El Salvador the stone that the builder refused

After a tumultuous couple of weeks for Bitcoin and the crypto market, we’ve finally seen a timely bounce, catalyzed by one of the most significant announcements of Bitcoin’s history. Before we get into that, let’s clarify the confusion which led to Bitcoin’s recent dip. It was reported this week that U.S. authorities recovered 63.7 Bitcoins worth approximately $2.3 million that was used to pay for a ransomware attack on the Colonial pipeline. How they recovered these assets hasn’t been officially disclosed, but it was most certainly not, as some suggested, due to “an underlying vulnerability in blockchain technology”. (New York Times) Some reputable theories believe that the Bitcoin was transferred to a centralized exchange and recovered. Others say that authorities may have acquired data or accessed a server that controlled the private keys or account information for the Bitcoin. (Washington Examiner) Presumptions aside, it is likely the transparency of Bitcoin’s transactions on the public ledger that aided the recovery effort. The Bitcoin network remains the largest and most secure network for transferring stores of value. This leads us to the monumental news of Bitcoin now officially being recognized as legal tender in El Salvador. (CoinTelegraph) It was only in 2001 that the U.S. dollar replaced the colón, their native currency since 1892. Bitcoin is now considered a currency and will not be subject to capital gains taxes for its usage. This, as Americans stare down the prospect of a possible 20% tax increase on capital gains, sounds borderline utopian. (Wikipedia) The President of the Republic of El Salvador, Nayib Bukele, promptly added the signature laser eyes to his Twitter profile to show his alliance with the Bitcoin community. The country will put infrastructure in place to power Bitcoin payments using the lightning network for merchants. Over 20% of El Salvador’s GDP is purely remittance-based, and with millions of citizens not having access to banking services, Bitcoin could save its citizens billions of dollars while increasing its economy through green energy mining. The internet erupted when Bukele tweeted that he mandated the state-owned geothermal electrical company to develop plans to introduce Bitcoin mining powered by volcanoes and water vapor. (@nayibbukele on Twitter) This effort could harness excess geothermal energy to power Bitcoin mining and could lead El Salvador to quickly becoming a major mining competitor. Optimizing energy inefficiencies in current infrastructure is one of the most promising arguments for green Bitcoin mining. A prime example is Quebec, Canada, which alone has enough unused hydroelectric power to operate the entire Bitcoin network. (Documenting Bitcoin) A representative of the International Monetary Fund told reporters Thursday, “Adoption of bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis." (Yahoo News) While the IMF is looking into the decision, the announcement has lit a fire across the world, inciting a wide variety of countries to consider adopting Bitcoin as a reserve currency or legal tender. The seal has been broken and, with El Salvador being first, no country wants to be last. Following suit, there are murmurs of Paraguay, Panama exploring similar initiatives. Congressional members of Mexico added laser eyes to their social media profile photos in solidarity and said they are moving forward in proposing new bills to embrace Bitcoin and crypto. In Central and South America, inflation concerns are rising, especially after the devastating ongoing effects it has had on many countries–most notably Venezuela. Speaking of inflation, CPI data was released this week and it’s very concerning. Headline CPI hit over 5% year over year, which is the highest since 2008. This doesn’t take into account the substantial price increases that are being felt by consumers, from the grocery store to the gas pump. (CoinDesk) As inflation continues to rise above economist expectations, the cliche comes to mind: “Bitcoin fixes this.” Keep in mind, in order for a country to add Bitcoin as a legal tender, it will require that country to acquire Bitcoin and hold it in reserves to help process and settle transactions and taxes. First, it was institutions and public companies looking to add Bitcoin to their balance sheet to hedge against inflation on cash reserves. Now, it’s actual countries. Take it from Federal Reserve chair Jerome Powell, who stated that he sees Bitcoin and cryptocurrencies more as a gold replacement than something that could take the place of the dollar. Slowly, and then all at once, it looks like Bitcoin is replacing the pot of gold at the end of the rainbow.