Geopolitical Compass #10

The Bitcoin Heavy Edition: Bhutan government is mining, while the US and Argentina are making moves against it.

Notable events in geopolitics and capital markets this week. Expand your perspective, gain context, and discover actionable insights.

Bank Failures

Perspective. Who believes there are no more coming?

Bhutan

The Bhutanese government through it’s investment vehicle - Druk Holding and Investments - has disclosed it has been mining Bitcoin using excess renewable energy for the last few years, starting when Bitcoin was valued at USD 5,000 per coin.

I’ll tell you right now, there are others - nation state adoption is happening in stealth. There is no benefit to broadcasting your states accumulation of Bitcoin which could only work to drive up the price and attract unwanted attention from the vandals experts at the BIS, IMF and World Bank.

Bhutan generates nearly 100% of its electricity from renewable sources.

“Our portfolio contains investments across a range of asset classes that deliver exposure to traditional sectors and the industries driving the modern economy. This includes global equities, fixed income and venture capital investments in promising startups; domestic and international real estate; renewable energy including hydropower generation; healthtech, biotech, life sciences and agritech; and digital asset mining and investment,” said a statement from DHI.

In terms of the risk management the view within DHI is that like in any business a certain amount of risk is involved, but for Bhutan the risk is already mitigated to a large extent as DHI is not buying and selling digital currency, but is mining mainly Bitcoin at a relatively low cost using green energy.

El Salvador, Russia, Iran, North Korea, Bhutan….. so which country will be next to openly declare its Bitcoin accumulation?

Bhutan is also planning to launch a USD 500 million fund for Bitcoin mining.

Bitcoin

Two often heard objections to Bitcoin is that it’s not private and can be tracked, and that its useless in areas if the government shuts down your internet - the favourite argument of gold bugs.

The beauty of Bitcoin vs gold is that it’s a technology platform that enables innovation to constantly improve it.

As outlined here, for broadcasting transactions privately:

nostr-tx-broadcast, which is a tool that allows individuals to leverage the open source distributed communications protocol to relay their transactions instead of broadcasting from their own wallet or node. This would allow users to increase their privacy when broadcasting transactions to the network.

For internet down situations like when security services temporarily shut down the internet in a country during protests.

give users the ability to send and receive payments via the lightning network offline via a mesh network leveraging Bluetooth technology. This adds a layer of robustness to the bitcoin stack by giving users an alternative avenue to transact with each other if the internet ever goes down or if they simply live in an area that doesn't have access to the internet at all. Being able to send and receive using a mesh network running on relays leveraging Bluetooth makes it significantly harder to kill bitcoin.

Both of these technologies still have a while to go and will only ever be a niche use case, but it’s important to realise two things. Firstly, it illustrates the power Bitcoin possesses for future freedom of money vs CBDCs and gold. Secondly, any people finding themselves in these scenarios are truly desperate, but Bitcoin will be there to provide them freedom to survive.

US Mining Tax

Meanwhile, the ‘Biden’ administration is proposing to destroy the Bitcoin mining industry in the US and send it overseas. Yet another industry in which the US is currently achieving well in will be shunned.

One new proposal in this year’s Budget, the Digital Asset Mining Energy (DAME) excise tax, is an example of the President’s commitment to addressing both long-standing national challenges as well as emerging risks – in this case, the economic and environmental costs of current practices for mining crypto assets (cryptomining, for short). After a phase-in period, firms would face a tax equal to 30 percent of the cost of the electricity they use in cryptomining.

You cannot stop Bitcoin, but you can drive its innovators, industry, hard money and sovereignty benefits out of your nation and citizens hands and into those of others.

‘Climate’ is the gift that keeps on giving to inept socialist leaders and can be used for all manner of freedom removal and industrial kneecapping.

Argentina Ban

The Argentinan Central Bank has banned payment apps in the country offering customers Bitcoin to “mitigate risks.”

Indeed, risks of Argentinian’s fleeing to a better money as the nations inflation rate exceeded 100% last month.

I find it both humorous and sad that in their official statement announcing the ban, these people refers to themselves as competent:

Payment service providers that offer payment accounts may not carry out or facilitate transactions with digital assets, including cryptoassets, that are not regulated by the competent national authority and authorized by the Central Bank of the Argentine Republic (BCRA) to their customers.

A 100%+ inflation is not the sign of a competent authority or bureaucracy.

As usual, these bans do not effect Bitcoin, but they do punish and restrict the freedom of the Argentinian people they purport to ‘protect.’

Why Bitcoin and Not Shitcoins

This is why its critically important to understand what Bitcoin is and why no other cryptocurrency can replace it.

It took thousands of years to create the perfect money that is unconfiscatable, uncensorable, uncontrollable by foes, not centralized and uninflatable.

It takes 27 seconds to create another shitcoin:

Ukraine

A realistic assessment of facts on the ground in Ukraine from former US diplomats. As I discussed earlier this week, reality is slowly spreading.

According to World Bank statistics, Ukraine had a population of 44 million when the war began, but today barely half that number are still in their homes. Eleven million Ukrainians have fled to Europe or are internally displaced. Several million more have fled to Russia and millions more now live in areas under Russian control.

Last year the Ukrainian economy shrank by 30 percent, while Russian GDP fell by only 3 percent. The ruble is as strong against the dollar today as it was when the war began. The IMF predicts that in 2023 Russia's GDP growth will surpass that of Britain and Germany. Clearly, Western sanctions have not destroyed the Russian economy.

While Russia remains largely self-sufficient in food, energy, and military hardware, much of Ukraine's infrastructure lies in ruins. While Ukraine has become heavily dependent on NATO for armaments, both NATO's own reserves and Ukraine's old Soviet-era munitions stocks of artillery shells and air defenses missiles are quickly being depleted. In this war of attrition, time is not on Kyiv's side.

Moscow regards any NATO presence in Crimea in much the same way that Washington would view Russian missiles in Cuba or a Chinese naval base in Nova Scotia. It was never realistic to expect that Russia would surrender Crimea without suffering a decisive military defeat. Now, however, the peace terms Kyiv can expect have become even less favorable than they were seven months ago.

Wrapping Up

Lastly this week, a reminder that among all the modern and horrible eco-friendly architecture built today, like this…

Adelaide, South Australia

Poland reminds us it is still possible to build beautiful things…

That’s it for this week, if you enjoyed this edition, please give it a like below!