The Wolf Den #861 - El Salvador
It's complicated...
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In This Issue:
El Salvador
BTC "Should" Cool Off. Good Luck With That!
Altcoin Charts - Weekly Levels
Legacy Markets
Wild Predictions Are Back - Beware
Explain Bitcoin Mining To Me Like I Am 10 Years Old
Robinhood Traders Are Back
Could This Rumor Be True?
We Are Greedy
BlackRock Seeded ETF Fund
Bitcoin Hits $42K - INFLATION IS YOUR FAULT!!! Macro Monday
El Salvador
On June 5, 2021, President Nayib Bukele of El Salvador made a historic announcement at the Bitcoin Conference in Miami, declaring a bill to adopt Bitcoin as a legal tender in the country. The news sent shockwaves of excitement and vindication through the Bitcoin community, envisioning neighboring countries following suit and grand promises of transforming the nation and setting a global standard. However, the reality turned out to be far more nuanced than this optimistic black-and-white scenario.
El Salvador was widely praised by the Bitcoin community for turning to an open-source, inclusive, and decentralized system to issue their “volcano bonds.” Instead of looking to the banks or IMF, the sovereign nation decided to attempt an unprecedented experiment. Their billion-dollar bond raise was the first of its kind, slated to happen on a Bitcoin side chain called Liquid Network. Once finished, the money was to be split 50-50 between buying Bitcoin and building a city.
Rarely do things in crypto go as planned.
Before delving into the many issues in El Salvador, it's essential to shed light on the often-overlooked history of the nation. El Salvador's 20th century was characterized by economic inequality, political turmoil, and a devastating civil war from 1979 to 1992. The era witnessed military coups, elite power concentration, and widespread human rights abuses. Acknowledging this historical context is crucial to understanding the challenges the country faces today.
While it's evident that El Salvador is currently on a positive trajectory, the nation is far from flawless. Positioned prominently under the global financial spotlight, El Salvador faces an undue burden of expectations, particularly from Bitcoin enthusiasts who may not necessarily prioritize the nation's best interests. Furthermore, many of the citizens of El Salvador are publicly anti-Bitcoin because other more important basic survival needs of the country are still not being met.
It should be clear at this point that El Salvador is not an easy topic to discuss.
Let's now paint a picture of Bitcoin in El Salvador today. Firstly, Bitcoin is not widely accepted as a currency, except in the small beach town of El Zonte. Many hotels, shops, restaurants, and businesses outside of El Zonte don't accept Bitcoin, and little is done to address this issue. Despite legal promises, much of the country doesn't even accept credit cards, indicating that Bitcoin is far from achieving universal acceptance as mandated by Bukele’s law.
Article 7: Every economic agent must accept bitcoin as payment when offered to him by whoever acquires a good or service.
With low Bitcoin acceptance, the progress of other initiatives, including the Chivo Wallet, Bitcoin bonds, a Bitcoin city, and volcano mining, can be inferred. Unfortunately, these projects have not delivered their anticipated results. Frankly, Salvadorans are not concerned about Bitcoin. With gang violence persisting as a daily reality (but dramatically decreased over the past few years), widespread food insecurity, and 70% of the population lacking a bank account, Bitcoin appears to be nothing more than a PR stunt in the eyes of many Salvadorans.
While this may sound concerning, there is more to discuss. Nayib Bukele's political system is viewed by many citizens as authoritarian, whereas Bitcoin, in stark contrast, embodies the essence of freedom. Without passing judgment on the country, its leaders, or laws, it's important to note that the notion of freedom in the country is not without its complexities. For example, today’s publication could land me in all sorts of trouble if I was a Salvadoran.
In the upcoming February presidential elections in El Salvador, it is highly likely that Nayib Bukele will secure re-election. Bukele's new law permits consecutive terms, citing human rights as the basis. While again refraining from passing judgment, it is evident that the current landscape involving Bitcoin, freedom, and overall well-being in El Salvador is incredibly complex and delicate. Adding to the nuance, El Salvador has only now seen a positive return on its Bitcoin position.
Take a look at this message from Nayib Bukele on Twitter.
While challenges persist, hope is not lost for El Salvador; in fact, the opposite holds true. Violence is at a low, making the country safer for citizens and tourists than it has been in a very long time and the exploration of freedom money, i.e., Bitcoin, continues, despite its slow pace. Although there's an arguable sidestep from democracy, President Bukele enjoys general popularity, and it seems that the end goals are centered around hope, freedom, and prosperity.
These things take time.
I truly enjoy sharing these brief updates on El Salvador. While the country still faces a long road ahead, there's tangible optimism that the toughest challenges are in the rear view, allowing the scars to begin to heal. The hope is that Bitcoin indeed becomes the beacon of light that we, as Bitcoiners, believe in alongside President Bukele. It is also important that we acknowledge the reality that Bitcoin doesn't resolve all issues overnight.
