A New Frontier
President Bukele of El Salvador has big plans for his country. After guiding the country to become the first in the world to adopt bitcoin as legal tender, he laid out his vision for a bitcoin city planned in the eastern region of La Union. If all goes as planned, the city will offer bountiful electricity from a nearby volcano.
Bukele didn’t stop there. Likening his plans to cities founded by Alexander the Great, Bukele said Bitcoin City would be circular, with an airport and a central plaza designed to look like a bitcoin symbol from the air.
“Invest here and make all the money you want” Buckle said in English. The city will not levy any taxes except for VAT. Half of the VAT levied will be used to fund the bonds issued to build the city, and the other half will pay for city services.
Will it work? Salvadorans are skeptical. Although Bukele is a popular president, his bumpy introduction to bitcoin has fueled protests against the government. But we think it is premature to classify it as a failure.
To fund development, El Salvador plans to sell a billion dollars worth of bonds on the bitcoin blockchain. Of this amount, half will be used for development, and half will be held to service future payments.
The idea behind this bold move is that if Bitcoin continues to rally, the half that was saved will easily pay back the dollar value of the bond.
This is a bold idea by a president. If it flops, it will likely flop spectacularly. We are optimistic that some good will come out of this development.
El Salvador’s real scheme is to borrow dollars to use bitcoin as a means to make more dollars. The yield on the bond will be paid in dollars, assuming it is paid (the recent Moody’s rating is a caa1, meaning a very high credit risk).
We don’t know if Bukele’s gamble will pay off, but we respect him for making the effort. If he can pull it off, it will likely create other crypto based developments. There are a lot of developing nation's eyes on his experiment.
Keep Up With the Wanderer Crew No Matter Where We Are
I've been trading and traveling my entire adult life. I'm currently trading from my boat in the Caribbean. Over the years this has gotten easier and easier to do. Drop the anchor, tether your phone to your laptop, browse some charts, and trade. At Wanderer we first began investing in Bitcoin in 2017 when it was worth $2,500. Fortunately, we recognized its potential, unfortunately, we didn't realize it even earlier. Today it is worth about $50,000, and we believe it is here to stay. Bitcoin will have its ups and downs along the way, but years from now we expect it will be much higher, and we'll still be bopping around in the islands.
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