El Salvador plans to provide low-interest Bitcoin-backed loans to SME

Nayib Bukele, dubbed the “CEO of El Salvador,” is pushing the envelope by implementing Bitcoin as a legal tender in the real world. The Salvadoran government is attempting to develop a Bitcoin-backed credit product for micro and small companies around the country.As a result, small and micro-businesses will be able to qualify for low-interest loans secured by Bitcoin in the near future (BTC). 

El Salvador is considering making Bitcoin-backed loans Available

During a recent Facebook Live Audio discussion titled “Bitcoin loans with lower interest rates,” Monica Taher, an advisor for the government of El Salvador, stated that the next step in El Salvador’s Bitcoin agenda was to use the benchmark cryptocurrency to provide low-interest loans to small and micro-businesses.The government advisor, Mónica Taher said:

“The Bitcoin small loans will provide access to digital money for the unbanked while helping them create a credit history. El Salvador’s economy will strengthen by empowering its small businesses.”

The execution of loans, according to Paul Steiner, president of CONAMYPE (the national institute for small and micro-businesses), will function with the government-created El Chivo wallet. El Chivo, the official Bitcoin and USD wallet of the Government of El Salvador, has seen a rapid increase in use.In less than four months since its inception, it has amassed more over 60 percent of the country’s total population. 4 million people out of a population of 6.5 million (including persons under the age of 18 who are ineligible to use the wallet) are already using it.El Salvador’s business landscape is dominated by small and micro-businesses, and Bitcoin-backed loans offer a chance to change that. Steiner demonstrated:“El Salvador has roughly 1.2 million businesses in the country. Roughly 66% are micro-businesses or ‘subsistence’ businesses. Over 90% of micro-businesses are self-funded via informal loans or loan sharks.”As an example, Steiner says that it was common for loan sharks and informal lenders to demand up to $15 in daily interest for a $100 loan that was to be repaid in 20 days. These entrepreneurs’ life would be considerably improved by Bitcoin-backed low-interest loans, which would serve as “an entry point for financing.” 

Are Bitcoin-Backed Loans Great Solution?

Andrea Mara Gómez, project manager for Acumen, a decentralized finance (DeFi) lending system, stated that “some crypto enthusiasts in El Salvador are already using crypto solutions such as DeFi because they offer ease of use and a higher interest rate than banks.”Alessandro Cecere, one of Ledn’s Community Managers, was also present during the discussion about BTC loans. Ledn pioneered BTC-guaranteed mortgages. His query, though, was if El Salvador would follow their pattern and use Bitcoin as mortgage security in the future.According to the report, Steiner was open to discussion and optimistic about the future of Bitcoin and the cryptocurrency business. His primary goal is to improve the business environment for small and medium-sized businesses (SMEs).El Salvador’s president, Nayib Bukele, has predicted that at least two more countries will embrace Bitcoin as legal tender this year, and he may be striving to see this prediction come true. He recently announced that he would be meeting with Turkey’s President, Recep Tayyip Erdogan. Turkey has expressed interest in adopting Bitcoin in order to help the country overcome its enormous present inflation. Erdogan recently announced that a measure to regulate cryptocurrencies was on its way to the country’s legislature. The law aims to change the country’s present crypto legislation and pave the way for Bitcoin adoption.

Twitter launches verified NFT profile picture feature

Social media giant Twitter has enabled a feature that lets users officially verify NFTs used for their profile pictures. Previously, anyone could simply right-click and copy an image, and there was no proof of ownership without digging into the Ethereum blockchain to check it.
The feature, which was rolled out on Jan. 20, is only available to paid subscribers of Twitter’s Blue service. Official NFTs will be highlighted by a hexagonal border instead of the traditional circular one used for profile pictures.
The move marks the firm’s biggest push into the NFT space to date. Twitter has become the social media platform of choice for the crypto industry over the past few years.
There are ways around it for wily hackers to copy the image, mint an NFT of it with a blockchain address, and upload it to their profiles. Twitter has yet to confirm how it intends to combat any digital thievery that may occur.

Twitter’s NFT Push
Company product lead, Esther Crawford, said Twitter is “positioning itself as the social network for the discovery, conversation, and education around NFT, blockchain, and crypto technology,” according to the WSJ.
“Crypto is a key pillar of Twitter’s future. We want to support this growing interest among creators to use decentralized apps to manage virtual goods and currencies,”
Twitter uses a third-party API (application programming interface) to grab a user’s NFT from the OpenSea marketplace, which acts as the verification. If OpenSea has any issues, then Twitter may not be able to verify the images and tokens.
Competition in the NFT space is heating up, and social media companies want to be at the forefront. Meta is also reportedly working on plans to allow users to create and sell NFTs on its own Facebook and Instagram marketplace.
In November, Twitter announced that it was launching a new division to focus on NFTs, crypto, dapps, and blockchain technology.
NFT Ecosystem Outlook
The NFT ecosystem saw explosive growth in 2021, which has continued into this year. According to Nonfungible.com, there has been $517 million in NFT sales over the past week. It reported that 277,509 NFTs have been sold on primary and secondary markets.
Collection tracker CryptoSlam is reporting that the most popular NFT collection over the past week is Meebits, with a whopping $1.9 billion in secondary sales trade volume.

