El Salvador Adopts Bitcoin… Who’s Next?
We had HUGE bitcoin action this week … and it’s about to shake up the entire crypto market!
El Salvador’s government announced that it’s adopting bitcoin (BTC) as a sovereign currency (a prediction Paul made back in January, by the way!).
But the question is: Which country will be next?
Already, several others are showing interest.
This could mean BIG things for crypto investors. Think of using bitcoin instead of the cash in your wallet!
So, here’s what you can do:
- Join the ranks of crypto investors by signing up for our Crypto Flash Trader email list. We’ve got a new special report coming soon, completely free. This way, you can learn all things crypto before our new service launches! Click here.
- Check out this week’s IanCast video. We thought it was a big deal when companies added BTC to their balance sheet. This is a whole other league above that.
Plus, we’ll tell you what’s going on with electric vehicle and cannabis stocks:
El Salvador Adopts Bitcoin as Currency…Our Prediction Came True
Paul: There’s so much going on this week in the crypto world and in general. There’s actually a lot of news in the cannabis space, extending to psychedelics. We talked earlier about the growth stock market and America 2.0 stock market continuing to push upward.
Definitely lots of positive signs. Then we have some amazing stats from California on EVs and the market share Tesla is taking from incumbent companies. Nonetheless, the news of the week has to be this: El Salvador is fulfilling one of my predictions.
I’m not going to thump my chest. But I did say I believed at least one country was going to turn over their monetary system to Bitcoin (BTC). While El Salvador didn’t do quite exactly that, they essentially did that. They have officially recognized BTC as legal tender in their country.
Interestingly, the collective response has been “yawn.”
Ian: I follow a lot of crypto people on Twitter so it might have been a bit of an echo chamber, but I definitely saw a lot of excitement from them. If you are looking at mainstream news it is barely getting any coverage. People who cover crypto regularly are thrilled about it.
It’s understandable. I have to be honest, I didn’t expect it to happen this soon. We aren’t even halfway done with the year yet and a country has already made BTC legal tender. That’s a huge deal. A lot of other countries, particularly in Latin America, are looking at doing the same thing.
I saw that Paraguay already has a plan laid out to be the next one to do it. That could be happening soon as well.
Paul: You posted two articles. The first one from The Street. It’s all the countries where BTC adoption is being considered. The article says politicians from Paraguay, Panama, Brazil and Mexico have all expressed interest in BTC adoption. Mexico and Brazil?
These are large countries. Then there’s another article as well saying the same things. In our Slack chat we were talking about how momentous this is. The mainstream financial media says no big deal. That’s very much in line with my experience. For the very big things, the media is actually very late in recognizing it.
Even among the day trader set or the people who tend to come in last and want the biggest moves all in a day, for them this is no big deal. It didn’t moon instantly so it’s worthless. This must be a piece of junk news so forget it. However, we were talking about how big of a deal this is going to be.
If one more country, even if it’s the size of Panama or Paraguay, is joining in, forget about it.
Ian: We thought it was a big deal when companies started putting BTC on their balance sheets. This is whole other league above that. It’s huge. One of the things that interested me about El Salvador doing this is that you can put free BTC in their economy and that will get you citizenship there.
It’s also working in that way where they are attracting a lot of people who already like crypto. A lot of people are probably going to get duel citizenship now in El Salvador, which is good for them because it will be a huge economic driver. I think it will make it even more appealing for other countries who are looking to do the same thing.
Paul: So next time a politician that outrages either side — left or right — El Salvador, watch out. The planes will be filled with people with BTC in their pocket. In terms of the practical impact of what this means, let’s say you are in El Salvador. How is this going to unfold?
They have actually thought about this. They have not just randomly said it. They created a fund for folks who don’t want to hold on to their BTC and want to swap it out for U.S. dollars. They have $150 million — am I right?
Ian: I think it was around there.
Paul: You can swap it out and they will give you U.S. currency to hold if that’s what you prefer. They have really thought through this. I was telling you that one of the things that really makes a country like El Salvador or Paraguay or countries in Africa, countries with deep inflation like Zimbabwe.
In a place like Zimbabwe, one satoshi would actually have quite significant value.
Ian: Right. That’s one of the main appeals for these countries to get on board with this. I remember in 2018, it was a horrible year for BTC, but people in Argentina were still buying it because they said it still out performed their own currency.