We will continue rooting for El Salvador and hope that Bitcoin does indeed play a positive role.
BTC "Should" Cool Off. Good Luck With That!
Bitcoin hit one of the most significant areas of resistance on the chart, which is $42,000. It is overbought on most time frames and is showing some signs of potential bearish divergence... which would likely be followed by hidden bullish divergence, making is somewhat inrrelevant for now.
Bitcoin "should" retrace here, but Bitcoin has a tendency to avoid doing what it should, leaving those waiting to buy the dip on the sidelines.
This is a tough area to get long, certainly. But I would never short this asset in a bull run. It could melt your face.
Altcoin Charts - Weekly Levels
For those who are new here, I share SETUPS and not SIGNALS. These are ideas that I am watching - if a certain thing happens, then the trade triggers. I am not telling you what to buy or when. I am showing you how I am watching certain charts and what has to happen for me to take a trade.
As discussed yesterday, I will share a few charts with their key larger time frame levels, to give us some context on what is likely to come for these coins. Remember, lines are not exact - they are more like areas or zones.
Legacy Markets
Stock markets experienced a period of uncertainty as traders reconsidered the likelihood of central banks, particularly the U.S. Federal Reserve, cutting interest rates to avoid a recession. This shift in sentiment follows a significant rally in November driven by expectations of a softer monetary policy.
In Europe, German bonds saw gains after ECB's Isabel Schnabel indicated that further rate hikes are unlikely. The German DAX Index slightly increased, nearing a record high and outperforming the broader Stoxx 600, which remained mostly unchanged. However, emerging-market equities dropped over 1% following Moody's Investors Service's downgrade of China's sovereign debt outlook to negative.
In the corporate sector, Barclays Plc's shares fell after news that Qatar’s wealth fund is reducing its stake significantly. Conversely, Ericsson AB's stock rose following its deal with AT&T Inc. for network modernization in the U.S.
Investors are now entering December with doubts, questioning the previous month's belief in a quick and substantial shift in monetary policy. Upcoming U.S. jobs data is expected to be crucial in understanding the economic trajectory and its implications for inflation and borrowing costs.
Market narratives have fluctuated dramatically throughout the year, reflecting changing investor sentiment and economic conditions. Money markets had previously priced in a high probability of the U.S. central bank cutting rates in early 2023, with expectations of multiple reductions by the end of 2024.
In the commodities market, oil prices recovered after three days of losses, buoyed by Saudi Arabia's affirmation that the recent OPEC+ production cuts would be fully implemented and could be extended further.
Key events this week:
Eurozone S&P Global Services PMI, PPI, Tuesday
US ISM Services, Job openings, Tuesday
Eurozone retail sales, Wednesday
Germany factory orders, Wednesday
US ADP private payrolls, trade balance, Wednesday
CEOs of the biggest banks on Wall Street, including JPMorgan, Citigroup, Goldman Sachs, Morgan Stanley and Bank of America, expected to testify on regulatory oversight to the Senate banking committee, Wednesday
Bank of Canada monetary policy meeting, Wednesday
Bank of England issues biannual stability report on UK financial system, holds news conference, Wednesday
China trade, forex reserves, Thursday
Eurozone GDP, Thursday
Germany industrial production, Thursday
US wholesale inventories, initial jobless claims, Thursday
Germany CPI, Friday
Japan household spending, GDP, Friday
Reserve Bank of Australia’s head of financial stability Andrea Brischetto speaks at Sydney Banking and Financial Stability conference, Friday
US jobs report, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 was little changed as of 10:20 a.m. London time
S&P 500 futures fell 0.3%
Nasdaq 100 futures fell 0.6%
Futures on the Dow Jones Industrial Average fell 0.2%
The MSCI Asia Pacific Index fell 1%
The MSCI Emerging Markets Index fell 0.8%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0833
The Japanese yen rose 0.1% to 147.06 per dollar
The offshore yuan was little changed at 7.1527 per dollar
The British pound was little changed at $1.2635
Cryptocurrencies
Bitcoin fell 0.7% to $41,740.56
Ether fell 1.3% to $2,206.09
Bonds
The yield on 10-year Treasuries was little changed at 4.25%
Germany’s 10-year yield declined four basis points to 2.31%
Britain’s 10-year yield declined four basis points to 4.15%
Commodities
Brent crude rose 0.7% to $78.59 a barrel
Spot gold fell 0.1% to $2,026.55 an ounce
Wild Predictions Are Back - Beware
As briefly mentioned in yesterday's title, wild predictions are back in vogue now that Bitcoin is once again on the move. In the past 24 hours, Bitcoiner Adam Back and a Bloomberg analyst separately made headlines with some bold price targets - $700,000 and $500,000 respectively.
