This is my first letter since El Salvador entered the hyperbitcoinization phase by adopting the Bitcoin standard as legal tender. If I were to say that things are moving very fast in crypto, that would still be an understatement. The introduction of bitcoin on a national scale is noteworthy as the bitcoin market represents only a tiny drop in global assets. A decade after its inception, academics, enthusiasts, economists, and bankers still disagree on how to classify Bitcoin, with some arguing that it is a commodity while others think that it has chosen characteristics in action. The arrival of El Salvador throws a cat among the pigeons by making it a national currency. The world is still no smarter than it was yesterday.
2020 remains a truly memorable year on the crypto timeline for a number of reasons, but 2021 really marks a different phase of adoption – a move away from retail and institutional adoption across countries. This comes as a big surprise as it is the opposite of what crypto should be. The philosophy on which Bitcoin was built was that of anti-establishment and disintermediation. The Genesis block, which was the first to be generated for Bitcoin, had an important note from the Times newspaper published in the UK which read: “Chancellor on the verge of the second rescue package for banks.” This was the first message Satoshi delivered to the world in the ledger – a clear contempt or contempt for the establishment. We’d soon find out that the relationship between governments and Bitcoin would never be romantic. It would develop into one marked by scare tactics, restrictions and prohibitions. Bitcoin was born out of a desire to give people the ability to log out in the event of a bank rush, similar to the last recession.
The future of Bitcoin as a mainstream asset has always been characterized by uncertainty, but 2020 marks the turning point that will bring the institutionalization of Bitcoin and other crypto assets to the fore. On July 22, 2020, the US banking sector regulator, the Comptroller of the Currency, issued authoritative policy for banks that allows them to keep crypto assets in the same way as money. This development shocked crypto believers as well as banking institutions worldwide. Oh boy !! – little had they known what was about to come. A few days later, on July 31, the currency’s auditor followed suit with a seismic announcement that it would begin accepting applications for a national special bank charter from crypto fintechs. The cryptoverse went into a frenzy as if it were like Christmas, Easter, and New Years, all of which happened within hours. It had become clear that the crypto standard was unstoppable. It was the beginning of a whole new era in digital assets. These developments were all necessary ingredients for mainstreaming crypto. If large institutions wanted to deal with crypto, the prerequisites had to be met, and this also included custody services at the institutional level, since companies do not deal with technical issues such as storage, disposal, etc., cyber attacks. These regulations have been the linchpin of growth in this area, as time will tell.
The August 11, 2020 event significantly changed the script for Bitcoin. First, as announced on July 28, 2020, a publicly traded company in the US decided to invest its treasury reserves in Bitcoin, and the rest was history. Microstrategy’s investment was 21,454 bitcoins (valued at over $ 250 million at the time). From the moment Microstrategy entered the market, large companies holding Bitcoin have become a normal occurrence. This only lasted until Tesla decided in February 2021, Bitcoin worth 1.5 billion occurrences.
Conception of a new asset class
Cryptocurrencies and Bitcoin as an asset class were unthinkable years ago given the violent past between traditional finance and decentralized finance, for which Bitcoin is part of the ecosystem. A shift in the narrative wasn’t cemented until the global head of digital assets at Goldman Sachs spoke about bitcoin after a year-long anti-bitcoin campaign by the CEO. He explained that “Bitcoin is now considered an investable asset. It carries its own idiosyncratic risk, partly because it is relatively new and in an adoption phase. “ This is Bitcoin’s journey to becoming legal tender.
During a Bitcoin conference in Miami, Jack Mallers spread the news through a taped video that the President of El Salvador would introduce laws to make Bitcoin legal tender in his country. Within a few days, Bitcoin was introduced as legal tender in El Salvador with a majority vote, making it one of the most sensational stories in business, law, banking, finance and almost every discipline that can be named.
Bitcoin was never made for countries, but similarly, it hasn’t precluded anyone from adopting it. Bitcoin’s history is dynamic and constantly evolving, and it will continue to confuse anyone who stumbles upon it. It’s an asset, a commodity, a currency, and anything anyone wants.
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