Digital-asset funds have attracted capital over the past two weeks, albeit at a slower pace as investors remain cautious after the crypto crash in May. It appears that investors are warming up ether, which saw a third consecutive week of inflows totaling $11.7 million, according to a report by CoinShares.

Overall, net inflows to digital asset funds totaled $2.9 million for the week ending July 9, down from $4 million during the previous week. Fund flows have weakened following a period of strong investor demand during bitcoin’s rally in Q4 2020.

• Minor outflows were seen in bitcoin investment products totaling $7 million last week, which coincided with slowing trading volumes, according to CoinShares.
• “In recent weeks there has been a regional divide in bitcoin inflows, with North American providers seeing consistent inflows while their European counterparts have continued to see outflows, suggesting a geographic divergence in sentiment is present.”
• Multi-asset investment products were the most popular last week with inflows totaling $1.2 million, and now represent 16.5% of total assets under management, according to CoinShares.

• Aside from ether, investors have also flocked to other altcoins such as Binance coin and cardano, which saw inflows of $400,000 and $600,000, respectively.
• Increased altcoin flows, although small compared to bitcoin, imply investors are starting to diversify across their digital asset holdings.

Hailed by fans as a market-disrupting liberation, and demonised by critics as a dangerous, volatile creation, bitcoin and other cryptocurrencies are never out of the headlines for long. On December 16, 2020, the price of bitcoin hit $20,000 for the first time. On January 3, 2021, its value soared above $34,000, meaning the cryptocurrency had gained almost $5,000 in the first few days of 2021. Then on February 9, 2021, its value briefly hit a new record high of $48,000 after electric-car maker Tesla revealed that it had bought $1.5bn of the cryptocurrency and pledged to start accepting it as payment for vehicles.

On Sunday, February 21, the coin rallied to a new record high, peaking at $58,354 before falling dramatically two days later as low as $44,845.72, a loss of 18.4% for the day and a decline of almost a quarter from Sunday. At the time of writing [March 2], the coin had swung back up to $48,739.20 

Experts believe recent jumps in the price has been due to a wave of money from both institutional and private investors, spurred on by the coronavirus pandemic.

There’s a certain amount of mystery around bitcoin and other cryptocurrencies. Satoshi Nakamoto is the pseudonym used by the presumed person or people who developed bitcoin, created and deployed bitcoin’s original implementation software and conceived the first blockchain database.

The Three Biggest Cryptocurrencies

Bitcoin, the best-known and first major cryptocurrency, launched in 2009 and remains the market leader. Its market capitalisation — effectively its total worth — is $910bn, as at March 2. Ethereum and Cardano come in second and third, with respective market caps of $179bn and $39bn, as at March 2.

Since 2009, a wide range of challenger cryptocurrencies, dubbed altcoins, have arrived on the scene.

How Bitcoin Price Has Performed

The bitcoin price has climbed steadily since September 2020, fuelled by demand from investors and also news that PayPal will allow US customers to buy and sell the cryptocurrency within its app next year and Tesla pledging to start accepting it as payment for its vehicles. One bitcoin currently costs $48,739.20, as at March 2.

However, the cryptocurrency has made steady gains before, such as at the end of 2017 – before collapsing in 2018 (see graph below, which was produced in January 2020).

Extreme volatility is perhaps the most defining factor of the cryptocurrency market. To put bitcoin prices into investment profit and loss terminology, if you had invested at the start of 2020, you would be sitting on a 300% profit by the end of the year. However, if you’d invested at the start of 2018 and sold at the end of the year on New Year’s Eve, you would have lost 73% of your money as the bitcoin price collapsed.

If you wonder what market forces drive these prices up and down so wildly, you are not alone. While generally speaking the value of these currencies is, like anything else, linked to supply and demand plus the number of competitors, it is often difficult to determine what exact factors influence this erratic performance. This makes digital currency all the more high risk an asset to invest in!