I'm not a huge fan of these sorts of predictions, but from a fundamental perspective, I tend to agree that Bitcoin can flip gold's market cap given enough time, which is the basis of Adam Back’s reasoning.
Digital gold #bitcoin will surely flip physical gold sooner or later; and probably this halving cycle. so within a year or two. currently it'd take $700k/BTC but it maybe partially a substitute (some people start selling gold to buy #bitcoin crossing the market caps below that).
My call is #Bitcoin should flip gold's market cap within the next halving cycle. So it's a variable price target as it might start to drive capital flight from physical gold to digital gold, pulling down the price of gold. Timing of "probably within next few years" is secondary.
Explain Bitcoin Mining To Me Like I Am 10 Years Old
ChatGPT:
Imagine Bitcoin mining like a digital treasure hunt, but instead of searching for real treasures, people use computers to solve complex puzzles and earn rewards in the form of Bitcoins.
Here's a simple breakdown:
Digital Coins: First, you need to know that Bitcoin is like a special digital coin, not like the coins you hold in your hand. These digital coins are stored in a computer program.
Blocks: Think of these digital coins as being stored in something called "blocks," kind of like pieces of a puzzle. Each block contains a bunch of Bitcoins.
Miners: Now, here's where it gets interesting. People called "miners" use super-powerful computers to solve really tricky math problems. These problems are like puzzles that need a lot of brainpower to solve.
Proof of Work: The miners' computers race against each other to solve these puzzles. The first one to solve it gets to add a new block to the chain, and that's where the term "blockchain" comes from. The blockchain is like a long chain made up of lots of these blocks.
Rewards: When a miner solves a puzzle and adds a new block, they get rewarded with some Bitcoins. This is how new Bitcoins are created, and it's how miners make money. They also collect transaction fees from people who send Bitcoins to each other.
Security: This whole process of solving puzzles and adding blocks makes Bitcoin really secure. It's like a fortress for your digital coins because it's really hard for anyone to cheat or steal.
So, in simple terms, Bitcoin mining is like a computer competition where people solve puzzles to earn digital coins and make sure the whole system is safe and secure. It's a bit like a high-tech treasure hunt in the digital world!
Robinhood Traders Are Back
Robinhood’s 8-K filing revealed that, “November Crypto Notional Trading Volumes were roughly 75% above October 2023 levels.” Perhaps Cathie Wood's strategic move of rotating her equity position from Coinbase to Robinhood will be recognized as a genius play, despite the recent criticism she has faced. Only time will tell.
Could This Rumor Be True?
To maintain complete transparency, it is important to note that the rumor I am sharing lacks substantiated evidence and is solely based on statements made by Max Keiser. Max is a divisive figure within the crypto community, consistently asserting that additional Latin American countries are on the verge of adopting Bitcoin. While it's plausible that Max's timeline may be inaccurate, his underlying theories could hold true. Regarding the potential purchase of $500 billion worth of Bitcoin by a Qatar Sovereign Wealth Fund, I can only express my hopeful anticipation for such a development.
We Are Greedy
No surprises here. As you can see, the fear and greed index is at 75 - greed. That said, it has been at greed for a month, slowly rising towards extreme greed.
A contrarian would look at this and immediately think it is time to short the market, but it can go MUCH higher for MUCH longer.
BlackRock Seeded ETF Fund
BlackRock, the world's largest asset manager, received $100,000 in seed funding for its spot Bitcoin exchange-traded fund (ETF) in October 2023, as revealed in a recent U.S. Securities and Exchange Commission (SEC) filing. An unknown investor agreed to purchase 4,000 shares at $25.00 per share on October 27, 2023, acting as a statutory underwriter for the Seed Creation Baskets.
The SEC filing also disclosed BlackRock's plan to handle the sponsor's fee. Instead of selling Bitcoin (BTC), the ETF's asset, BlackRock intends to borrow Bitcoin or cash as trade credit from a lender on a short-term basis. This approach allows BlackRock to charge fees through a loan, minimizing the impact on Bitcoin's price. The trade credits are settled the business day after the execution date, incurring a financing fee of 11% plus the federal funds target rate divided by 365.
ETF analyst Eric Balchunas commented on these developments, expressing intrigue. BlackRock filed for a spot Bitcoin ETF in July and is among the 13 applications awaiting the SEC's decision. While previous spot BTC ETF applications have been rejected by the SEC, market experts anticipate that the first spot BTC ETF in the United States could be approved by early 2024.
Bitcoin Hits $42K - INFLATION IS YOUR FAULT!!! Macro Monday
It's Macro Monday with Dave Weisberger, James Lavish, and Mike McGlone.
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that‘s the first reasonable, grown up summary of ES in while in the BTC sphere, well done!