- According to Samson Mow of Blockstream, Bitcoin will rise to $1 million in five years, a phenomenon he attributes to El Salvador’s ‘volcano bonds.’
- The country is issuing 10-year, 6.5 percent interest bonds, amid scepticism and warnings from traditional financial players and the IMF.
Samson Mow, chief strategy officer of blockchain technology provider Blockstream, expects El Salvador’s volcano-powered Bitcoin-backed bonds to fuel Bitcoin’s (BTC) rise to $1 million in five years.
Despite previous setbacks, BTC rallied to an all-time high of almost $69,000 this month, before pulling back. Altcoins such as Ethereum, Binance’s BNB, Solana, Cardano, and XRP have seen even greater gains. The net effect pushed the total crypto market capitalization to the heights of $3 trillion.
Now, Mow is convinced of a more optimistic BTC future, following El Salvador’s BTC plan.
“If bitcoin at the five-year mark reaches $1 million, which I think it will, [El Salvador] will sell bitcoin in two quarters and recoup that $500 million,” Mow noted on a weekend conversation of how the country could finance its Bitcoin bonds, as reported by Reuters.
El Salvador, Volcano Bonds, and Bitcoin
Notably, El Salvador’s treasury held 1,120 Bitcoin (over $63 million at current price) per official data on Oct. 27. Now, under president Nayib Bukele’s leadership, the nation plans to build a low tax Bitcoin City backed by a $1B Bitcoin bond and powered by geothermal energy from the Conchagua volcano. Half of this amount will build the city, while the remaining half will be used to acquire more Bitcoin.
“If you get 100 more countries to do these bonds, that’s half of bitcoin’s market cap right there,” said Mow. He added El Salvador holds a first-mover advantage in issuing the bonds in terms of “game theory.” Moreover, Mow notes that if 10 such bonds are issued, $5B in Bitcoin would be taken off the market for several years, making “El Salvador the financial center of the world.”
The ‘volcano bonds,’ as they are now widely called, will be US dollar-denominated 10-year bonds, with a 6.5 percent interest.
“Invest here and make all the money you want,” Bukele reportedly told an audience during the close of a week-long Bitcoin promotion in the country. He even likened the upcoming Bitcoin City to cities founded by Alexander the Great.
Nonetheless, traditional financial players still view Bukele’s plan with a shadow of a doubt. Renowned investors speaking to the Financial Times say the scheme could mean the country has less access to traditional debt markets. Kevin Daly, a fund manager at Aberdeen Standard Investments said;
I don’t know who is going to buy these bonds but it sure as heck isn’t going to be us,
Meanwhile, the International Monetary Fund (IMF) has warned that El Salvador’s new legal tender could pose consumer and financial risks. The nation is currently pitching for a $1.3B loan from the IMF to build a new airport and train line.