Risk Of investing in cryptocurrencies

If you want to invest in crypto, ponder first whether you would buy a house in Rapid City, South Dakota. This city in the United States has just over 75,000 inhabitants and is reportedly one of the places with the most unpredictable weather on earth, where snow blizzards and summery thunderstorms occur without warning, before everything calms down again and temperatures rise dramatically the very next day. The weather of Rapid City is an apt metaphor to describe the behaviour of bitcoin & co: it can be totally bonkers.

If you do invest, be prepared to lose some or all of your money. Crypto is not conventional investing. 

In 2018, MPs called cryptocurrencies a “Wild West industry”. They are also not regulated by the UK watchdog, adding another layer of risk. From January 6, 2021, the Financial Conduct Authority will ban the sale of complex derivatives that speculate on cryptocurrency movements: financial services will be prohibited from offering retail customers contracts for difference, spreadbet options, futures and exchange traded notes that focus on digital currencies. 

Bank of England governor Andrew Bailey recently said he was “very nervous” about people using bitcoin for payments. He has previously warned that cryptocurrency investors should be prepared to “lose all their money”.

How Good Is Bitcoin Investment?

Bitcoin is at the (very) “high-risk” end of the investment spectrum. The price of cryptocurrencies is volatile; some can go bust, others could be scams, and occasionally one may increase in value and produce a return for investors.

As with any investment, do your due diligence and don’t pin all your hopes on one company or one cryptocurrency: spread your money around so you spread the risk and only invest what you can afford to lose.

What happened
Shares of several companies with deep ties to the cryptocurrency market soared on Tuesday, Feb. 2. Cryptocurrency asset manager Riot Blockchain (NASDAQ:RIOT) gained as much as 10.1%, Chinese-American cryptocurrency mining expert Marathon Patent Group (NASDAQ:MARA) reached a high of 11.6%, and Canadian crypto-mining company Hive Blockchain (OTC:HVBT.F) peaked at 12.3%. Data analytics specialist MicroStrategy (NASDAQ:MSTR), which has converted its long-term cash reserves into direct bitcoin holdings, also followed suit with a 6.8% gain as of 3 p.m. EST. The stocks are surging because many of the leading cryptocurrency tokens are on the rise today, which should translate into stronger financial results for all of these companies.

So what
Bitcoin prices are up by 5.6% in 24 hours, and Ethereum prices have gained 12.5% over the same period. Ripple stabilized after a wild weekend, and that token for cross-border transactions has now gained 42% in seven days. Other big names gaining more than 10% today include Ethereum competitor Cardano and the bitcoin alternative known as Litecoin.

Cryptocurrencies are known for their volatile price swings, often crashing or soaring for no particularly good reason. That’s not the case today, because the blockchain-based sector actually has some solid news to share.

• Index funds manager Bitwise Asset Management announced a new bitcoin fund, intended to provide an alternative to the popular Grayscale Bitcoin Trust (OTC:GBTC) with lower management costs and under the wing of asset management giant Fidelity (NYSE:FNF). If approved by financial regulators, this fund will help bitcoin’s liquidity and price stability while putting pressure on first-movers like Grayscale to improve their existing fund options.
• The cryptocurrency exchange Gemini, managed by the Winklevoss twins of Facebook fame, is launching interest-bearing cryptocurrency accounts. Gemini’s crypto savings account offers annual percentage yields (APY) of up to 7.4%, which is a generous interest rate next to the national average of less than 0.1%. If this type of cryptocurrency holding accounts becomes common, that could be a solid argument in favor of treating crypto tokens as serious currencies and/or investment assets.
• MicroStrategy isn’t done buying bitcoin quite yet. The company announced on Tuesday that it had acquired another 295 tokens worth $10 million in cash. The company now holds 71,079 bitcoin, worth $2.54 billion at current bitcoin prices. The original purchase price for this bitcoin reserve was approximately $1.15 billion. Larger corporations following MicroStrategy’s lead to move a portion of their long-term investments into bitcoin and other crypto tokens could make a world of difference to the financial stability of these markets.

Now what
On top of all that, business magnate and Tesla CEO Elon Musk has been supporting the not-so-serious Dogecoin token in a series of tweets recently, but last night he said that those were all jokes. In reality, Musk believes that “bitcoin is a good thing” and is a supporter of this specific token. He also said that bitcoin is “on the verge of getting broad acceptance by conventional finance people.” When the world’s richest man speaks, markets react.

Nobody knows where bitcoin, Ethereum, and other cryptocurrencies are going next, especially since governments around the world are still developing their legal and regulatory frameworks for handling these innovative but risky digital assets.

I happen to have a collection of various cryptocurrencies myself, all created from a very small bitcoin buy six years ago. So far, I see these tokens more as a fun experiment than a serious investment. That could change as the regulatory system develops and the cryptocurrency market crystallizes into something solid. For now, I’m happy to watch the crypto stocks above from the sidelines.