Skip to content

You're viewing content for the United States. Select your region for information relevant to your location.

Stormrake
Sign up

Welcome to Bitcoin City!

· Regulation · Stormrake

  • BTC
  • COMP
  • ENA
  • ENS
  • ETH
  • TRX
  • UNI

Welcome to the Stormrake Monthly Australian crypto market & education update.
For sophisticated investors who want to expand their crypto knowledge.

Summary:

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

* Bitcoin hit another all time high in November prior to falling 22% from those highs and recovering much of that. 
* Bitcoin City was announced. A brand new city with no Income Tax or CGT, where Bitcoin is legal tender.
* Inflation has reared its head in the US and Australia as a flow on effect from earlier money printing
* Equities were hit hard by news of another strong variant of Covid-19

or Read below for all the detail.

Inflation continues
 

Some of our readers may have noticed that petrol prices are higher. The September quarter numbers released by the ABS (Australian Bureau of Statistics) show that maximum unleaded prices rose to the highest level ever recorded due to "higher global oil prices amid economic recovery and supply disruptions". A closer look shows furniture prices are going through the roof in Australia as well as cars. If you haven't checked your car's value recently, you might be pleasantly surprised. However, don't sell your car to see how much you've made because you will struggle to buy another one at a descent price.

Let's have a look at what's happening in the US:

* Inflation annual 

The US is experiencing high inflation only a year after everyone thought inflation wasn't possible while the economy was struggling.

The Fed came out to say this is nothing to worry about because inflation is just "Transitory". Here's the exact extract - "Inflation has risen, largely reflecting transitory factors". The Fed was trying to say that this is a temporary blip and prices will return to normal (it's just covid). No one at this office bought that line and the graph above shows inflation kept rising. 

Now we are at the next stage of government narrative. Blame someone else:

Elizabeth Warren is a Senator in the US Congress. Here she blames corporations for gauging you but is that really the truth of the matter. 

Let's have a look at money supply again:

Grey area shows an incredible increase in money supply (M2). This has never been rolled back. In fact, the printing has been increasing. The astute reader might notice the graph isn't up to date though. Well that's because the M2 supply statistics have been discontinued, meaning we can no longer see clearly exactly how much money is being minted. One thing is for sure however, this amount of money printing eventually leads to higher prices whether you are Turkey or the United States of America.

This all leads us to the final questions?

1. Why should I care?

Inflation can be the least understood and biggest "tax" you will ever pay. Pensioners relying on their nest eggs for retirement are currently getting killed by inflation after enduring years of getting almost nothing on their term deposits and fixed income. All those investors making 10% in equities might be saddened to find out that they still can't afford a new car especially considering the CGT they will be paying on the equities gains. First home buyers saving for their first home will never be able to afford one if they save in dollars.

2. What can I do about it?

Hold Assets

Wealthy people know that you don't store your money under the mattress in dollars. You have to hold assets that can't easily be printed like dollars can. The hardest of those assets is Bitcoin which not only has a finite supply but you know exactly what that supply is. There will never be any more than 21 Million Bitcoin and there's a decentralised network out there protecting that. By buying Bitcoin you become immune to the wealth destruction created by central bank money printing. 

So, what is Bitcoin City? Well, the president of El Salvador is not content with just being the first to make Bitcoin legal tender. Now there are plans to build a physical Bitcoin City in El Salvador. Nestled on the coast, at the foot of a volcano, in an are close to Honduras and Nicaragua lies the site of a future city that will carry Bitcoins name. The city will be the worlds first to be free of income tax and Capital Gains Tax as well as Payroll Tax and Property Tax. The only levied tax will be GST and the infrastructure will be financed by Bitcoin backed Bonds that have a 6.5% coupon and a possible bitcoin bonus. I know, sounds a mix of insane and impossible but so far everything that president Bukele has promised has come true and in good time. He is leveraging the talent of some of the greatest minds in the crypto space for ideas and the ability to pull this off. The city incentivises people to move there from all over the world and it may just work because the economy will have Bitcoin at its centre - a currency that can't be manipulated.