchanges, Bitcoin sceptic Peter Schiff was quick to note:

That’s pretty bearish that you already bought all that #Bitcoin and the price kept dropping anyway.

Unsurprisingly, Bitcoin Twitter responded with a flurry of comments relating to gold’s underperformance over the past 12 months with memes ranging from the obscene to the hilarious:

Twitter

Who Else Has Been Buying Bitcoin?

Despite a drop in momentum over the past six months, the narrative in this Bitcoin cycle has been about growing institutional adoption.

If you’re interested in following the latest developments in this space, be sure to check out our Crypto Institutional Purchases List 2021, which we regularly update when new announcements are made.

Categories
Bitcoin Crypto News Market Analysis

Bitcoin Returns in Q2 2021 – Worst in Eight Years

Bitcoin’s performance in 2021 has thus far been a tale of two quarters. In Q1, Bitcoin enjoyed the best start to a year in eight years, outperforming traditional asset classes with returns of over 100%. Of late, however, much of the wind has been knocked from Bitcoin’s sails as Q2 has been the worst on record in eight years.

How Does Bitcoin’s Performance Compare to Previous Years?

Relative to past performance, Q2 appears to be somewhat of an anomaly. Over the past eight years, there have only been two quarters that have recorded negative returns. Bitcoin’s returns of -40.03% in Q2 2021 are by far the worst in eight years, the next closest being -6.7% in 2018.

Data by Skew Analytics

Ethereum Has Outperformed Bitcoin in 2021

It is often stated that other cryptocurrencies, relative to Bitcoin, tend to outperform on both the upside (during bull markets) and downside (during bear markets). Thus far, 2021 doesn’t appear to be following that pattern, particularly when it comes to Ethereum.

Compared to Bitcoin, Ethereum has enjoyed a better year to date with returns of 162% in Q1 and just under -5% in Q2.

https://au.investing.com/crypto/ethereum

Bitcoin Markets Remain Uncertain

For the time being, the market appears to be on edge, despite bullish announcements such as MicroStrategy moving to acquire up to an additional US$1.5 billion in Bitcoin.

While not an exact science by any measure, the Fear & Greed Index below suggests we have a way to go before sentiment can be said to have shifted in a positive direction.

While the short-term downward moves are cause for concern among long traders, particularly those using leverage, many Bitcoiners remain undeterred.

Volatility, in their eyes, is to be expected of an emergent store of value on a price discovery path towards global adoption. In the interim, they simply #stacksats, HODL and repeat the mantra, BTFD.

There are top analysts however, that are predicting BTC will hit $160k by the end of 2021.

Categories
Bitcoin Crypto News

In 2012, Only Computer Nerds Used Bitcoin, Now Countries Are Using It

Over the past decade, Bitcoin has evolved from obscure digital collectible held by cypherpunks to globally recognised institutional asset being adopted by countries such as El Salvador as a currency. Over the past decade, its value has skyrocketed and, with a compound annual rate of return of over 200%, it has outperformed all other asset classes by a factor of at least 10.

In a tweet by an avid Bitcoin supporter, outlines Bitcoin’s adoption so far.

— Charlie Shrem (@CharlieShrem) June 15, 2021

Given Bitcoin’s meteoric rise into mainstream discourse, it’s worth reflecting on some of its major milestones along the way.

Bitcoin’s Historical Milestones

2008 – The Bitcoin Whitepaper is published by Satoshi Nakamato.

2009 – Bitcoin is launched and towards the end of the year, the first exchange publishes an exchange rate of US$1 = 1,309.03 BTC.

2010 – The first real world transaction in Bitcoin takes place, the infamous 10,000 BTC for two pizzas, valued at $25.

2011 – Bitcoin achieves parity with the US dollar.

2012 – Bitcoin crosses $100 for the first time.

2013 – Bitcoin crosses $1,000 for the first time and the FBI shuts down darknet marketplace Silk Road (the market’s funds have since been returned).

2014 – The biggest exchange at the time, Mount Gox, is hacked with 840,000 Bitcoins stolen, valued at roughly US$460 million.

2017 – Bitcoin forks and reaches a new all time high of $19, 834.

2020 – Bitcoin reaches a new all-time high of $28,949 and institional adoption accelerates. Insurance companies buy bitcoin, the first bitcoin fund is launched, the first bitcoin ETF is launched and MicroStrategy becomes the first listed company to convert corporate treasury into bitcoin.

2021 – Bitcoin reaches a new all-time high of $63, 346. El Salvador becomes the first country to adopt bitcoin as legal tender. A growing number of companies accept bitcoin as payment.

