Everything you wanted to know about ES Volcano Bond and were afraid to ask!

[Zlantann]

I am really humbled by this outstanding analysis. I have learnt a lot from this comments and it has help me to change my perception about so many things concerning bitcoin and the ES Volcano Bond. It's a great privilege to learn from mentors like fillippone and JayJuanGee.

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[fillippone]

Bitcoin Bonds are missing in action still, but they are coming, Treasury Minister says:

El Salvador's Bitcoin Volcano Bonds Launch Still on Hold, According to Treasury Minister

The government is reconsidering the launch date of its Salvadoran bitcoin bonds, whose funds are to be used to finance the construction of the Bitcoin City, a city that would feature a 0% income tax and be carbon-neutral due to the geothermal energy powering its operations. Alejandro Zelaya, El Salvador’s minister of treasury, explained that the market conditions and the war in Europe had affected the conditions to issue these bonds.

Still, I think regulation is the main hurdle in launching these bonds, not the prevailing market conditions.

[JayJuanGee]

Bitcoin Bonds are missing in action still, but they are coming, Treasury Minister says:

El Salvador's Bitcoin Volcano Bonds Launch Still on Hold, According to Treasury Minister

The government is reconsidering the launch date of its Salvadoran bitcoin bonds, whose funds are to be used to finance the construction of the Bitcoin City, a city that would feature a 0% income tax and be carbon-neutral due to the geothermal energy powering its operations. Alejandro Zelaya, El Salvador’s minister of treasury, explained that the market conditions and the war in Europe had affected the conditions to issue these bonds.

Still, I think regulation is the main hurdle in launching these bonds, not the prevailing market conditions.

For sure, government officials are not necessarily going to specify all of the reasons (and maybe not even their most motivating reasons) for decisions that they make, even though for credibility reasons they do tend to want to provide some kind of reason that is sufficiently plausible.

Many of us who have been watching the variety of El Salvador's bitcoin related projects that have come about since their June 2021 announcement (and subsequent legislation) have remained glued towards wanting to see how the various seemingly ambitious implementations are playing out.. and surely any ambitious outline can start to end up in a kind of territory in which some of us might start to consider whether they may have been overpromising and under-delivering - and of course, underpromising and over-delivering remains the gold standard - yet I am not even really opposed towards the potential utility for aspirational type overpromising statements .... because even some of the background preparations can allow for various kinds of learnings about whether their current formulations need to be tweaked or maybe other jurisdictions might want to consider some kind of similar proposal, but they might make it a wee bit less pie in the sky - for example, there can surely be trade-offs regarding whether a whole new city needs to be considered or to possibly take some already existing location/infrastructure that might cause the aspirations to have more plausibly in terms of how they are described.

Actually, whether you are correct or not fillippone, in regard to possible unstated issuance obstacles, many of us have likely noticed that Bukele seems to have been taking quite a bit of a lower profile and seemingly fewer public tweet confrontations, and I have my doubts regarding that lower profile being merely due to lower BTC price performance in recent times, even though of course, it makes sense that bitcoin-related arrogance (or smugness) is much more difficult to pull off during times that bitcoin is consolidating for seemingly extended periods or even when the BTC price seeming to go against expectations for decently long periods of time.   .. and don't get me wrong, I am not even proclaiming that there likely are quite a few behind-the-scenes pressures being put on Bukele that individuals (or even non-governmental institutional actors) would not necessarily receive by various status quo powers that be financial institutions/governments/otherwise rich peeps.

It kind of reminds me of my own time in this forum in 2016 or so, and some members were telling me that they liked me much better during 2014 and 2015 when my BTC portfolio holdings were considerably in the red and saying that I was much more humble and nicer during those times, but then when my BTC portfolio holdings went into positive territory, my posts on the topic were filled with a lot more "I told you so" smugness, and even if I was being trolled a bit, for sure, we likely realize and understand that our options and power is greatly increased when our portfolio/holdings are in positive rather than negative price territories - and surely whether we are individuals, institutions or even governments, there is going to be a certain level of stress (and restraint) when we are in a place that our holdings are not really profitable.. and bitcoin history has shown us** that so long as we do not fuck up in terms of not selling too much BTC too soon, we can get into extreme levels of optionality merely from the level of profits of our BTC portfolio  going from many multitudes or even magnitudes of profitability (I was told that the use of the term "magnitude" is meant to indicate using 10x multiples rather than 1x).

