El Salvador innovates Bitcoin usage by bringing in bond markets

Welcome to the Stormrake Monthly Australian crypto market & education update.
For sophisticated investors who want to expand their crypto knowledge.
Written by Michael Milmeister with research from the Stormrake Team

* Is this the most important volcano in the world? - Izalco Volcano in El Salvador's Cerro Verde National Park  with thanks to Kraig Lieb

Summary:

If you are a busy investor that doesn't have time to read this whole newsletter here is a brief summary:

* The world's first country (El Salvador) officially set Bitcoin as legal tender and we devote this month's newsletter to El Salvador. The Volcano pictured above is set to be the power source for a new bitcoin mining operation in El Salvador.
* Microstrategy (NASDAQ: MSTR) completed another enormous capital raising for Bitcoin investment
* Markets have continued trading in a sideways pattern between 30K USD and 40K USD
* Coins continue to pass from small speculators to strong hands (long term large hodlers)
* Bitcoin dominance increased significantly in June now over 45% of all crypto value.
*Chinese shutdown of mining operations is seen as the biggest dampener on prices
* Taproot is now locked in - Taproot will be a soft fork that brings some improvement to the Bitcoin network including some greater privacy. We will focus on this in next months newsletter

or read below for all the detail.

Countries adopt Bitcoin.

In brief, my view is that the news of El Salvador adopting Bitcoin is incredible. I always said that it is inevitable that countries will start adopting Bitcoin, but I thought we would be waiting until the next cycle in 2025 to see this. I was wrong. It's all happening now and it makes the case for a double pump in 2021 much stronger. I don't like price predictions, but Plan B (the creator of the Stock to Flow model) has been quoted saying: Bitcoin (BTC) could trade at an eye-watering $450,000 by the end of 2021, while $135,000 would be the “worst-case scenario”. 

Now you might laugh and say that El Salvador is a small country and insignificant globally. Well, yes, El Salvador is the 148th biggest country in land size (10 times smaller than the state of Victoria), Ranked 107th in population (marginally larger than Victoria) and 102nd in GDP (1/20th of Victoria). 

That's all true but.....

1. El Salvador is experiencing a boom as a direct result of this exposure and the opportunity is now there to become a Central American financial capital. El Salvador will attract foreign talent by allowing citizenship for investing 3 BTC in the local economy. It will seek to set up a crypto hub including high speed internet and it will encourage Bitcoin mining using renewable and cheap power from the very volcano pictured above. El Salvador is likely to get first mover advantage on this, and could look like a very different country 5-10 years from now.
2. Someone has to take the first step and this opened the door for others. Paraguay is already introducing legislation around Bitcoin, a country that is much larger and has a slightly bigger population and Economy. Then there is Tanzania and Tonga. Tonga will look to invest up to a third of its sovereign fund into Bitcoin directly. 

I'll cover more of the El Salvador news later but let's take a look at something quite different yet very linked. Our fundamental understanding of money needs to change and evolve to really understand the significance of Bitcoin:

A look at Money in popular culture. 
Ren - Money Game Pt2

This is a Rap song I came across recently thanks to my 12 year old son. He showed me the song because he thought I might be interested in the lyrics so let's take a look at an excerpt of the song and discuss:

"Money is a game and the ladder we climb
Turns a saint into a sinner with his finger in crime
I'll break it down for you m........... line by line
This is business economics in a nursery rhyme
She sells seashells on a seashore
But the value of these shells will fall
Due to the laws of supply and demand
No one wants to buy shells 'cause there's loads on the sand

Comment:
The author is talking about how the government controls money supply leading to distortions in the economy that in turn lead to wealth disparity and allow those that control the money supply to have all the power and even lead to war and injustice. I don't want to get into that too deeply but let's have a look at the first couple of lines and you can explore the track yourselves if you like later.

Seashells used to literally be money and that form of money went to zero for the obvious reason that it was easier to go and collect seashells then it was working all day and getting paid in seashells. Too much supply leads to the money being worthless. The dollar suffers from this issue because it can be printed cheaper than it is currently selling for. The people that print the money benefit from the printing and the last 2 years have seen more money printing for both USD and AUD than ever before, which devalues the dollar and destroys the savings of anyone holding dollars (or seashells). Bitcoin however, solves this. It has a hard supply limit of 21 Million BTC, and no one has the authority to print more. 

Step one: you must create a sense of scarcity
Shells will sell much better if the people think they're rare, you see
Bare with me, take as many shells as you can find and hide 'em on an island
Stockpile 'em high until they’re rarer than a diamond

Comment: If you control the currency you can pretend it is scarce by releasing only part for circulation. This happens with Diamonds for example. It also happens with digital currencies that have a small circulating supply but no hard cap on supply (or heavy centralisation where the rules can change - be wary of shit coins)

Step two: you gotta make the people think that they want 'em
Really want 'em, really fuckin' want 'em,  hit 'em like Bronson
Influencers, product placement, featured prime time entertainment
If you haven't got a shell, then you're just a f...... waste, man

 Comment: We talk often about why terrible crypto projects sometimes do well and its a concept called "proof of marketing". DOGE is a proof of marketing coin. Rising because of viral marketing and advertising via Elon. It's not hard money though and has a huge supply and concentration of ownership.

Listen to the track yourselves and let me know what you think. I just love that artists can sing about really important money concepts and our kids are listening to something that isn't just popular garbage.

Let's get into the report: