Crypto Digest — October 10th, 2021

Week in short:
It seems like a new rally might be starting — the Bitcoin is back at $55k (overtaking the Facebook market cap!), the overall market cap is back at $2tn+, the user base is 200m+, and the news outlook finally starts to look pretty positive.

This week’s digest:

1. Updates on El Salvador: the half population is using Bitcoin
   4 months ago, El Salvador became the world’s first country to declare Bitcoin an official payment form, and things are working out well so far. According to the President, half of the population is already using the official blockchain wallet.
   So what? El Salvador itself, being a small economy, will not impact the crypto market a lot, but what is important — is its successful example which other countries might follow. Especially given an already high degree of interest in crypto from the Latin countries because of the unstable (and sometimes lacking autonomy) financial systems: Panama, Venezuela, Paraguay, and even Brazil.
   *Link [read, <1 min]
2. Brazil: Bitcoin might become an official currency in the world 8th largest economy
   Speaking about following El Salvador’s example, Latin America continues bringing joy to crypto enthusiasts. Congressman Aureo Ribeiro shared that they are working on the legislation to declare Bitcoin an official currency in its territory, and this new law is almost ready. Moreover, this idea is generally supported by the Brazilian population, with over 48% agreeing that Brazil should adopt Bitcoin, according to the recent survey.
   So what? In my opinion, developing countries are the perfect platform for crypto popularization. They often don’t have stable financial systems but do have a large population with solid demand for financial services. So while developed countries might try to fight crypto adoption in their pursuit to keep greater control over the money (hence, the economy), the developing countries might want to encourage the usage of cryptocurrencies. If it happens and gains the critical mass of users, it would become too large to ignore (or fight) even for the potent regulators in developed countries.
   *Link [read, 4 min]
3. Bank of America Report: too large to ignore
   Another bulge bracket bank (after Goldman Sachs) has published its official outlook on the digital assets class. It describes all aspects of the crypto economy in detail: blockchain technology, altcoins, stablecoins, CBDC, DeFi, and much more. Definitely worth reading if you want to learn something about these topics.
   So what? Well, first of all, this publication one more time confirms the wide institutional recognition of crypto as a distinct asset class (will we see crypto in the CFA curriculum soon?). Second, it leads us to the conclusion that crypto is already too large to ignore (even before this expected mass adoption in the emerging economies), and probably a reasonable investor should consider including this asset class in his portfolio.
   *Link [read, 140 pages]
4. SEC does not plan to ban crypto
   So if it’s already too big to ignore, will we see even more countries following China’s example of trying to ban crypto? It looks like the answer for the US at least is NO as the SEC’s Chairman has spoken: “Our approach is really quite different”.
   So what? For me, it sounds somewhat counterintuitive as the US, first of all, should be interested in holding the crypto growth to protect the dollar’s hegemony. Maybe the reason is that they don’t actually consider it to be a considerable threat? Anyway, we know that American policy tends to change quickly, so we should keep an eye on it. But their overall reaction right now looks promising for the market.
   *Link [read, 1 min]
5. Awaiting for Bitcoin ETF: Volt Equity introduces an alternative
   Continuing on the topic of favorable US policy towards crypto, the SEC has approved an ETF consisting of companies holding large amounts of Bitcoin on their balance sheet — around 30 companies, including Tesla and PayPal. We are still waiting for the SEC’s approval of Bitcoin ETF, but this is already something.
   So what? It introduces another way to get exposure to crypto for an investor. These “Bitcoin Revolution Companies” have large amounts of BTC on their balance, so their stock prices are definitely exposed to the crypto prices. This is another way for retail or institutional investors to invest in crypto using traditional financial instruments.
   *Link [read, 2 min]