**For sure, past performance does not guarantee future results, even though it is becoming more and more widely appreciated that bitcoin remains one of the best of asymmetric upside bets - including that it remains way more accessible for anyone around the world - which may well have not been the case for a lot of historical assets.. and surely bitcoin's digital form factor remains part of the innovative amazingness that is still way under appreciated to cause it to be really distinguishable from previous historical potential investment "opportunities."

[stompix]

Bitcoin Bonds are missing in action still, but they are coming, Treasury Minister says:

El Salvador's Bitcoin Volcano Bonds Launch Still on Hold, According to Treasury Minister

The government is reconsidering the launch date of its Salvadoran bitcoin bonds, whose funds are to be used to finance the construction of the Bitcoin City, a city that would feature a 0% income tax and be carbon-neutral due to the geothermal energy powering its operations. Alejandro Zelaya, El Salvador’s minister of treasury, explained that the market conditions and the war in Europe had affected the conditions to issue these bonds.

Since is a topic where you can ask stuff without being afraid, did he mention where is he going to get that green energy from, and maybe maybe, address the issue of why if they do have so much green energy they've finally started their  378 MW gas (LNG) power plant in order to reduce imports from Guatemala?

Just saying, if you have spare green energy for a whole future city, the above plant would make no sense, right?
Probably my personal dislike for Bukele but something is really fishy and stinky there!

[fillippone]

Since is a topic where you can ask stuff without being afraid,

It is. I hope it is a positive feature of this thread.

did he mention where is he going to get that green energy from, and maybe maybe, address the issue of why if they do have so much green energy they've finally started their  378 MW gas (LNG) power plant in order to reduce imports from Guatemala?

It looks like You know more than me. The energy for the mining ops and the Bitcoin city should be geothermal. One of the energy features is that it might be challenging to move the point from the production site to where it might be needed. Of course, this problem doesn’t exist for the Bitcoin mining operations, which can absorb energy wherever it is produced (provided internet connectivity).

But the point is interesting: why are they setting up an LNG regasification if geothermal energy is so abundant in the ES’territory?

And of course I do share your worries about Bukele.

[stompix]

Since is a topic where you can ask stuff without being afraid,

It is. I hope it is a positive feature of this thread.

I know, I just have an "it's Friday feeling" (although it's obviously Thursday) and I feel like joking and teasing a bit, doing things more relaxed, not just numbers and numbers and numbers...
30 degrees, all sunny, all green, planning on opening a beer after ... we do some numbers!  

But the point is interesting: why are they setting up an LNG regasification if geothermal energy is so abundant in the ES’territory?

Because it's a f lie! That's why!
Just as his 95 MW well, there is no such thing in the world! No single well has this capacity, no single well can be mined and operational in months!

Now, let's go for all this geothermal energy, directly from the source:
https://www.cne.gob.sv/tema/energias-renovables-2/energia-geotermica/
oops...got deleted! nice!!
But from google cache:

Code:

resultando 791 MW en total. Si la capacidad instalada de generación eléctricageotérmica en El Salvador es de 204.4 MW, 
la proporción de la capacidad instaladacon respecto al potencial geotérmico se puede aproximar a un 25.8 %

Salvador has 791 MW geothermal capacity only 200 currently in use, a total of  1 506 MW all renewable, 757 not renewable, and 25% of all electricity imports mainly from Guatemala. There is no extra geothermal energy, there won't be, it's simply not possible unless we have a new tectonic plate movement, which probably will mean no Salvador after.

That's why they burn gas, that's why they burn oil, that's why they import energy, but those things are not to be told! I don't think bitcoiners would want to invest billions in a city with this view when you look at the sunrise on the ocean:



Think of it just like that green open farm premium meat with a happy pig on it for which you've for 20 euros extra and only when you arrive home do you see those tiny letters letting you know it's 70% water, 20% MDM meat, and 10% natural recycled bee wax that makes it label worthy

[fillippone]

Today I got in a Twitter feud about El Salvador Bitcoin Bonds:



Here you have the Bloomberg Article that started the discussion:
Bitcoin-Bond Sale Flop Deepens Debt Market Rout in El Salvador

Prices on the country’s debt collapsed in April, falling 15.1%, a rout only surpassed by bonds in war-torn Ukraine. El Salvador’s benchmark bonds due in 2032 now yield 24%, a level that suggests investors are bracing for default.
Since abandoning talks with the IMF and adopting Bitcoin as official tender last year, investors have soured on El Salvador’s bonds, concerned not only with the ability to keep current on its debt but also the willingness to keep paying under the eccentric 40-year-old Bukele who has flashed authoritarian tendencies. And now, as the January debt maturity approaches, the 78-cent price on the notes shows many bondholders are losing conviction.