There are a lot of fiat currencies out there that have crazy inflation year after year. People are looking for alternatives. There aren’t many. You can get gold or silver, but it has a lot of inconveniences attached to it. Countries regulate how much can go in and out.
BTC just frees all that up. So does crypto in general. I think it is going to revolutionize the way people store their money and also be a big thing that levels the playing field. When countries incentivize people with crypto to come into their economy, that’s going to be a huge boost for economic growth.
Paul: Many people have understood the benefits of BTC and, by extension, crypto. One is its portability. You could write it on a strip of paper and put it in your pocked if you wanted. The other one is its absolute finiteness. 21 million coins. Let’s assume they are all available.
We know that’s untrue, but nonetheless the absolute issuance is 21 million. The divisibility and the fact it is so much more divisible than gold or silver or a diamond or any other store of value is something that is deeply unappreciated until you have a development like this.
In a country like El Salvador, the unit of BTC that is going to be transacted for day-to-day life is going to be a thousandth of a BTC? Ten thousandth of a BTC? I am thinking it’s going to be four zeros and a one. It might actually be the level of a satoshi which is seven zeros and a one.
That’s a big deal. We have a demonstration case that’s not at some experimental level. It’s an entire country that’s going to go on what I am going to coin as the BTC Standard.
Ian: I think it’s probably the most bullish news I have ever seen for BTC. This was the goal from the beginning to revolutionize the currency industry and the financial industry. This is the first big step it has taken.
Paul: The fact the media has no excitement for the long-term impact of it does not mean the market does not get it. You showed me a chart we should put up. Perhaps you can talk people through it. It’s the BTC long-short ratio on Binance, which is one of the biggest exchanges out there.
Ian: This is basically comparing the number of people going long BTC future versus people going short BTC futures on Binance. It’s the most liquid futures market in the world. A lot of people use it to trade BTC futures, which is, in most cases, similar to trading regular BTC.
The way I see this is as a counter indicator. When the long-short ratio is high, it means a lot of people are buying and not a lot of people are shorting. As you can see, in May right before the big drop in BTC it was really high. Then it came down. A lot of people got wiped out of their positions and went short.
Now there’s more shorts than longs, which doesn’t happen very often for BTC. I think that’s a bullish thing. It means that a lot of people are probably going heavily short and we could see a short squeeze in the future.
Paul: Regular investors are unused to our way of thinking of the world through demand and supply. They will think, “How is that a good thing if people are going short?” Just lay out our views of demand and supply and how what matters is the balance and how it’s tipping to tell you where the future direction is going to be.
Ian: As I said, it’s a counter indicator. When everybody is on one side of the market — for example, in the stock market when everyone was buying growth the first couple of months of the year, there were no buyers left at the end of that. When people go to take profits, there’s nobody there to give any support to the price.
That can cause some panic selling. When everybody is on the long side and nobody is on the short side, when people go to sell there is nobody to buy their stock. It’s the same concept with BTC. When everybody is going short and they start to take profits and cover their shorts, there’s nobody there to stop the price from going up.
That can cause a short squeeze, which can be a pretty big move. That’s essentially what caused the move in Tesla a couple years ago and what caused the move in GameStop. With BTC, I think we could see a steep gain really soon.
Paul: Bottom line to encapsulate this is that trend following is the most pervasive short-term speculative strategy pursued by everybody in any market. It’s a perfectly good strategy early on. However, it tends to be not when people are putting it on.
In other words, after a 50% downtrend move in BTC, the trend following folks are all short. Now the demand and supply balance is tipped against them because as any new buyers come in, they are going to be forced to bid it higher because there is very little supply in the market.
On top of that, there’s latent demand from all these folks who are short who have to cover into a rising market. Now that drives momentum higher. Slowly, you find as the number of people losing money on the short side — slowly at first — start to be long, it starts small, then a little bigger and then bigger.
That’s what creates a nice, long trend. After this enormous move — I mean we went from $64,000 to essentially a little under $30,000. It was a solid 50% move. You have to say the scale of the move is a bear market. The only difference is, it didn’t take out the previous high of $20,000.
I had friends who were betting on that. They were saying, “This is going to be $18,000. This is going to be a wipeout.” I even had somebody tell me it was going back to $3,000. I never thought that was in the cards.