You can view more events on Bitcoin Timeline by TradingView.

The Path isn’t Straightforward

Despite its exponential growth and increased global recognition, Bitcoin has had to overcome innumerable threats and challenges over the years. Notwithstanding, today it’s arguably as resilient and antifragile as ever.

While bitcoin remains somewhat de-risked relative to its early days, HODLing isn’t easy. If it was, everyone would do it:

Categories
Banking Crypto News Cryptocurrencies Stablecoins

What Are CBDCs and Stablecoins?

CBDC

Everything is being dematerialised and it’s no surprise that money is quickly moving in that direction too. Central banks around the world have recognised that digital currencies are here to stay and in response they are forming their own stablecoins, CBDCs.

What are CBDCs?

A CBDC (central bank digital currency) is simply a digital form of a fiat currency issued and regulated by a central bank and/or government authority. They can be classified as either retail or wholesale.

  • Retail CBDCs
    • Issued for all people and companies (or, put differently, the general public)
  • Wholesale CBDCs
    • Only used by permitted institutions such as banks
    • Used as a form of settlement for interbank transfers

Despite improvements in efficiency, a recent European survey showed that privacy remains the #1 concern when it comes to CBDCs. CBDCs would allow governments to automatically tax every transaction, to allocate funds away from specific individuals and, most importantly, provide visibility into every transaction and counterparty.

Are Stablecoins Different to CBDCs?

Stablecoins are a type of cryptocurrency whose value is tied to an outside asset, such as the US dollar or gold. Unlike CBDCs, issued by public authorities, stablecoins are issued by private companies. Therein lies the primary difference between the two.

Usually the entity behind the stablecoin will set up a regularly audited reserve asset base backing the stablecoin. Fiat is the most common collateral for stablecoins (as is the case with Tether and USDC), but others are pegged to precious metals or other cryptocurrencies.

What’s the Current Regulatory State of Stablecoins and CBDCs?

Over the past few years, stablecoins have continued to enjoy increased levels of acceptance among regulators. Most notably in January, the US Office of the Comptroller of the Currency (OCC) announced to the 1,100 banks and federal savings associations that they can issue payments with stablecoins to their clients. The UK Treasury also took steps towards regulation, recognising the important role stablecoins may play in settling and clearing large transactions in capital markets.

Some argue that CBDC projects have been initiated largely in response to the growth in the use of stablecoins, but not all governments agree. At present, there are 77 CBDC projects in either research, pilot or close to production stages.

Some, such as the Bank of Japan, are in the early research/experimentation phase, while others such as the “Sand Dollar” by the Central Bank of the Bahamas is already in full production. The People’s Bank of China’s “DCEP” appears to be in late test stages with the general public and as recently as May 2021, the US Federal Reserve in collaboration with MIT announced it was pursuing its own digital dollar currency project – dubbed Project Hamilton.

Stablecoins and CBDCs backdrop

The Race is On

At this stage, it remains unclear how stablecoins and CBDCs will coexist in a future fully digitised economy. In some respects, it looks to be a race between corporates and governments.

In the short term, it is unlikely that growth in the use of stablecoins between merchants, corporates and retail will subside. It also seems reasonable to expect more robust regulatory frameworks and increased competition and development of CBDCs over the coming year.

Despite a lack of clarity, one thing is certain: the race is on as to which digital currency will be the first to be recognised as legal tender.

Categories
Bitcoin Crypto News

MicroStrategy Buy Another $500 Million Worth of Bitcoin

Michael Saylor is at it yet again, this time issuing debt to buy more bitcoin. Yesterday, he announced via Twitter that MicroStrategy had closed an offering of US$500 million in senior secured notes due in 2028 at an annual rate of 6.125%.

In the formal press release, some interesting information emerged:

  • MicroStrategy’s existing approximately 92,079 bitcoins are being held by a newly formed subsidiary, MacroStrategy LLC
  • The notes are fully and unconditionally guaranteed by MicroStrategy Services Corporation and certain subsidiaries (existing and formed in the future), and secured by all assets within such entities, including bitcoin acquired on or after closing
  • The notes however would not be secured by any existing bitcoin or bitcoin acquired from the proceeds of any sale of existing bitcoin

MicroStrategy May Sell $1 Billion in Stock to Buy More Bitcoin

In addition to the announcement above, MicroStrategy filed paperwork for the proposed sale of up to $1 billion in class A common stock, essentially giving the company the ability to sell stock, from time to time, as it deems fit.

