Crypto Beans #24 El Salvador's Bitcoin love affair? How does this play out

Hey there everyone! 👋 This is Shivam. I bring to you the 24th weekly edition of Crypto Beans. This is an effort through which I try to share my thoughts on the crypto space and help you stay updated. Your 0 to 1 guide in crypto.

Read time - 4 mins

In this edition, the article I explore is titled "El Salvador’s Bitcoin love affair? How does this play out" Hope you enjoy it.

Spill the beans (Explain to me like a 5 year old) 

El Salvador holds 2,381 Bitcoin, worth approximately $40 million

1} El Salvador adopted Bitcoin in 2021, let’s look at the current state and what lies ahead for the Central American country

El Salvador is the smallest countries in Central America, On June 9th, 2021, El Salvador’s government published in the official gazette the legislation making the digital currency Bitcoin legal tender within the country.

The Bitcoin Law and infrastructure:

The legislation went into effect on September 7th, 2021. With El Salvador being the first country in the world to formally make Bitcoin a legal tender it is too soon to tell what the implications are globally, but one thing is for sure this is the first domino to fall in broader global adoption.

The law also created a government-backed digital wallet called Chivo, it allows users to send, receive, and store Bitcoin. Think GPay or PhonePe but for Bitcoin

Also, El Salvador has 212 Bitcoin ATMs, the 4th largest behind the US, Canada, and Spain

In terms of adoption,

• As of January 2023, Chivo wallet downloads: over 2 million

• At least one Bitcoin transaction: over 1 million

• Total Population - 6.5 million

That's a healthy adoption of more than 15% assuming unique transactions

Current GDP of El Salvador- $32.48 billion, Bitcoin makes up less than 0.5% of El Salvador's GDP

2} What are Bitcoin second order effects

1. Financial Inclusion - In 2022, the number of people: With access to a bank account is 70%. Using mobile money is 50%, With a credit score is 25%

2. Bitcoin Tourism - In 2021, El Salvador had a total of 1.22 million international tourist arrivals. This number is expected to increase in 2022, and it could reach 2 million or more

3. Bitcoin Remittances - In El Salvador, remittances account for a significant portion of the economy, making up about 25% of GDP. The average remittance fee in El Salvador is about 7%.

An estimated $280 million per year in remittance fees. BTC saved an estimated $400 million in remittance fees since September 2021.

Indeed, If Salvadorans will use Bitcoin to receive remittance, it means that senders from other countries will require enablement services to exchange local currencies with Bitcoin and send them over Lightning Network to El Salvador, so they will need banking services as well.

El Salvador’s move could result in a domino effect that may lead other countries to adopt Bitcoin as a legal tender, as well. Many of the countries that today suffer from the same social and economic issues, could closely observe El Salvador’s experiment to assess if the same move can also be exploited within their borders.

3} Future vision for Bitcoin in El Salvador

1. Building a Bitcoin city -The government plans to build a Bitcoin city on a volcano, the city will be a hub for Bitcoin mining and innovation.

The idea behind Bitcoin City is to finance a city using the surplus income from the sale of cryptocurrencies, combined with the use of locally-sourced energy to mine cryptocurrencies and make the city the focus of foreign investment. Attracting capital using crypto assets as a beacon. This capitalization would occur in Bitcoin City in the way of Bitcoin Bonds (debt).

2. Issuing Bitcoin bonds - The government plans to issue Bitcoin bonds to raise money to fund the Bitcoin city and other projects. The bonds will be sold to investors around the world, and they will be denominated in Bitcoin.

Once the bonds have been sold around the world, $500 million will be used to purchase cryptocurrencies and another $500 million for the design and construction of the city's Bitcoin energy and mining infrastructure.

3. Educating the public about Bitcoin - The government plans to launch a public education campaign about Bitcoin. The country recently launched NEW BITCOIN COURSE where they aim to change how people learn about BTC.

They want to make it fun, creative interactive and, most importantly, easy to understand. BTC Times reported that some of the new topics in the curriculum included “What is Money?” and “Navigating scarcity in the growing economy.”

In 2022, the government has educated 10,000 users on crypto, which was a 2500% increase from the year before. This shows that El Salvador is rapidly progressing in terms of promoting Bitcoin and spreading awareness among its citizens. In fact, the country wants to lead the way for Bitcoin education globally. They are also giving out special BTC degrees for those who complete the diploma program.

State of Crypto affairs - A quick look at the market 

The global cryptocurrency market cap today: $1.19 Trillion

Weekly change: +0.03% | Yearly change: -6.90% 

Bitcoin (BTC) is the largest cryptocurrency with a market cap of $527 Billion.

Weekly change: 1.45% | YTD change: 63.44%

Another important metric is Bitcoin dominance which can be used as a rough indicator of the relative strength of Bitcoin versus other cryptocurrencies. A high Bitcoin dominance means that Bitcoin has a large market share and is potentially more influential in the overall cryptocurrency market and vice-versa.

Bitcoin dominance: Current Year: 45.90% | Last year (June 2022): 46.53%

Greed and fear index 

The market sentiment has been a bit neutral now post Bitcoin dumping in the last week. The beginning of a crab market it seems. However, with an agreement on Debt ceiling can send the Bitcoin soaring to new heights in the short term

Note: The data used is based on metrics like Volatility, Surveys, Bitcoin Dominance, Social and Google Trends. Source: Coinstats

Is ETH ultrasound money? 

Let's have a look at Ethereum supply changes post its merge to a PoS blockchain from PoW.

The significance of the charts - understand how the supply of Ethereum is decreasing post the merge, which means “deflationary economics” for the Blockchain

Supply change since merge POS -277,088 ETH

The graph highlights POS vs POW issuance since the merge. Impressive numbers, look super bullish for ETH long term given the supply of ETH is not growing as before

What's brewing today? Bringing fresh beans to you: 

Mercado Bitcoin, Brazil's Largest Crypto Exchange, Receives License as a Payment Institution: The company plans to offer financial services that combine the potential of crypto with traditional financial services.

What AI Governance Can Learn From Crypto’s Decentralization Ethos: Prominent critics of AI development are calling for government intervention to stave off the threat of human extinction. But we need more than centralized regulation of this industry, argues Michael J. Casey.

Has Ethereum Been Taken Over by a 'Cartel'? Here’s What You Need to Know: The bigger a staking "cartel" gets, the more rewards it earns, and the more alluring it is for users—centralization begets centralization.

Whats meme-ing? Better make sure this is fun

And now the funny part,

What did you think of today's edition?  

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.