Meanwhile, while all this is going on, El Salvador was considering making it its legal tender. That tells you that the bears are delusional, Ian.
Ian: I am seeing a lot of generally bearish sentiment on social media. The people who are saying that are the people who are already short. The new people going short is very rapidly diminishing. From here, I think there’s only going to be new buyers in the market.
I don’t think many people are going short initially here.
Paul: In a precious IanCast, I mentioned that one of the primary trading strategies you can count on is “buy the rumor, sell the news.” In other words, in anticipation of an event is the moment to buy. The moment the event arrives, you want to sell. Except in reverse.
No one actually knew El Salvador was considering this. Did you know they were considering this?
Ian: I hadn’t really seen too much about them. It’s been obviously a long time they have been thinking it out.
Paul: In other words, there was no rumor of any of this. Generally, it also works in reverse. When you have a big event happen out of the blue, the tendency is for everyone to think it’s no big deal. The markets take a little bit to wind and then it’s a slingshot.
I believe that is what is going to happen with BTC. I texted you today about your prediction. You should tell folks what it is for BTC. I think it’s going to be in the cards and it’s going to stun and shock people. So go ahead.
Ian: I am still betting on this. I am still saying BTC is going to be $115,000 in August. That may sound crazy. A lot of people probably don’t even think it’s going to hit that in the next year. But like you said, when BTC gets going and when the market recovers, it will be a straight shot up.
Things are only improving for every aspect of the crypto economy — constantly. It’s a very bullish overall fundamental situation going on. I think when things do start to go back up it will be a big rally.
Paul: I 100% agree overall. We got a message on last week’s IanCast in the comments that said maybe if we are lucky we will hit $82,000 three years from now. I don’t know. We could hit $82,000 in a couple weeks really. Look at all the demand conditions that have improved.
Number one, BTC is at a much lower price. That means you can actually accumulate a lot more than you could when it was at $64,000. Not a single company that was accumulating BTC before — Square, Tesla, MicroStrategy — has indicated they have changed their mind as a result of this volatility.
If anything, all the other folks who have been sitting on the sidelines are probably beginning to accumulate. They are not going to tell you in advance because then people would immediately bid the price up. They will tell you after they accumulate it.
Now we have these super class of accumulators. Countries are coming to do it. People say, “This thing is over. This was all hype.” The conditions are as good, if not better, than when we were telling folks when BTC was at $10,000 that this was starting to get going.
Ian: The thing about countries, people refer to people with 1,000 BTC or more as whales. The countries are going to be super whales. They will eat up the supply fast. That is super bullish overall. With the crypto market in general, I still think Ethereum will do well, Uniswap, Chainlink and some of the other alts I’ve mentioned.
Overall, I’m very positive on BTC. $115,000 by August and $350,000 I think I said by next June. I’m still holding to those predictions.
Paul: You brought up Ethereum (ETH). I sent you a text earlier today talking about a release by the G7 countries talking about crypto and their strategies for issuing CBDCs. Which is what?
Ian: Central bank digital currency.
Paul: I sent you what was an analysis written by Moody’s of this press release. Tell folks a little bit. I’ll lay out what the press release said. Essentially, the central banks of the G7, which are all the large industrial nations of the world, they see crypto coming at their monetary system.
The press release said if they issued these CBDCs then the banks would lose their primary source of funding, which are savings and deposits, and the payment structure like the wire system. It’s take forever, sometimes days, and is subject to all kinds of fraud no one talks about.
But BTC is a major problem of course. But nobody talks about all this other fraud that goes on. They see all this and their concern is to try to protect their incumbent position in there. You know, when I think about it it reminds me of so many industries where they keep looking backward instead of forward.
Ian: I totally agree. One of the ones we were talking about was the retail industry. This is like Macy’s saying that online shopping is good, but we can’t transition too fast because it will hurt our business. That’s essentially what the G7 is saying.
The countries like El Salvador don’t care. Countries with hyper inflationary fiat currencies don’t care. This is going to help them in the short term and the long term. I think things are going to change whether or not these bigger countries want them to and it’s going to happen quickly.
I think they are going to be forced to adapt. Not necessarily with CBDCs either. The way I see it, the dollar is already a digital currency. I think it’s 92% digital right now. It wouldn’t change that much. I think going with BTC or some other crypto is a better idea.