While the article wrongly  links the rout in bond debt of El Salvador to Bitcoin, there is a true correlation on this.

If the yield requested by investors to hold El Salvador Credit Risk denominated in USD, this means Bitcoin Bonds as originally described must also raise greatly. You see from the graph below the yield needed to hold an 8 years bond surged from 7% one year ago, to 20% 3 months ago to 35% today.


You can then guess  that if you think at the exercice I proposed on the OP now you can buy at the moment, the initial exercise of buying a USD denominated Bond

[stompix]

While the article wrongly  links the rout in bond debt of El Salvador to Bitcoin, there is a true correlation on this.

The rout has more with Bukele than with bitcoin but from there is just another hop and in the mind of somebody who doesn't like details it's one and the same..

From an investor's point of view, you have a country that is in deep "that", unable to pay its debts, a gambling wannabe dictator that has managed to catch all the 7 dips to date, and the only reason for these bonds to actually work is a rise in price in Bitcoins and a utopia no property tax, no income tax utopia city to be actually profitable excluding the other 12 billion needed for it to be built. So, why even bother with these and not buy other ^%^% that is tied to the price if we assume you can't buy bitcoin directly? Even Micro or Riot stocks seem safer than these despite that ski slope they are drawing in the charts!
Anyhow, it's still possible for the bitcoin bond to be a success while Salvador defaults on its debt, this wouldn't amaze me at all, I've seen enough fucked up things to not even raise an eyebrow.

Oh, btw, :

5. How this Bond is innovating the Financial System.

hihi, now this starts to sound more and more like  "kickstarting a new Bitcoin Standard"  

Also, don't get in Twitter feuds, even eating 3 times a day at KFC is healthier than that.
 

[fillippone]

From an investor's point of view, you have a country that is in deep "that", unable to pay its debts, a gambling wannabe dictator that has managed to catch all the 7 dips to date, and the only reason for these bonds to actually work is a rise in price in Bitcoins and a utopia no property tax, no income tax utopia city to be actually profitable excluding the other 12 billion needed for it to be built.

The path for the Volcano bonds to succeed is narrower and narrower everyday. And this is only partly related to bitcoin.
Of course, even some Excellion statements must be put under scrutiny: how and why, an oversubscribed bonds get delayed because of adverse market conditions?

[JayJuanGee]

From an investor's point of view, you have a country that is in deep "that", unable to pay its debts, a gambling wannabe dictator that has managed to catch all the 7 dips to date, and the only reason for these bonds to actually work is a rise in price in Bitcoins and a utopia no property tax, no income tax utopia city to be actually profitable excluding the other 12 billion needed for it to be built.

The path for the Volcano bonds to succeed is narrower and narrower everyday. And this is only partly related to bitcoin.
Of course, even some Excellion statements must be put under scrutiny: how and why, an oversubscribed bonds get delayed because of adverse market conditions?

Some factors might be unsaid.

For example, if the creators and promoters of the bond feel that they can ONLY release the bond in market conditions in which they have a high confidence that BTC prices will be going up, then in that sense they attempt to time the market without really directly saying that is what they are doing. 

Of course, we also know that sentiment has a tendency to inversely correlate to where the BTC price is going... so when the BTC price is going up and has been going up for a while bullish sentiment gets pretty high.. but that does not necessarily result in the BTC price continuing to go up.  The opposite is true regarding the BTC price going down, and sentiment can stay negative for quite a long time, even when the evidence becomes pretty clear that the "bottom is in." 

Sure, maybe something else more nefarious is going on.. but I really doubt it.

By the way, maybe one of the implications that you are making fillippone is that they were asserting that they were not technically ready to release the bond, but the evidence is showing that technically they could have released the bond, so they had been providing technicalities as an excuse rather than their real concerns.. and also you seem to be implying that they had been overly asserting the level of subscription (sentiment towards buying the bond), and even if you are correct that sentiment was never as strong as they were making it out to be, they still might have had been making the better decision to not have had released the bond and to continue to not release the bond, even if they are not completely describing all of their rationale or accurately describing the underlying facts.

