Macquarie Enters the Game

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In today’s Money Morning…it’s a virtuous circle of innovation and value…want to see crazy? Look at Switzerland…energy meets money…and more…

If people aren’t calling you crazy, you aren’t thinking big enough.

Richard Branson

As you might’ve heard last week, those crazy El Salvadorians became the first country to make Bitcoin [BTC] legal tender.

It’ll stand aside the US dollar — El Salvador hasn’t had its own currency since 2001 — and citizens can use whichever one they want.

To that end, the government has helped create a new wallet.

The Chivo wallet accepts bitcoin on the lightning network but allows users to instantly convert it to US dollars if they don’t want to hold the more volatile bitcoin.

This brings up a very overlooked point…

It’s the technology behind Bitcoin — an alternate financial system that sits apart from the existing one — that’s just as important as the ‘digital gold’ store of value use case.

Importantly, both these use cases reinforce each other.

The more valuable bitcoin becomes, the more secure the network becomes. It’s a virtuous circle of innovation and value.

Now, plenty scoff at this idea. Mainstream economists and commentators still think bitcoin and cryptocurrencies are without value; a bubble waiting to burst.

Despite over a decade of evidence to the contrary, they know better…

Want to see crazy? Look at Switzerland

They’ve tried to call El Salvador’s adoption of bitcoin — a move admittedly not without risk — stupid.

From their privileged position in the financial system, it probably is.

I mean, I’m sure if El Salvador could print money out at will and use it to buy pumped-up technology stocks, they would.

This is actually something Switzerland has been doing for years.

Apparently, they own around $127 billion of US equities. I repeat, these stocks are bought with money they can print at will.

It’s nuts!

But they get away with it because they’re an established part of the financial system.

For years they were used as a way for wealthy individuals in other countries to avoid taxes using very private Swiss bank accounts.

They’re very much part of the global elite.

So they get away with these sorts of financial shenanigans.

Countries like El Salvador don’t have that luxury…

They have two choices today:

Become a slave to the US dollar and the whims of US politics.

Or try something different.

El Salvador has taken the brave option of trying something different. Of tethering themselves to a global movement of decentralised money.

They give up significant power by doing this.

Once their citizens are in the crypto ecosystem, it’d be very hard to reverse that later. No government can control Bitcoin.

But it seems El Salvador think the benefits of being an early adopter here are worth it.

Time will tell, but be in no doubt a lot of other countries will be watching closely. And they’ll be ready to take the plunge very quickly if El Salvador becomes a success story.

Funnily enough, Australia’s Macquarie bank has decided to join the ‘craziness’…

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Energy meets money

Henry Ford had the crazy notion over 100 years ago that money should be backed by energy.

In 1931, he was quoted in The New York Times as saying:

Under the energy currency system, the standard would be a certain amount of energy exerted for one hour that would be equal to $1.

That’s essentially what bitcoin is.

[Editor’s note: You can delve deeper into this idea of an ‘energy standard’ here if you want to.]

Bitcoin miners use energy to run powerful computers in order to secure the Bitcoin network and process transactions.

Anyone anywhere can become a miner, though, these days you need some serious computing grunt power and access to cheap electricity.

Cue the entry of Macquarie bank into the bitcoin mining industry.

They announced last week they were partnering up with Blockstream — a US$3.2 billion bitcoin company that just got Series B investment from the likes of Baillie Gifford last month — to explore the development of renewable energy-backed bitcoin mining facilities.

The announcement read:

The first pilot project with Macquarie will utilize Blockstream’s enterprise-grade mining facilities and expertise in mining hardware hosting. Macquarie will invest in the facility while utilizing its deep expertise in energy to explore opportunities to provide renewable energy to power the mining process. The collaboration is expected to scale beyond pilot as new power resources are developed.

The heavy hitters in finance are starting to realise something about bitcoin that I’ve been banging on for a while about now.

That is that bitcoin is going to radically reshape energy markets.

Macquarie, probably our most entrepreneurial bank, has clearly realised the immense scope of this collision.

Maybe this bitcoin thing isn’t so crazy after all…

Good investing,

Ryan Dinse Signature

Ryan Dinse,
Editor, Money Morning

Ryan is also editor of New Money Investor, a monthly advisory aimed at helping investors take an early-mover advantage as decentralised finance and digital money take over the world. For information on how to subscribe and see what Ryan’s telling his subscribers right now, click here.

About Ryan Dinse

Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately…

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