Paul: I know many people will interpret this and say, “The dollar is going to collapse!” Our view is different. The dollar is backed by the U.S. economy. Despite whatever critiques we want to throw at it, it’s still innovative and growing. It’s been the main catalyzer of many of these new technologies.
As long as U.S. citizens have to pay their taxes in U.S. dollars, as long as the U.S. sovereign state requires others to transact in dollars, the dollar is going to hold its value. It doesn’t need to have every single person hold it for it to maintain its value. I know many people will argue with that.
I believe the main threats are actually much more significant for exactly where the G7 is pointing to: the banking system, the Wells Fargos of the world, Bank of America, MasterCard, Visa. These companies are effectively on their way to zero. What do you think?
Ian: The thing with crypto and DeFi is it cuts out the middle man and decentralizes everything. It makes everything infinitely more efficient. In time, it will make it cheaper. It’s way easier to access, all you need is an internet connection, which is spreading throughout the world.
It’s almost totally global at this point and it will be very soon. It’s on its way in whether these countries want it to be or not. The other thing about CBDCs is that I highly doubt they will have decentralized blockchain that controls it or some other transparent thing.
It really has no benefit over the current system.
Paul: I think by definition they have no interest in a transparent blockchain. They would like it to be as opaque as possible so nobody will actually know what their doings are. That’s the essence of a central bank. They lack the desire to do any of it.
The other thing that has become clear from thinking it through, when you look at the ETH DeFi system, it looks like the future monetary system of the world. What do you think?
Ian: I agree. It’s being used more and more. I think there are more than nine million ETH in there right now. Each ETH is around $2,500. That’s a lot of money. Overall, I think it’s still $60 billion in the ETH ecosystem even with this 50% crash.
When things get going again, I think we could see it hit trillions of dollars sooner than people would think, maybe even within the next year.
Paul: I agree. You put up in our Slack chat a prediction for the size of the cryptoconomy. I forget what number you said. My initial reaction was to object. However, the more I think about it, I think you are right. What was the number you threw out?
Ian: I think I said somewhere between $20 trillion to $25 trillion. I can’t remember the timeframe. It might have been a couple years. For the whole market, $20 trillion to $25 trillion.
Paul: I think that’s completely in the cards when you consider how quickly this has already moved. BTC began trading in 2009 and we are in 2021. The cryptoconomy is larger than the total value of the coins, which is at about $1.6 trillion. We’re probably already at $3 trillion.
Ian: It’s incredible what’s happened in such a short period of time. BTC itself was over $1 trillion at the top. You add that in, add ETH which will be $1 trillion soon — it’s around $350 billion at this point — it’s only a matter of time. I think we are at the beginning of a huge growth period for this.
Even though we have seen the speculative money come in, there’s going to be money that’s actually using the services. We are going to see some huge growth.
Paul: This is the moment where I will shill our coming Crypto Flash Trader which is now imminent. It will be coming by the end of this month. It will be led by Ian Dyer who is in front of you. There will be incredible opportunities among the coins that represent the future monetary system.
Obviously ETH sits there at the top. Uniswap as the primary exchange. The one that comes to me is Chainlink as the data provider. Throw some others out.
Ian: Compound and Aave for lending and money markets. There’s Yearn Finance which aggregates. You can put your money in there and it will trade things to get you the best rates. There’s Nexus Mutual which is DeFi insurance. There’s a lot of interesting things going on.
Paul: We have been tracking this world for several years. We can see how we all interact. Because there is no intermediary function in decentralized finance (DeFi), it does create an extraordinary amount of volatility. There’s no market maker to soften the blow when a large seller wants to come.
It creates extraordinary opportunities. If you’d like to participate, there’s a link below for an email list where you can be informed about this service when it launches. I believe we have also been sending out free material to get people prepared. Check into that.
I think we have covered most of the things I had on my list on crypto.
BTC Total Market Cap Makes it the Dominator
Ian: Just one quick thing: BTC Dominance. This is the ratio of BTC market cap to the total market cap. Right now, BTC is leading the market. A lot of things are down, BTC is holding steady. It’s actually up the past couple of days. That is a sign of strength when BTC is the leader.