Founder and CEO Michael Saylor has embraced the laser-eyes meme

According to the filing with the Securities and Exchange Commision (SEC):

We intend to use the net proceeds from the sale of any class A common stock offered under this prospectus for general corporate purposes, including the acquisition of bitcoin.

While it is not clear how much of the proceeds would be used to purchase more bitcoin, it would be surprising if Saylor deviated from the “convert corporate treasury into bitcoin” strategy that has been in place since last year.

Is the Bet Paying Off?

So far, with the Bitcoin price hovering at around US$40,000, it would appear as if it has:

As Dan Held has said, for a company called MicroStrategy, this strategy may well be one of the best macro strategies yet.

Who Else Has Been Buying Bitcoin?

If you’re interested in following the latest developments in this space, be sure to check out our Crypto Institutional Purchases List 2021 which we regularly update when new announcements are made.

Categories
Bitcoin Crypto News Market Analysis

On-Chain HODL Waves Provide Bullish Signals for Bitcoin

On-chain analytics provide a unique data-driven glimpse into the innumerable dynamics at play within the free market for digital monetary technology. According to a recent article by on-chain Bitcoin analytics firm Glassnode, there are several indicators suggesting that this bull run is far from over.

Key points:

  • Long-term BTC HODLers continue to accumulate during bear markets
  • A new bear market BTC accumulation phase has started
  • Current bull cycle top has not yet been reached

Long-Term HODLers Continue to Accumulate

To illustrate, the chart below shows supply accumulation by long-term HODLers and how it consistently peaks during the bear markets.

Based on historical patterns, it would appear that a market top remains some way away.

Glassnode, 2021

Long-Term HODL Conviction Continues to Grow

To elaborate on an earlier point, Bitcoiners and smart money generally implement a simple strategy: accumulate Sats as cheaply as possible and then realise profits (if at all) late in the bull cycle. On-chain data reflects this as long-term HODLers increase holdings during bear markets and withdraw into cold storage.

This is outlined in the HODL waves chart below where it can be seen that older age bands (cool colours) are increasing in thickness, suggesting that coins are maturing and are held by strong hands. The thicker these cool bands become, the more supply is owned by long-term HODLers. As old coins are spent, they become reclassified as young coins (warm colours) with a corresponding increase to young HODL wave thickness.

Since Bitcoiners usually only spend their coins late in the bull cycle, one of the ways to identify a shift in macro sentiment is if there is a noticeable swelling in the young age bands.

Comparing the thickness of young age bands relative to previous market tops, it is evident that if history were to repeat itself, then this bull cycle is likely to accelerate further for some time.

Glassnode, 2021

This sentiment is also reflected in the Realised HODL ratio, which describes the cyclical nature of wealth transfer from weak hands to strong hands.

Importantly, bull market tops have been characterised by long-term HODLers transferring a portion of their wealth to new investors. This results in an increased liquid supply and creates a new maximum number of new holders.

Based on historical patterns illustrated in the chart below, it could be argued that a market top in this bull cycle remains out of sight, at least for the time being.

Glassnode, 2021

On-Chain Analytics: Best Viewed in the Broader Context

Despite these positive metrics, analysts often caution investors against relying entirely on on-chain analytics. In an emergent space with an array of diverse participants, each with their own incentives, it is important to always consider the broader context, including technical and fundamental analysis.

Interested in On-Chain Data? Read Further …

In March this year, we reported that a data metric called NRPL (Net Realised Profit/Loss) showed that people were taking profits – with the metric dropping negative for the first time since September 2020.

Categories
Bitcoin Crypto News Regulation

It’s Official, Bitcoin is Legal Tender in El Salvador – How it Will Work

El Salvador

In a historic move for the story of global Bitcoin adoption, the El Salvador legislative body has officially voted in favour of a bill adopting Bitcoin as legal tender.

On June 9, in a vote of 62 in favour, 19 opposed and 3 abstentions, history was made. All that’s left is for the president to sign it into law, expected to happen June 10.

This news following the breaking news on June 7, where Nayib Bukele, President of El Salvador, at the Bitcoin 2021 conference, announced that he would be submitting a bill to Congress that would effectively treat Bitcoin as legal tender.

Users Won’t Require a Government Issued Wallet

President Nayib Bukele discussed the development with Coindesk columnist Nic Carter, highlighting financial inclusion and noting that users won’t necessarily be required to have a government digital wallet. However, businesses would be mandated to accept Bitcoin for the sale of goods and services.

