On June 9th, 2021, El Salvador officially passed a law to accept Bitcoin as legal tender. Furthermore, the country is also committing to Bitcoin mining that uses renewable sources.
This is a huge announcement and one we need to dissect as we continue to evolve our investment thesis in cryptocurrencies. So first off, what does this announcement mean?
El Salvador is the first country to accept Bitcoin as a legal tender at the country level. Before, it has only been accepted at various stores or outlets. This law brings into effect the first nation that sees the value in Bitcoin.
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Part of my original investment thesis in Bitcoin and other altcoins is that they could eventually be used as a reserve currency. A reserve currency is stored and used to balance the amount of fiat money (paper) printed.
Gold used to be the reserved currency to the US Dollar until 1971 when Richard Nixon took us off the gold standard. Since then, the US Dollar has lost much of its value due to excessive money printing.
Many believe that Bitcoin can step in and insert itself as the new reserve currency, taking over for gold many years later. This announcement is the first of many steps that will need to take place for the world to institute a new reserve currency.
What is next? Right now, other countries are looking at what they can do to legalize Bitcoin as well. Inflation is running rampant in many South American countries and even in the United States.
Bitcoin could be a stabilizing force in many smaller countries. However, the price of Bitcoin is still too volatile to become a reserve currency soon (5-10 years). Once the price action becomes more predictable and stable, more countries will follow suit.
Still, this is a special announcement and win for cryptocurrency markets. But, unfortunately, I also feel that other governments are going out of their way to hinder Bitcoins’ adoption. Why this is, I have no idea. But it usually involves money.
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There has been no change to my investing thesis. I am still dollar-cost-averaging into cryptocurrencies every month. I am looking for cryptos that receive a good amount of interest payments and see if they make sense to invest. I may as well get paid to wait.
Also, I will keep my crypto portfolio to 1-3% of my total investment account. Crypto has been getting destroyed in the markets recently, and I am down some 33%. However, this is a great time to keep investing.
As I wrote in “Build the Mindset of an Investor,” the best time to invest is when the markets are down. This is the calm before the next crypto storm. Let’s say a cooling-off period. When the next wave hits, we don’t know. All we can do is reconfirm our investment thesis and march on.
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The news from El Salvador is a game-changer and can lead to an influx in Bitcoin and crypto activity. Look for more countries to make similar announcements over the next 2-3 years. However, all eyes will be on El Salvador for the time being.
Ensure you are staying up-to-date with the crypto news. Everything changes so fast in the crypto space that you have to read almost every day. I would like to know why the major forces, like the US government and US Banks, are hindering Bitcoin adoption.
What do they fear? As you continue to invest, you should begin to form your questions as well. I’ll keep updating the CryptoCurrency 101 Series (101, 102, 103, 104, 105) as best as I can. My goal is to leave breadcrumbs of information so that anyone can follow behind. With that, I am off. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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