For a couple months, we saw BTC lagging and all the alt coins were mooning. BTC being strong is a great sign. It’s exactly what we saw in December. BTC had a great month, ETH and the alt coins not so much. When BTC is leading, I think it’s a leding indicator for the market in general.
I think we will see a rally very soon. BTC being strong is a big part of that.
Paul: Post a crash, what happens is that the buyers at the lows have to have real desire to stomach the volatility. Those folks are called the strong hands. In other words, they are not going to sell whether it goes lower or higher. Their idea is to make 10 times their money or 20 times.
That’s what creates what I call a hard market. In other words, it’s very difficult to extract supply, especially in large volume. I agree with you. The fact that BTC has largely held its value is a great sign. The next run is going to be sustainable gains where the corrections will be much smaller.
We are BOP on crypto, BTC and ETH. We are super BOP on crypto in general. We think this is a world that is taking off. It’s still flying. It may seem post this crash that it’s not. Nonetheless, we would tell you this is one of the highest return opportunities available today for you.
Ian, with that, let’s move on to America 2.0 stock market, growth stocks, Fourth Industrial Revolution stocks. You said earlier you were seeing a lot of signs of strength. Tell people what you have been seeing.
Ian: One of the big things that I’ve mentioned a couple times is the options market. People are buying calls at a rapid rate right now on these stocks. When you buy a call option you are betting that the price of the stock is going to go up in the short term, usually within a month or two.
In our options services, we go a little bit longer out, but most people buy options as a short-term bet. That is very bullish because options are risky. You can lose 100% of your investment if the stock doesn’t go your way. So these are high-conviction bets that people believe these stocks have bottomed and are going to go higher.
We have seen this in the past as a leading indicator to a stock rally. I believe this is not going to be any different from that. This is a sign that growth stocks are going to make a comeback. Just in the past couple of weeks we have seen our defacto America 2.0 index ARKK — the ARK Innovation ETF — outperform the S&P, the Nasdaq and the Dow.
It’s definitely looked very strong for America 2.0 stocks.
Paul: The other indicators are Tesla and Square. These are America 2.0 icon stocks that many people look at. They, too, are starting to show some lift. They seem to have run out of big sellers. There’s always going to be small sellers.
It means that, once again, that demand and supply balance we talked about with BTC is in the favor of demand. As big demand comes in, there’s no sellers. Then there’s a lot of pressure to put that price higher if you want to get in. From having been on the hedge fund side, it makes you quite hesitant to put large amounts in all at once.
When you go to put it in, you’re going to bid the stock up 10 points. You don’t want to bid it up. So you wanted a quarter basis point position but you only go in for 5 or 10. But even that the market can’t really take without lifting it 5 points or 7 points.
Now this effect goes on where things start to cycle upward. I believe we are very close to where that’s starting to happen in a fairly big way.
Ian: We have seen some of the more speculative, higher-priced stocks like biotech, software, ecommerce and alternative energy leading the charge back up. That’s a great sign. We see the more speculative growth stocks be the drivers of the rally. That’s very bullish.
Paul: Even the so-called meme stocks, the fact that those are rising tells you that the buyers are optimistic. The buyers are our buyers. While GameStop and AMC may not seem like America 2.0 stocks, those folks are America 2.0 buyers. That is also a great signal that this correction is over.
The next run is going to be in America 2.0, Fourth Industrial Revolution stocks. We have seen that in some of our signature stocks. 3D printing is one of the things I am very sensitive to. I have made a very public prediction of that being the America 2.0 stock for our franchise.
While I am doing that, I might as shill for Profits Unlimited as well. This is our flagship service. It goes for about $49. It’s a multi-cap investment newsletter that’s focused about the stocks we talk about in Fourth Industrial Revolution and America 2.0. We also have BTC and ETH in there.
If you are interested in that, click on the strong hands. That will take you to a page that shows you how to subscribe. The last couple of months have been pretty tough. It’s been a reset in many ways.
However, there is the upside: Like BTC, it’s now a market where the balance favors prices rising. The call volume data also shows that.
Buying into the Marijuana Market Rebound
Let’s go to cannabis where there are some amazing things that should be going on that is somehow not going on. According to an article from Marijuana Moment, which is a fantastic publication — all who are invested in cannabis should check it out — reported on a poll from the ACLU that says as many as two-thirds of Americans want most drugs to be legalized.