A Trust Fund Will Manage Bitcoin’s Volatility

To manage the volatility of the cryptocurrency, a trust fund would be set up to instantly convert Bitcoin to US dollars, effectively transferring the volatility risk to the trust. From time to time, the trust would replenish its US dollars through the sale of Bitcoins.

If there’s an ice-cream parlour [and the owner] doesn’t really want to take the risk, he has to accept Bitcoin because it’s a mandated currency but he doesn’t want to take the risk of convertibility, so he wants dollars deposited in his banking account and when he sells the ice cream, he can ask the government to exchange his Bitcoin [for] dollars. Of course he can do that in the markets also but he can ask the government to do it immediately.

Nayib Bukele, President of El Salvador
El Salvador President
Nayib Bukele’s recently updated Twitter profile image: note laser eyes

Government officials are expected to meet with the IMF later in the week. Analysts eagerly await the outcome of the meeting as their response is likely to set the precedent for other nations following suit.

Categories
Bitcoin Crypto News Hackers

BTC Wasn’t Hacked; the FBI Just Seized Control of the Bitcoins via the Server

FBI

Following a ransomware attack last month, US investigators have seized close to 64 Bitcoin valued at approximately A$2.73 million. Bitcoin’s price dropped by almost 10 percent on the news and commentators were left speculating as to how this might have occurred. Some claimed the Bitcoin wallet was hacked, but this was not the case.

How It Was Reported

Mainstream commentators and cryptosceptics were vocal from the outset, some implying that Bitcoins could be seized by law enforcement agencies at will:

Bitcoin Community’s Response

The Bitcoin community, in characteristic fashion, fired back promptly with a barrage of tweets, some charitable and others less so:

What Really Happened

In the end, it was Blockstream CEO Adam Back who offered a considered response to help clear things up:

Bitcoin commentator Marty Bent, however, remained somewhat suspicious:

How could these attackers be smart enough to take down a vital piece of energy infrastructure but too dumb to run their own full node with a connected xpub associated with a dedicated device?

https://tftc.io/martys-bent/issue-1008/

While we may never know all the details as to how the Bitcoins were recovered, Bitcoiners were quick to point out that the episode proved how unsuitable Bitcoin is for illicit activity.

As to how this may occur, respected BTC developer Matt Odell offered a neat summary:

Related reading:

Categories
Australia Crypto News Cryptocurrencies Cryptos Data Investing Surveys

40% of Australian Millennials Prefer Crypto Over Real Estate

As Australians become increasingly interested in alternative investments, a recent survey by international cryptocurrency exchange Kraken has found that 40 percent of millennials prefer investing in digital assets over real estate.

More Than a Million Millennials Will Buy Crypto in the Coming Year

The findings arrive on the back of a global property market boom elevating house prices to record levels across most Australian capital cities.

Other findings of the report include:

  • 40% of millennials and 31% of Gen Zs believe crypto is a good alternative to property
  • 20% of crypto investors view crypto holdings as being useful in saving for a home or investment property deposit
  • On average, Australian crypto investors have 12.5% of total assets in cryptocurrencies
  • 10% hold more than 25% of total assets in digital currencies
  • Just under 25% of investors are long-term HODLers

As real estate investment becomes increasingly elusive, the report notes that up to 4 million Australians will be buying cryptocurrency in the coming 12 months, a third of whom are millennials. Up to 67 per cent of this group were found to believe that digital assets are a good alternative to an investment property. We also saw recent survey results that 49% of Money Invested into Bitcoin Would Have Gone into Stocks with over 62,000 answers, shows the percentage breakdown of investor capital by markets that was invested into cryptocurrencies..

Kraken Optimistic About APAC

Jonathon Miller, Kraken’s Australia-based managing director, says that cryptocurrency adoption in Australia is growing at a rapid pace with the bulk of demand rather unsurprisingly stemming from millennials and other younger generations. Miller notes:

Australians maintain some conservative attitudes towards investment. Property has been a cultural norm and high on the wish list for most investors, but as affordability continues to be an issue we’re seeing more young people look for other options to grow wealth.

Jonathon Miller
Jonathon Miller, Kraken Australia MD

Miller maintains a positive outlook for the broader Asia-Pacific region and confirms what many have long suspected, that youth is undoubtedly leading the way in crypto adoption:

We’re confident that as more investors look to diversify their portfolios and seek investment opportunities outside of the traditional offerings, we’ll see cryptocurrency come into its own in APAC.

Jonathon Miller

In related news: