In today’s Exponential Investor

  • The crypto revolution: the facts
  • The crypto revolution: the benefits
  • The crypto revolution: the lies

I love our business.

The main reason is because in the (almost) nine years that I’ve been a part of it, never once have I ever been told” “you can’t write about this idea or that.”

Since day one, I’ve had complete and utter intellectual freedom to publish my investment ideas, and sometimes my non-investment ideas too.

Not many publishing organisations can ever truly, hand on heart say they allow such freedoms of their Editors.

But here, at Southbank Investment Research, at Exponential Investor, we have such freedom.

And yesterday you saw it in full, beautiful display from my colleague, friend, Nick Hubble.

Nick was filling in for Kit Winder who’s away this week.

What I love about Nick’s work is he’s never afraid to say what he truly believes. He doesn’t pull any punches and if he doesn’t like it, you’ll know about it.

Yesterday Nick had this to say about the “crypto revolution”.

While crypto investors celebrate the news out of El Salvador, and from crypto-adopting Wall Street, believing the big-government and big-business adoption of bitcoin gives it credibility, I’m declaring the opposite. The crypto revolution is over.

Nick argues that government, big business and the financial sector are co-opting crypto for their own ways.

He has got a decent point.

What happened in El Salvador?

A clear and recent example is the adoption of bitcoin as legal tender in El Salvador.

And, yes, the first day of the launch was rocky to say the least.

It also didn’t help that the US dollar value of bitcoin fell by about 10% as well.

Subsequently, though, the Chivo app (the app they’ve rolled out for Salvadorians to use in adopting bitcoin) is the now the most downloaded app in that country.

It’s followed by Bitcoin Wallet and the Bitcoin Beach Wallet.

Also, because the basis of the Chivo app is bitcoin’s Lightning Network, the cost to send bitcoin from Chivo app to Chivo app is $0.

This is crucial information, and here’s why.

What benefit does bitcoin bring to the people of El Salvador?

El Salvador is a remittance country.

That means that billions of dollars are remitted into the country each year. Remittances from Salvadorians working abroad in the United States and elsewhere are crucial to the economy.

In 2020 around $6 billion was sent into El Salvador from those working overseas.

That’s about 23% of El Salvador’s GDP.

Much of that is remitted through companies like Western Union. But companies like Western Union have been leeching off countries like El Salvador in the remittance market for years.

In some instances, the fee to send money to El Salvador, charged by Western Union is more than 10%. In other examples, a $100 transfer can have fees as much as 12.5 % attached. The smaller the send, the higher the fee. A $10 transfer can cost 33% in fees.

That’s the old way.

If someone sends bitcoin from their Chivo wallet to a family member also with a Chivo wallet, the fees are $0. If you’re an Salvadorian citizen, and you send any amount to family through Chivo, it doesn’t cost anything.

That is how bitcoin fixes a systemic problem in a country that is immensely reliant on remittance to fuel their own domestic economy.

It’s not going to be a flick of the switch, overnight, instant solution. It will take time to ease this kind of system into operation and to get people to understand the benefits.

But this is how mass change takes place.

Here is what really matters: El Salvador is only adopting bitcoin, it’s not co-opting the entire system. The system has been built already: the Salvadorians can’t change it, but they can use it to their advantage.

The same goes for Visa, Square, all of Miami, or anyone, anywhere.

You can’t change or control something like bitcoin, but you can use it for its features and benefits.

But while I disagree with Nick, I thank him for providing a counter argument.

I’m sure plenty people will agree with him. Which is fine. Seeing both sides of an argument helps to make you a better investor and to understand all considerations when deciding what action to take… or not to take.

What is another danger that you need to look out for?

While researching what is actually happening to bitcoin in El Salvador, I could not help but notice what is (not) actually happening with Litecoin at Walmart.

This week major news outlets (such as Reuters and CNBC) reported that Walmart had started a partnership with Litecoin to accept Litecoin as crypto payment in the retail giant’s stores.

Now considering this came as a press release through GlobalNewsWire and was then picked up by Reuters and CNBC (amongst others) it sent a rocket up the backside of Litecoin’s price.

Source: Coinmarketcap

Straight away, I smelt something fishy – if you’ll excuse the mixed metaphor.

Even with major news outlets reporting this, even from the official press release, I was calling the story out as a lot of [NB word redacted as this is a family-friendly publication].

When you’ve been in crypto long enough, you just know when something is off. And this was very, very off.

For example, before even bothering to search more there was no way Walmart would accept Litecoin over something like bitcoin, or even Ethereum… in fact, I’d say that company would go with Dogecoin before Litecoin.

Then a simple search of their corporate page confirmed that the story was complete rubbish.

Those who’ve been around crypto long enough knew the Walmart news was nonsense.

As for the newcomers to crypto – the “noobs”- and the mainstream media…  they couldn’t get enough of it.

Sadly, when it comes to the mainstream media, I feel as if this “Brainlet” meme applies…

Source: Know Your Meme

As it pans out the press release was fake, the news was fake. No Litecoin and Walmart partnership…

We all knew it, the mainstream media did not.

And it caused the Litecoin price to spike… and crash.

The point is, you’ve got to know your stuff. People would have bought Litecoin without thinking because of the mainstream reporting.

But it’s not the mainstream that will catch the eye of who’s to blame here. The point will be made that crypto is a risky, dangerous place where you will “lose all your money”.

Yes, there are risks. Yes, it can be volatile and wild. Yes, it can also be the most fun investing in your life.

But the dangerous thing is getting your information from rubbish sources like (all too often) the mainstream media.

When you’re looking at the crypto markets, ask yourself, is it that hazardous? Or is it more perilous to your financial wellbeing to listen to the mainstream, to sit it out, to stay on the sidelines?

Is it better to stick with the traditional system, to information from Reuters, CNBC, and companies like Western Union? Are those the future of how we transact, interact, obtain information?

Or is the crypto revolution really here, and here to stay?

It is your call as to which way you lean.

But I think it’s clear that the revolution is not over, it is just beginning.

Until next time,

Sam Volkering
Editor, Exponential Investor