That, for sure, includes cannabis. Yet, in a number of states there are people slowing this down. However, the stocks are not necessarily going with that. They are continuing to go up. You put out a trade in Canopy Growth in one of the options services that you run for our publisher.
Tell folks what you are seeing to make you put on that trade.
Ian: One of the things that stuck out to me for the rebound in marijuana stocks was an industry-wide selloff after Canopy reported their earnings last Tuesday. Then right after that, they started coming back up. I think like a lot of America 2.0 stocks that went down after earnings, that was the peak capitulation moment.
The selling is done. Everybody gets their panic selling out. At that point, it has totally dried up and any amount of buying is going to push the stocks back up. It may take a couple weeks or even a couple months, but I think cannabis stocks are on their way back up.
They were one of the hardest hit sectors during this correction, along with 3D printing. I think we will see a big bounce in these stocks. We have a few cannabis trades and I am very positive on them.
Paul: I have been noticing that MJ, which is still the largest ETF out there, the price charts look really good. In other words, there are solid signs of both accumulation and bid up. People are probably short covering and there are actual position buyers coming in to bid positions higher.
Ian: Canopy I see as one of the main indicators for overall sentiment of the cannabis industry. It’s one of the biggest companies, it’s one of the most well known and it’s one of the top companies of MJ. When I see good buying in that stock, that’s a good sign for the industry in general.
I think a lot of these companies have bottomed out. I still maintain my prediction for MJ. $40 by the end of the year.
Paul: I know most of our readers will say there’s all this news. There’s a delay in Connecticut. There are people delaying the legalization state by state. We would say, this is actually positive. The market has already discounted that.
In other words, even in the face of so-called negative news, the buyers are still buying. They are saying it’s temporary.
Ian: And these companies are in total growth mode. A lot of them have bounced back from a rough period where the stocks were in a bear market. They have gotten past all that and now it’s going to be years of amazing growth for these companies.
Paul: We have also seen another sign of a bull market. Somewhere near the bottom there was an extraordinary number of acquisitions going on. Supply of companies was being sucked up by people who had access to capital and consolidated the industry.
Now there is a focused industry that has liquidity and cash and can expand as the opportunity opens out with legalization, whether it comes on a federal level or state by state.
Tesla Beats Best-Selling Vehicle of All-Time: Ford F Series
I saw an article from a site called Wolf Street. Usually Wolf Street is actually pretty negative on Tesla, but it says that Tesla has hit 8% market share in California and it actually blows away what has been the bestselling vehicle of all time, the Ford F Series truck.
According to the article, Tesla’s Model Y outsold the bestselling vehicle of all time by 6% with 13,786 Model Ys against 12,978 F Series. Tesla sales in California grew by 12.5% to 26,150 vehicles. EVs are starting to become a large part of the fleet. California has always led Tesla sales.
This is a real sign. To blow away the F Series truck, which is still bought in large numbers, is a sure signal that EVs are getting going.
Ian: It’s impressive that the Model Y did that already. That’s a couple years younger than the Model 3. Like Elon said, he believes the Model Y is going to be the bestselling car in the world. So there’s a lot of ground to gain from here.
There’s a couple Tesla gigafactories that aren’t even done being built yet that are going to focus on Model Y production. It’s not just in the U.S. The California stat is extremely bullish, but the global scale is looking great for Tesla. There are countries in Europe where Tesla is one of the leading sales for car companies.
Paul: It’s dire times for the Toyotas, Hondas, Chevrolets and Nissans of the world. If Tesla is at 6% in California in 2021, the market share of internal combustion engine cars really must be in rapid decline. In other words, after the post-pandemic surge where people are buying inventory, it’s going to be tough times for them.
Ian: It’s only going to get better for Tesla. The cars are getting cheaper because the technology is being scaled. They are already years ahead of the competition because they have all these gigafactories built. They don’t have to go through all the costs of redoing everything, their assembly lines and how they make the cars.
They are way ahead of the game. It’s a good sign for them and not so much for the older car companies.
Paul: Plus they actually have an implemented Autopilot system that’s already in every car. Versus external systems that other folks have. This is all a reiteration of what we tell you every week on the IanCast. We are BOP on Tesla for all the reasons we mentioned on the EV side, energy side and Autopilot side.
We know it has gone up a great deal, but there is still significant upside remaining.
Editor, Rapid Profit Trader