The latest failure/refusal to release the bond may well have not even had been nefarious.. even though some people might ascribe nefariousness in terms of telling the truth no matter what or following through no matter what.. yet from my thinking I have my doubts about ascribing nefariousness.. even if it could be true that they ended up coming to some of the wrong balance.. because maybe in the end it would have been the "right thing to do" to just keep the date no matter what the market conditions.. and even if they had pretty strong feelings that they were going to be releasing the bond into a market with likely negative rather than a positive momentum.... oh and another by the way, most of us also realize that some actions take place on the margins, and sometimes what the actors end up doing does end up having a tipping effect in terms of contributing to what direction the market ended up going... but it seems really difficult to have confidence (even after the fact) in knowing those kinds of tipping effect consequential things that might have come from whether the behaviors would have been to do x or to do y or to do z.. even with BIG and influential actors.

[fillippone]

Bitcoin Bond has disappeared.
No law was approved
No news From Bukele
No word from the Bitcoin Bond "architect".

Nothing.

Probably, the global outlook for the Bond market is not the best.
In addition, Bitcoin markets are not really bullish at the moment.
Third, El Salvador is on the brink of a default on its debt.



Of course, the economic impact on the nation's finance of the bitcoin purchase is quite irrelevant, so be warned that the story that the bitcoin law led El Salvador to bankruptcy is "bullshit", to say the least.

[stompix]

Bitcoin Bond has disappeared.
No law was approved
No news From Bukele
No word from the Bitcoin Bond "architect".

Oh, who could have thought of that!
The bond was 200% oversubscribed, thousands were ready to invest in this ...scheme! And no word from Bukele?
No word, just like it happened with the 200MW geothermal eco-friendly one in the world bitcoin mining project?
Oh no, after Akon city now there is no Vulcano city?
Man, those surprises one after one, I need a large cup of green tea to keep myself calm, this is overhelming!

Damn, so now we have to go back to square one and use bitcoin for what it was, a payment system that didn't need a third party, and stop using it as a propaganda tool for some wanna-be dictator. Tough choice but I can live with that!

[JayJuanGee]

Bitcoin Bond has disappeared.
No law was approved
No news From Bukele
No word from the Bitcoin Bond "architect".

Nothing.

Probably, the global outlook for the Bond market is not the best.
In addition, Bitcoin markets are not really bullish at the moment.
Third, El Salvador is on the brink of a default on its debt.



Of course, the economic impact on the nation's finance of the bitcoin purchase is quite irrelevant, so be warned that the story that the bitcoin law led El Salvador to bankruptcy is "bullshit", to say the least.

So?

How long are we going to give it?

You are giving up fillippone?

How about we give it until the end of the Calendar year?  That's only 6 months.

We know that bitcoin bear markets can last 5 months to 2 years.. and sometimes we are not even sure if we are out of the bear market, yet.

We surely can have difficulties even knowing how long we had been in a bear market, even though it seems to have had been confirmed around mid-May 2022 when the BTC price dropped below $35k and failed to spring back up in a quick manner..

Maybe if the BTC price were to at least get back above $30k, then some of the El Salvador bitcoin bond investment discussions can resume? 

Really, is nothing being done on all of the various El Salvador bitcoin-related investment fronts, or are there just low key operations taking place in El Salvador (for the time being?)?

Building gets done during bitcoin bear markets?  Hype gets done during bitcoin bull markets?  You are suspecting that El Salvador had overdone the hype portion, and made too many mistakes? 

[fillippone]

So?

My post was meant to resonate with what @Stompix said: I couldn't be more bullish on bitcoin, but I cannot be bullish on El Salvador, even if their hipster dictator adopted bitcoin as legal tender or got help from some most notable experts from the BTC world.

This debt crisis revealed the weak spot of the Bitcoin Bond Strategy....it wasn't sensible in bull markets; it is even more stupid now in bear markets.

[fillippone]

Some news about Bitcoin Bonds coming from El salvador.
 



As we highlighter in the thread,the lack of a “bitcoin law”,  a key foundation for  the Volcano bond, was still lacking from El Salvador.
Something is moving according to this sources.

El Salvador Steps Closer to Issuing Controversial Bitcoin Bonds

• Presidency dispatches a digital-securities bill to lawmakers
  El Salvador Steps Closer to Issuing Controversial Bitcoin Bonds
  
• Presidency dispatches a digital-securities bill to lawmakers
• President Bukele aims to raise $1 billion via blockchain bonds

