Ledn’s Weekly Hodl: Tango con Bitcoin
Week of Monday November 20th
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Bitcoin Market Analysis
Bitcoin is up north of +8% since we published our “Bitcoin’s Dual Shock” issue in late October, currently trading at over $36,000/BTC.
Weekly spot traded volume has nearly doubled since October 15th, as excitement around a spot Bitcoin ETF approval and the halving continues to grow.
Since Bitcoin began to rally, the rest of the crypto market has followed suit, with altcoins, meme coins, and NFTs all racking up trading volumes. An interesting distinction in this NFT cycle is that the excitement has been focused not around Ethereum NFTs, but around Bitcoin NFTs - otherwise known as “Ordinals”.
This has caused Bitcoin transaction fees to spike as of late, as on-chain transaction volumes and revenues have soared from people inscribing and transacting bitcoin NFTs. Bitcoin miners are celebrating every minute of high fees they can possibly get leading up to the halving - when their revenues will be slashed in half.
Another tailwind for crypto asset prices came from Blackrock and Fidelity - both of whom applied to launch spot Ethereum ETFs last week - markets rallied after the announcement.
And yet another tailwind came this week from our friends in Argentina, who have elected Latin America’s second pro-bitcoin president, Javier Milei. In today’s essay we will dive into the implications for Bitcoin.
Below are the technical price levels that we are monitoring for Bitcoin:
Resistance 2: $38,000
Resistance 1: $35,000
Support 1: $30,000
Support 2: $26,000
Our Weekly Essay: Tango con Bitcoin
Democracy is an endangered species in Latin America.
As a Venezuelan, I’ve had to experience democracy vicariously for over a decade now.
Yesterday’s results from Argentina were a shock to everyone, even those who supported Milei. Many of us believed that the corruption machine would stand in the way of change. But this time, it didn’t.
Argentina is a rare example of a country that exhibits very high inflation and a working democratic system. Argentina’s democracy, its people, and its electoral system were the real heroes last Sunday.
To contextualize how extraordinary this event was, consider the list of the top 10 countries with the highest inflation in the world below:
Every single country on that list–except for Argentina, is considered an authoritarian regime, dictatorship, or failed state.
Because of the strong correlation between failed democracies and hyperinflation, I’ve long said that inflation is an economic phenomenon, and hyperinflation is a political phenomenon.
By restoring faith in its democratic system and institutions, Argentina has a real chance at curbing its systemic triple-digit inflation. The people of Argentina took destiny into their hands and forced a change. They have shown the world that it can be done. Their actions will send political shockwaves in the region.
What’s the plan, Javier?
Javier Milei is a libertarian and a capitalist. Broadly speaking, he believes in deregulation and free markets. The 3 main areas of his economic reform plan that impact bitcoin are:
Dollarization of the Argentine economy and shutting down the Central Bank:
One of Milei’s main platforms is his plan to gradually phase out the Argentine Peso, wind down the Argentinian Central Bank, and dollarize the Argentinian economy.
For more details on the plan to dollarize Argentina, and the effects that dollarization have had in other LatAm countries, you can check out our blog post from earlier in the summer.
This part matters because it will force a change in people’s spending an saving habits, pushing them to try new currencies and tools. And, as savings and payment tools, bitcoin and stablecoins are superior to cash and bank balances.
Eliminate “Legal Tender” rules: Milei doesn’t plan to make Bitcoin legal tender. He plans to eliminate the idea of “legal tender” altogether!
As Diana Mondino, a congresswoman from Milei’s party, recently stated “whoever wants to enter into a legal agreement denominated in bitcoin, will be able to do so”.
This means that the Argentinian people will be able to freely decide which currency or asset to use for their economic transactions. In other words, it will be “legal” to use bitcoin and stablecoins as a method of payment in Argentina.
Better understanding of the crypto industry with a light-touch approach: Broadly speaking, Milei’s government believes in deregulation. Beyond comments on using bitcoin as money, Diana Mondino, a congresswoman from Milei’s party, has also made broader comments on financial services on crypto rails, stating “with regards to the Fintech sector, we should not focus on the obstacles, but rather on the service being offered to the client or user–since obstacles come from somewhere else and are there to ‘protect something else’" (alluding that it does not protect consumers).
Mondino has been present at most Fintech and Bitcoin events in Argentina this year, and has a close relationship with the local community. They have taken the time to learn how the technology works and know the local players. When asked about the ability to “experiment” during an interview at the Argentina Fintech Forum, Mondino said that “the ability to freely create and test within certain parameters is limited”, and that “[Argentina] does not have a ‘Sandbox’ concept - and hopefully we can change that”.
Argentina and Bitcoin, a match made in “el cielo”
To understand why Milei’s victory in Argentina is such a pivotal moment for bitcoin and digital assets globally, consider the following facts about the country:
Large Economy: Argentina is the 24th largest economy in the world in terms of GDP. It is larger than Nigeria, Colombia, the UAE, Singapore and many others. It’s also the 33rd largest country in the world in terms of population.
High Inflation: Argentina is also an outlier in terms of inflation for the region among its democratic peers.
Argentina’s most recent annualized inflation reading came in at +138% year-over-year. There’s no question why people in Argentina voted for a change. Fun side-note, Sergio Massa, the candidate Milei was running against, was the Argentine Minister of Economy under the current administration. Largely the architect for the financial mess they are currently in.
High Crypto Adoption: The reasons mentioned above, coupled with the distrust of local banks (which we’ll get into shortly), have driven millions of Argentinians to use crypto. It is estimated that 3-5 million people in Argentina use crypto. The country ranks 15th in the Chainalisys Top 20 Countries by Crypto Adoption list, and #1 in value received in Latin America from 2022-2023.
Strong global influence: Argentina has a strong influence on the global stage, politically, economically and culturally.
In terms of its political influence, Argentina is a member of the G20 group of countries. And it was also being courted by the BRICS alliance to join. Something that Milei is openly against.
Culturally, Argentina is the current Fifa World Cup champion, and has birthed several of the world’s most famous soccer players - Lionel Messi and Diego Maradona, among many, many others.
Tourists love its tango, world-class wines, meats, and more - which is why it is the third most-visited country in Latin America, with over 3.9 million international tourists visiting every year. For context, Brazil, a much larger country by population and GDP, received only 3.6 million international visitors last year.
What Happens Next?
Argentinians will soon be able to legally transact in Bitcoin, Stablecoins, U.S. dollars, or any other currency or asset they’d like to use. Anyone who’s transacted in stablecoins and/or sent a wire transfer can attest to the fact that stablecoins are superior instruments to both cash and/or sending bank transfers or wires. This should result in an explosion in adoption.
The country also has a dark history with its local banks. “El corralito” is still fresh in everyone’s minds. This was a dark day in Argentine history– when Peso lost its peg to the U.S. dollar, and the government stepped in to freeze withdrawals to protect the banking system at the expense of savers. Those who had U.S. dollars saved in the system lost 65% of their value in just days.
This distaste for local financial institutions, coupled with Milei’s deregulation approach to Fintech, presents a massive opportunity for world-class companies that focus in the region. Ledn is a great example, with 10% of our user base coming from Argentina.
We’ve all seen what bitcoin did for El Salvador in terms of tourism, and I can’t wait to see what it does for Argentina. There’s going to be 2 places in the world where you can legally pay for bitcoin– and they are both in Latin America.
Vamos!
HODL
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