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Bitcoin debt securities? understand how it works

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El Salvador has announced that it will issue Bitcoin-linked debt.

And how will this be done? Through the use of a second layer solution (Liquid Network), developed by Blockstream.

Operation context

President Bukele has announced that he will build the world’s first Bitcoin City (“Bitcoin City”) with 0% tax on income, capital gains, property or payroll.

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To finance the construction, two classes of Bonds will be issued initially, totaling US$ 1 billion (about R$ 5.6 billion, in today’s quotation).

This billion dollar amount will be divided into 2 distinct classes, as explained below:

  • First class of Bonds: it will be a debt security backed by BTC, where the country will buy 500 million dollars in ₿ (Bitcoin) in cash, or “spot”, as it is called in English.
  • Second Class Bonds: This will be a title linked to the construction of a second geothermal plant, which will serve both to power Bitcoin City and to feed new mining farms.

The type of investment involved in the operation of this second class is a little unusual for bitcoin investors, who are not used to this type of operation linked to physical assets, in general.

However, it is a very common type of operation in the traditional market. With it, it is possible to raise funds to build some future asset, without having to resort to bank loans.

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What are “bonds”?

“Bonds” can be translated as “Bonds” or “Bonds” (in the sense of a payment obligation).

In this case, a bond is a fixed-income (or even variable, which is less common) instrument that represents a loan made by an investor (usually borrowed from a company or government), with characteristics similar to common loans (such as interest and defined payment term), and which can be traded, like any interest-paying asset.

Bond prices are inversely correlated with promising interest rates:

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When rates rise, bond prices fall, and vice versa.

Default x Bitcoin

On the defined payment term, when it does not occur on the agreed due date, the so-called “default” (default), which is when the company or the government cannot pay off previous debts.

Often, in the case of default from governments, more money is issued to pay off old debts. From this issue, a rather feared side effect appears: the inflation of the currency in the country starts to increase, and the population starts to lose purchasing power day after day.

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The problem there is when this process gets out of control, and inflation becomes a negative and vicious cycle of issuing new debts to pay off previous debts, and increasing inflation.

Obviously, that’s a risk Bitcoin won’t take. This is because, given the algorithm, there is a limited number of bitcoins to be mined in the world.

Currently, there are 18,880,493 BTC in circulation, which represents 90% of the total Bitcoins that will exist in the world in a few decades (21,000,000).

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One of the largest cryptoactive brokers in Brazil turns three in November and you are the winner!

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The cryptocurrencies at the best rates on the market! Simply activate the Novawards free program and enjoy reduced rates by up to 75%.

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Peter Schiff Names Real Reason Behind Bitcoin Drop

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Popular digital assets critic believes that measures against inflation are the real reason behind the most recent market correction

The famous Bitcoin and crypto critic, Peter Schiff, provided his Twitter subscribers with a potential reason behind one of the largest corrections on the cryptocurrency market this year.

According to Schiff, Bitcoin’s correction was tied directly to the Fed’s action toward risk assets like cryptocurrencies and some stocks. Previously, Jerome Powell hinted that tapering might happen sooner than the market expects.

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In addition to the end of the quantitative easing monetary policy, Powell has stated that the point rate may be increased sooner than was expected due to the inflation’s change of nature, which has become a real threat to the country’s economic safety and stability.

All of the actions that the Fed is currently taking are designed to control inflation, which is currently hitting highs previously observed back in the Depression era.

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High-risk assets like Bitcoin and other digital assets were allegedly considered a store of value for those who wished to protect their funds from increased inflation. Schiff is a widely known critic of cryptocurrencies, and he believes they should not be considered an inflation hedge.

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Whales Suddenly Move $320,000,000 in Bitcoin to a Single Destination – Here’s Where the Crypto Is Headed

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Crypto whales just moved over 5,800 Bitcoin (BTC) worth more than $327 million into a single destination, according to a whale-surveilling platform.

Whale Alert tells its 1.8 million followers in a series of tweets that in the last 24 hours crypto whales are relocating thousands of BTC amid a correction that saw Bitcoin tumble to a new 30-day low of $52,416.

Five of the transactions involved shifted BTC from wallets of unknown origins to popular US-based crypto exchange Coinbase. Meanwhile, one transaction moved a large sum of Bitcoin from global crypto exchange Binance to Coinbase.

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Here’s a summary of the BTC transactions:

While crypto investors tend to be concerned that a massive influx of Bitcoin into the crypto exchanges might indicate downward selling pressure, insights firm Into the Block reports that centralized exchanges recorded more outflows than inflows during the past week.

The crypto intelligence platform says,

“Bitcoin recorded nearly $2 billion in net outflows from centralized exchanges, the highest level in five weeks.”

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At time of writing, BTC is down nearly 7.14% on the day to $52,557.

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Ethereum Price Analysis: ETH drops 25 percent from previous swing high, ready to recover?

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  • Ethereum price analysis is bullish today.
  • ETH/USD rejected further downside at $3,600.
  • Previous support at $3,950 is currently tested as resistance.

Ethereum price analysis is bullish today as we expect further recovery to follow after a strong reaction higher from the $3,600 was seen this morning. Likely ETH/USD is set to break above the current resistance, moving to regain even more over the weekend.

Ethereum Price Analysis: ETH drops 25 percent from previous swing high, ready to recover? 1
Cryptocurrency heat map. Source: Coin360

The market has seen strong bearish momentum over the last 24 hours. The market leader, Bitcoin, has lost 17.23 percent, while Ethereum 14.83 percent. Meanwhile, the rest of the market has seen even more substantial losses.

Ethereum price movement in the last 24 hours: Ethereum breaks below $3,950 previous support, rejects more downside at $3,600

ETH/USD traded in a range of $3,739.39 – $4,647.29, indicating extreme volatility in the market. Trading volume has spiked by 113 percent, totaling $41.2 billion, while the total market cap trades around $465 billion, resulting in the market dominance of 21.16 percent.

ETH/USD 4-hour chart: ETH reacts back to previous lows

On the 4-hour chart, we can see the Ethereum price swiftly rejecting further downside after touching the $3,600 mark this morning.

Ethereum Price Analysis: ETH drops 25 percent from previous swing high, ready to recover?
ETH/USD 4-hour chart. Source: TradingView

Ethereum price action saw strong bullish momentum during the first half of the week. After establishing and retesting the new low at $3,950 last weekend, ETH/USD started to move higher on Monday quickly.

Ethereum reached $4,750 resistance by Wednesday, as bulls were eager to move towards the previous all-time high. However, more upside did not follow, leading to a reversal over the next days.

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Another attempt to test upside was seen Yesterday, with the following rejection leading to a strong spike lower. Overnight, the Ethereum price broke past the previous swing low at $3,950, leading to more downside this morning. Strong reaction, preventing further downside, was seen at $3,600, with ETH/USD since moving back towards the previous low.

Ethereum Price Analysis: Conclusion 

Ethereum price analysis is bullish today as we saw a swift drop to $3,600 met with a strong reaction higher this morning. Therefore, we assume ETH/USD has set a new swing low, and further recovery should follow over the weekend.

While waiting for Ethereum to move further, see our articles on the Best Crypto Wallet 2021, Decred Wallet, and Ripple vs SEC.

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