Last week, El Salvador did something remarkable… something unprecedented… and something which could be a sign of the future.
The country officially made Bitcoin (CCC:BTC-USD) legal tender.
The news almost got lost in the market panic that preceded the legislation, as the cryptocurrency market endured a “flash crash” just hours before the official announcement.
But pay no attention to that flash crash. It’s near-term price action driven by “sell-the-news” trading dynamics that will not impact the long-term value of Bitcoin or other cryptos.
Rather, what will impact the long-term value of the crypto market is El Salvador’s decision.
To be sure, there are many crypto pundits out there claiming that what El Salvador did is a one-off event – something a right-wing populist president is trying to do to consolidate his power, and nothing more.
But we think that cursory analysis misses the big point here…
This isn’t about El Salvador. It’s about Bitcoin democratizing global access to financial services.
How Crypto Could Change the World
Here’s the thing about the world: It has an unbanked problem.
That is, we’re nearing the end of 2021, and still, large swaths of the global population do not have access to financial services.
In Morocco, for example, 71% of the population is unbanked. In Vietnam, that number stands at 69%. In the Philippines, you’re talking 66% of the population that is unbanked.
But, in all those underbanked countries, many of these unbanked people have mobile phones and internet access – because, again, this is 2021, and everyone’s on Facebook and YouTube.
Nearly two-thirds of Moroccans and Vietnamese have internet access. In the Philippines, around 60% of citizens are connected to the internet.
In other words, across the globe, hundreds of millions of people have access to the internet, but no access to financial services.
What a weird world we live in…
Fortunately, there’s a fix. And that fix is Bitcoin.
Bitcoin is, in effect, a digital bank. All you need to have access to the Bitcoin financial ecosystem is a phone with an internet connection. So, to serve the unbanked populations in these developing economies, the fix is Bitcoin.
Make Bitcoin legal tender. Give everyone with a mobile phone access to a digital wallet to buy, store, share, and sell Bitcoin. And voila, you’ve fixed the world’s unbanked problem. Or, more specifically, you’ve fixed most of it, as some folks on the planet still don’t have internet access, but that’s a problem 5G companies are racing to fix right now.
In other words, Bitcoin and 5G together can solve the world’s enormous unbanked problem.
El Salvador is simply the first domino to fall here. The path will be bumpy. I’m sure you’ve read about the outages, technical glitches, and lack of El Salvadoran support for Bitcoin. But those are simply growing pains because, indeed, El Salvador is growing into a modern country for the first time ever thanks to its move to make Bitcoin legal tender.
In 12 months, the rest of the world will look at the El Salvador Bitcoin “experiment” as an enormous success – and dozens of other countries will be rushing to following in their footsteps.
But who could be next?
Well, we’ve created a very simply index to calculate who we think is most likely to adopt Bitcoin as legal tender next, based on a country’s unbanked population and internet penetration rates. Specifically, we’re looking for countries with both a high unbanked population rate and a high internet penetration rate, as those are the ones most ripe for Bitcoin disruption.
So, we created the Bitcoin Legal Tender Need Index, which is very simply just the sum of a country’s unbanked population rate and internet penetration rate. See the top 10 countries in that index below.Source: InvestorPlace
You know what’s super interesting about this list? How tightly it correlates to Chainalysis’ 2021 Global Crypto Adoption Index, which leverages on-chain data and exchange volume to measure which countries’ citizens are most heavily adopting cryptos.
Vietnam scored first on our BLT Need Index. It also scored first on Chainalysis’ Global Crypto Adoption Index, meaning that in Vietnam, you have a country that could benefit in a big way from making Bitcoin legal tender and whose citizens are chomping at the bit for that to happen.
That’s a powerful combination.
Meanwhile, Nigeria ranks third on our need index, and sixth on Chainalysis’ adoption index. Argentina ranks fifth on our need index, and tenth on the Chainalysis adoption index. Kenya is sixth on our index, and fifth on the Chainalysis index. Philippines and Colombia are also top 15 on both indices.
In other words, we think there are 10 countries that could really benefit from following in El Salvador’s footsteps and making Bitcoin legal tender, and about 6 of those have an underlying consumer population that is ready and willing to adopt this paradigm shift towards cryptos.
The Future Is Here for Bitcoin
So, no, we do not think El Salvador making Bitcoin legal tender is an isolated incident. Rather, it is the first domino to fall in a series of countries that will do the exact same thing.
And as that happens, you can bet your bottom dollar that Bitcoin prices will skyrocket.
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