Does Snowden Know More? Seems Probable...

El Salvador, the initial spark, and the many incentives to adopt Bitcoin

"Some powerful interests will do anything to keep us poor and underdeveloped, but we have the right to progress."

~ Nayib Bukele

Last Friday, I wrote to you about why Bitcoin wouldn't stop at $69K. As I'm typing this, Bitcoin is comfortably sitting above $73K following the latest rally. With such a rapid ascent and $70k now acting as a support level instead of resistance, it will probably consolidate and trade sideways for a bit. Either way, it looks like my prediction was correct.

But I'm not reaching out to brag about my crystal ball. Truth is, I had planned to take a break from writing about Bitcoin. But as I listened to people passionately discussing Bitcoin's potential during Monday's Phyle call, I realized I might have to revisit the topic once more this week.

We kept the conversation going with Matt Smith over email, and one thing became clear: we both believe Bitcoin could reach the $100K mark much sooner than most expect.

Matt already shared his thoughts with you yesterday on why he believes Bitcoin could soar even higher. And, today, I want to add my thoughts and discuss a development that could get us there quickly.

Let’s jump right in.  

One Nation Under Bitcoin

June 9, 2021, was a historic date. On this day, El Salvador passed a groundbreaking "Bitcoin law," officially recognizing Bitcoin as legal tender.

The small Central American nation became the first country to recognize Bitcoin as a legal currency, elevating it to the same status as the U.S. dollar.

The law took effect in September of that same year. Since then, Bitcoin has been officially recognized as legal tender in the country, alongside the U.S. dollar. Goods, services, and taxes can now all be paid for using Bitcoin.

El Salvador made history, a remarkable feat for one of the poorest and, until recently, one of the most crime-ridden countries in the Western Hemisphere.

To me, El Salvador's adoption of Bitcoin marked a major paradigm shift, not just domestically but also on the global stage.

But the mainstream media laughed it off as ridiculous shenanigans, calling it a "Bitcoin experiment" led by El Salvador's "eccentric" and "authoritarian" leader, President Nayib Bukele.

Oh, how wrong they turned out to be…

As I write this, El Salvador's Bitcoin treasury is sitting on just under $100 million in unrealized profit on the holdings it first started acquiring in September 2021.

But that's not all. Just yesterday, President Nayib Bukele tweeted that the nation is earning even more Bitcoin in the form of revenue from other services. These include revenue from its "Freedom VISA" citizenship passport program and Bitcoin mining.

At writing, El Salvador has 2,681 bitcoins, acquired through 12 separate purchases at an average cost of $42,600 each. This means that Bitcoin's impressive rise over the past year has pushed the nation’s bitcoin treasury to over $206 million, representing a 71% gain on its initial investment.

In addition to the above, it has helped attract a significant number of “Bitcoin tourists” and has also brought considerable investments to the country.

In short, El Salvador’s “Bitcoin experiment” has paid off in many ways …

But perhaps most importantly, Bitcoin rebranded El Salvador. Once known as the smallest and most dangerous country in Central America, it transformed into the country of Bitcoin.

Here’s Doug Casey:

El Salvador could experience a real renaissance, just like Hong Kong, Singapore, and Dubai did. Take Hong Kong and Singapore for example – they had great ports but lacked money, infrastructure, and an educated population. Despite this, they transformed themselves into two of the most successful and dynamic places in the world within just a couple of generations.

And what happened in Dubai was even more spectacular. I remember my first visit to Dubai back in 1980 – I was just passing through the airport. The airport was tiny, like the one in my little hometown of Aspen, but down-at-the heels and primitive. Fast forward to today, and Dubai International Airport is the third-largest and one of the most advanced on the planet.

Could El Salvador see a similar transformation? Absolutely. We've seen it happen in these other places. With freedom and good management there's no reason why it couldn't happen in El Salvador too.

Kudos to El Salvador. But the implications of its “Bitcoin experiment” extend far beyond its borders. Let me explain...

It Was Just the Initial Spark

Enough time has gone by since El Salvador kicked off its “Bitcoin experiment” for other countries to see how it's affecting their economy and potentially do the same.

