June 9, 2021 | Issue #172

MUST READS

El Salvador’s Legislature Votes to Adopt Bitcoin as Legal Tender

Just hours ago, El Salvador became the first country to make Bitcoin a legal tender.

The president intends to sign the bill into law later tonight or early in the morning. 62 members of the legislature voted in favor of the bill, with 19 opposed and three abstentions.

Since BTC is now legal money in El Salvador, capital gains on it will no longer be taxed. Additionally, El Salvador’s government said it will hold Bitcoin as a reserve asset and offer attractive incentives for individuals and companies to move to the country.

The new law also makes several proposals around how the country should adopt the cryptocurrency. This includes requiring any business — whether it be for acquiring a good or service — to accept payments in crypto, allowing people to pay their taxes in bitcoin.

And as this goes to press, lawmakers from Panama, Argentina, Paraguay, and Brazil are looking to follow El Salvador's lead.

On Tuesday, the President of El Salvador, Nayib Bukele, joined Nic Carter, Balaji Srinivasan, Caitlin Long, and others, on a Twitter Space to discuss the bill. You can find a summary of the conversation here.

This is a big deal. Stay tuned.

In other news... volcanoes?

Did The FBI Just Hack Bitcoin?

We've learned over the years that crypto trades a whole lot on momentum. Like most volatile assets, when there's good news – prices typically pump. Inversely, when spooky headlines hit the newswire, prices falter.

That was exactly the case this week, shortly after the announcement of the Justice Department's successful bitcoin recovery from the fuel pipeline hackers.

Rapid Reaction: "THE FBI JUST HACKED BITCOIN!!"

The Real Story: The FBI’s breach of a bitcoin wallet held by the cybercriminals who attacked Colonial Pipeline is all about sloppy storage, and not a reflection of a security vulnerability in the cryptocurrency.

Here's a simple explanation of what went down. And a more in-depth one here.

Saylor is Nutso

MicroStrategy CEO Michael Saylor announced that the cloud software company plans to buy more bitcoin, but this time more unconventionally. It also announced those bitcoins will be held under a new subsidiary called MacroStrategy.

The company is seeking to raise funds through the sale of $500 million aggregate principal amount of senior secured notes due 2028, which will bear interest at an annual rate of 6.125%, in order to fund its next purchase. Unlike the previous two offerings, however, these bonds are "vanilla", not convertible, and they are secured by the company's assets.

Bloomberg describes the corporate debt being issued for the latest Bitcoin buy as "junk bonds," meaning they're at a higher risk of default. In the SEC filing, MicroStrategy indicated that the company was taking an impairment loss of $284.5 million, due to fluctuations in bitcoin’s price in Q2.

Despite all the hot takes and an unfavored market reaction following the announcement, let's not forget MicroStrategy had soared to a two-decade high in February with unrealized gains of over $1 billion. Saylor also made it clear (again) on stage at the Bitcoin 2021 Conference in Miami that MicroStrategy does not plan to sell any bitcoin.

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DEEP DIVE

Bitcoin Gains by Country: Who Benefited the Most from the 2020 Boom?

2020 was an important year for Bitcoin, as an influx of institutional dollars spurred the asset to new all-time highs. But who benefited most from its booming prices? In a new report, Chainalysis breaks down estimated bitcoin gains in 2020 by country.

U.S. investors collectively made over $4 billion in realized bitcoin gains in 2020, more than 3x the next highest country, China at $1.1 billion.

Here are some other countries that punched above their weight:

Vietnam ranks 53rd in GDP at $262 billion but 13th in Bitcoin investment gains at $351 million
The Czech Republic ranks 54th in GDP at $251 billion but is 18th in Bitcoin investment gains at $281 million
Turkey ranks 25th in GDP at $761 billion but 16th in realized Bitcoin investment gains at $300 million
Spain ranks 19th in GDP at $1.4 trillion but 9th in realized Bitcoin gains at $554 million

On the other hand, some countries underperformed. India for example has the fifth largest economy with a GDP of $2.9 trillion, yet ranks a surprisingly low 18th in bitcoin investment gains at $241 million.

See the rest of the results here.

Square Puts Some Money Where Their Mouth is

The environmental impact of mining for bitcoin has come under intense scrutiny over the past few months – a development that reportedly has scared away some institutional investors and contributed to the recent decline in the price of bitcoin.

But to show the world that bitcoin can indeed be a net positive for the environment, Jack Dorsey’s payments company, Square, has teamed up with Blockstream, the Bitcoin technology firm behind the Liquid Network, to launch a renewable Bitcoin mining project.

Square plans to create a public dashboard for the new "solar-powered bitcoin mining facility" and it will serve as a “transparency case study” for Bitcoin mining and renewable energy.

CoinMetrics: Trading Volume Trends

The past month was an outlier in many ways as meme coins like DOGE dominated headlines and the entire market went through a crash.

Although it’s still too early to tell whether these trends will last or if they were just a flash in the pan, trading volume data provides some insights.

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REGULATORY FRONT

The Crypto Crackdown in China Continues...

Bitcoin miners in one of the major economic and technological development zones in China's Xinjiang province have been ordered to shut down all crypto mining activities by today.

The Zhundong Economic Technological Development Park is a 15,500 square km area home to a variety of coal production industries and also houses some of the largest bitcoin mining facilities in the country due to the high capacity of fossil fuel energy.

The instruction was based on the high-level bitcoin trading and mining crackdown comment brought up during the China State Council meeting last month.

In other China v. Bitcoin news, a slew of crypto-related accounts in China’s Twitter-like Weibo platform were blocked over the weekend.

CFTC Commissioner Criticizes DeFi

In a June 8 keynote address, Commissioner Dan Berkovitz of the Commodity Futures Trading Commission spoke out against DeFi stating that there are no intermediaries that regulators can charge with protecting investors.

He described such a system as "a Hobbesian marketplace" and said of unregulated DeFi markets that he does "not see how they are legal under the CEA," while also repeatedly using Wikipedia as his "source." 😆