El Salvador Volcano Bonds, Explosive
Bitcoin is concentrated digital energy that is strong, true, pure, & timeless — Michael Saylor, CEO MicroStrategy
Back in the day I remember “Michael” was a very common name. There were always a few in every class. I’m glad parents got a little more creative as years went on and that the name “Michael” is now reserved for Giga Chad bitcoiners like Saylor and I — kidding, however he is certainly the king of us Michael’s in my books. Did you see his announcement this week? MicroStrategy acquired another 7,002 BTC! Leave some for the rest of us, right? I actually had a few folks reach out to me concerned that bitcoin might become worthless once MicroStrategy owns all of it… After this purchase they own 121,044 BTC which is just over 0.5% of BTC supply — nothing to worry about.
Watch him orange pill Tucker Carlson and millions of his viewers here:
What we saw at the desk — Dan Wright
Congrats to all those that took advantage of the Black Friday prices last week!
BTC and ETH up 7.2% and 17.6%, respectively from the lows with the big winner on large caps being SOL — up 32%!
Volatility was the name of the game this week as news of the new covid variant, Omicron, produced big swings in the stock market.
Fed Chair Jerome Powell said the central bank will discuss accelerating its wind down of bond purchases (known as tapering) at its December meeting.
Powell said “transitory” should no longer be used to describe inflation and the market was surprised by a more hawkish Fed Chair given the fears about new covid variant, inflation and lack of data on the new Omicron threat to date.
In my past life as a speculative FX trader I always looked forward to the first Friday of the month for the US and Canadian job reports.
CDN Employment change 153.7k vs 36.5k expected
CDN Unemployment Rate 6.0% vs 6.6% expected
US Non-Farm Employment Change 210k vs 553k expected
US Unemployment Rate 4.2% vs 4.5% expected
Big miss in the US jobs report could lead to a slowdown in taper talk by the Fed with the possibility of more stimulus in the new year. Stock futures up before the open and weaker USD on the news.
How does all this affect the crypto markets? BTC/USD and ETH/USD held up surprisingly well with ETH/USD close to testing all time highs once again. Both are still in firm up trends within their channels.
See weekly charts below. We were net buyers on the desk with the last month of the year setting up to be strong!
El Salvador’s Volcano Bond, For Dummies
I’ll admit, when I first heard of the Volcano Bond, to be honest I immediately wrote it off. I think we really do ourselves a disservice sometimes as it relates to how we market bitcoin. Why not Bitcoin Bond? Anyway, I wrote it off as I thought it was gimmicky — similarly to how I wrote off El Salvador’s legal tender announcement. Maybe it’s because El Salvador in my mind is so tiny that I just don’t take it seriously. However, I was wrong about the legal tender announcement being no big deal and I believe that I’m also wrong about the Volcano Bond. I kept seeing it over and over again and noticed a few credible (less maximalist) people speaking it’s praise so I decided to take a closer look and boy was I wrong. Don’t judge a book by its cover.
El Salvador’s President Bukele took a page out of Michael Saylor’s MicroStrategy playbook when he announced last week that El Salvador would issue the first ever Volcano Bond. He said that the bond would be issued in 2022, but suggested that it could be as soon as in 60 days time.
The bond will offer a 6.5% coupon, or the rate of annual interest payments. In addition, investors will receive dividends generated by staggered liquidation of bitcoin holdings, which will begin from the sixth year.
Half of the $1 billion raise would be converted to bitcoin and the other half used for infrastructure and bitcoin mining.
So, why would you buy this bond when you can simply buy BTC or, if you’re betting on El Salvador why not simply buy it’s 10–year government bond which currently yields around 13%? 6.5% sounds like a pretty crappy deal, albeit a way better deal than the U.S. 10-year Treasury, which yields about 1.5% (risk free).
Well, if you’re a bitcoiner, you probably don’t have much respect for the International Monetary Fund (IMF). So, here’s a chance to tell em’ how you feel — with your wallet.
How about all the ridiculously rich bitcoiners that want to support El Salvador’s attempt at a Bitcoin City? If you’re sitting on thousands of BTC you have probably been in bitcoin for many years and got in and stayed in because of your belief that bitcoin can fix the world — well, if you’re not selling coins for lambos, here’s your opportunity to give back. Oh, and whatever you invest might greatly enhance the rest of your stack because if El Salvador’s offering is quickly over-subscribed, don’t you think other countries will start to wonder if they could do this as well? The game theory is brilliant.
Since the bond will be issued on Bitfinex (and likely other exchanges) in $100 tranches, traders and investors can look at them as a sort of stablecoin since it will be completely liquid and will trade 24/7 like the rest of the crypto market.
If El Salvador proves out this concept and other countries follow suit, these moves would absorb enough bitcoin to push up the value in a beautiful chain reaction.
In case you missed it…
- Goldman Sachs and other big banks exploring bitcoin-backed loans https://www.coindesk.com/business/2021/12/02/goldman-sachs-other-wall-street-banks-exploring-bitcoin-backed-loans-sources/
- Grayscale looks to fight back against the SEC https://www.trustnodes.com/2021/12/01/grayscale-prepares-to-sue-sec-over-spot-bitcoin-etf
- MicroStrategy acquires another 7,002 BTC https://markets.businessinsider.com/news/currencies/michael-saylor-microstrategy-crypto-bitcoin-buy-holdings-sell-stock-2021-11
- Jack’s Square changes name to Block https://www.cnbc.com/2021/12/01/square-changes-corporate-name-to-block-.html
- Jack leaves Twitter, goes all in on Bitcoin https://www.cbc.ca/news/business/twitter-ceo-jack-dorsey-1.6266503
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