Just remember, it only took one company - MicroStrategy (MSFT) - to embrace Bitcoin for others to follow suit. As of now, at least 38 public companies hold Bitcoin in their treasury.

Similarly, it's only logical for countries to start adopting Bitcoin following El Salvador's example. I'm completely confident that this will happen. And I'm not the only one. You might have come across a recent tweet from Edward Snowden, the whistleblower behind the Prism Gate scandal:

Now, while Snowden didn't specifically mention which nation he thinks might adopt Bitcoin, he’s not one to speak without good reason.

Here are my thoughts on the matter...

One big reason El Salvador decided to adopt Bitcoin is because it didn't have its own currency (having switched to using the U.S. dollar back in 2001).

This meant El Salvador lacked its own central bank, so they couldn't squeeze wealth from the population through endless money printing and inflation.

It's not often you see a government willingly give up the power to tax the population through inflation. But since El Salvador's government didn't even have that option to begin with, they were much more open to Bitcoin.

So, if I were to guess where the next country to adopt Bitcoin might be, I'd start by looking at dollarized economies. Ecuador and Panama are top candidates since they both use the U.S. dollar as their official currency. But there are plenty of other countries in the Caribbean, Africa, and the Pacific with similar dollarized or semi-dollarized economies.

NOTE: In April 2022, the Central African Republic (CAR) adopted Bitcoin alongside the CAR franc, but reversed course within a month due to legal issues. Based on reports, Bitcoin's status as a legitimate alternative currency in CAR remains uncertain, facing pushback from banking authorities.

Looking further out, Argentina could also be a candidate, particularly if President Javier Milei's efforts to dollarize the country prove successful. And Argentina's population of 46 million and economy of $641 billion far surpass those I previously mentioned.

If you're wondering why dollarized economies would adopt Bitcoin... Many of these, being developing nations, are especially vulnerable to the Fed's devaluation of the dollar, which increases prices and harms their economies. That's a huge incentive to pivot to Bitcoin.

But even a strong U.S. dollar can wreak havoc on developing countries’ finances.

You see, most countries in the developing world have currencies that aren't worth the paper they're printed on. Here's Doug again:

Three-quarters of the world's population uses "crap' currencies — essentially worthless paper: kwachas, pulas, dirhams, and the like. These currencies have no value outside of their countries and are often treated like toilet paper within them. The local people prefer to trade in dollars and euros when they can get them.

What this means in practical terms is that these countries are at the mercy of... you guessed it, the dollar.

That's because a lot of these countries borrow heavily in dollars and are big energy importers. So when the dollar gets stronger, they get squeezed, as dollar-denominated debt and imports become more expensive.

This wouldn’t be such a big problem if the U.S. didn’t use the dollar as a weapon against those who don’t side with it, cutting off countries from dollar payment systems and creating a shortage of dollars in international markets.

The U.S. government's "weaponization" of the dollar has become evident in recent years, targeting adversaries such as Iran, Cuba, Venezuela, Afghanistan, North Korea, China, and Russia.

But it never affects just these countries alone...

In 2022, when the U.S. hit Russia with unprecedented sanctions, including removing many of its major banks from SWIFT, numerous African, Asian, and South American currencies plunged to historic lows against the dollar. This led to horrific economic crises in countries like Sri Lanka.

Others like Egypt, Pakistan, and Ghana ended up having to ask the International Monetary Fund (IMF) to bail them out in 2023.

These countries had borrowed heavily in U.S. dollars. As the dollar strengthened, they couldn't afford the repayments.

For countries like these, moving away from the dollar is crucial for economic survival. Thankfully, they now have the example of El Salvador to follow.

And if Snowden is right and 2024 reveals the next nation to embrace Bitcoin, it'll be like tossing gasoline on the already blazing Bitcoin bull run. That could easily send Bitcoin soaring past $100k.

But, even more importantly, it would encourage more countries to adopt Bitcoin (paving its path to becoming a full-fledged reserve currency).

Until next time,

Lau Vegys

P.S. If you decide to get into Bitcoin, remember that its price can be a rollercoaster ride. So, it's best not to dive in headfirst. Instead, consider investing a fixed amount regularly. Just make sure it's an amount that wouldn't keep you awake at night.