By Michael McDonald
(Bloomberg) --
El Salvador’s presidency dispatched a digital-securities bill to lawmakers, taking the nation a step closer to raising $1 billion via the world’s first sovereign blockchain bond.
A spokesperson for the presidency late Tuesday released a copy of the 33-page legislation, which calls for a digital-assets commission and a Bitcoin Fund Management Agency to oversee crypto-related debt sales.
The text says the goal is to “create a legal framework to transfer digital assets that are used in public issuances in El Salvador, as well as regulate the requirements and obligations of issuers and providers of digital assets.”
The proposed blockchain bonds, with a minimum investment of just $100, are meant to help finance the construction of a tax-free, coastal Bitcoin City that would have geothermal energy from a nearby volcano for mining digital coins.
The bonds would raise $500 million for infrastructure in Bitcoin City and another $500 million to buy Bitcoin, with any appreciation in the digital currency ultimately shared with bondholders.
El Salvador last year became the first country to make Bitcoin legal tender. President Nayib Bukele, a champion of cryptocurrencies, has been trying to hawk Bitcoin-backed bonds to international investors but with little success.
The controversial initiative is stoking worries worries about the nation’s creditworthiness amid stalled talks with the International Monetary Fund on financing to help plug a budget gap.

[aysg76]

Also heard about the same on twitter and finally after a year they have submitted to securities bill with congress to issue the bitcoin bonds in the country.Altough Nayib has not made official tweet about the same but he has retweeted the Bloomberg report which clearly indicates the sign that they are close to the action.

The bill can be approved before this year Christmas as per some sources so we will see how it goes for the most anticipated fund raising in El Salvador at $1 billion split in half of $500 million.

The bonds will pay a 6.5% yield and enable fast-tracked citizenship for investors. The government will share half the additional gains with investors as a Bitcoin Dividend once the original $500 million has been monetized. These dividends will be dispersed annually using Blockstream's asset management platform.

Bitfinex is set to be granted a license in order to be able to process and list the bond issuance in El Salvador.

@fillippone can you find the translated version for it?

If anyone is interested in reading the full 33 page of securities bill then they can find out it here : Bitcoin bonds

[stompix]

They are still coming up with this :

The proposed blockchain bonds, with a minimum investment of just $100, are meant to help finance the construction of a tax-free, coastal Bitcoin City that would have geothermal energy from a nearby volcano for mining digital coins.

Their magical geothermal well that somehow evaporated, the bitcoin mining promoted in videos is dead with no talk about the operation, energy prices are matching those in nearby countries, Salvador is a net importer of energy, and they still claim they are able to invest in mining? Companies involved in mining are facing bankruptcy and the revenue has come down to some measly 5$ for every 75kwh burned but some still think this will be catchy, let's promote mining although we have no serious clue how it will work and there is a 90% chance of being a money pit!

The bright side on this is that it's nice they haven't gone with their plan at 40k/BTC at least they are able to buy the famous dip Bukele keeps hitting it!

The bonds will pay a 6.5% yield and enable fast-tracked citizenship for investors. The government will share half the additional gains with investors as a Bitcoin Dividend once the original $500 million has been monetized. These dividends will be dispersed annually using Blockstream's asset management platform.

You build a city from scratch, you exempt businesses and citizens from taxes, you build the infrastructure for free energy, and somehow magically you will get 6.5% returns!
Is that better than Celsius rates? 

[fillippone]

We might be ahead of time, but just looking at the possibility of issuing a bond, the timing doesn’t look great.
Bitcoin is at a historic low, with institutional interest waning and less committed than one year ago.
We all know you want to buy when the market is low, and not when it is high, but often financial need doesn’t work this way.
Also, the yield for the El Salvadorean Bond has dramatically risen since one year ago. At the moment, a 7Y Bond from El Salvador should yield at least 25%:




This is up 16% one year ago (red line in the graph), albeit down from 34% 3 Months ago (white line in the Graph).

And this is a “simple” bond. Usually, exotic bonds, with some “weird” payoff attached, are requested to yield more.

Bear in mind when you see the new Bitcoin Bond, with a coupon of 20%!

[fillippone]

During one of his last podcast, Rikki, one half of the "Bitcoin Explorers" Stated that the Bitcoin Bond was overly undersubscribed.
This was the exact opposite of what Samson Mow stated.

He is also very pessimistic about the possibility of having a bitcoin bond sooner than later (or never).
I will let you know if I discover more.

[JayJuanGee]

During one of his last podcast, Rikki, one half of the "Bitcoin Explorers" Stated that the Bitcoin Bond was overly undersubscribed.
This was the exact opposite of what Samson Mow stated.

He is also very pessimistic about the possibility of having a bitcoin bond sooner than later (or never).
I will let you know if I discover more.

I usually prefer to listen to podcasts rather than watch YouTube.. but I will watch Youtube, once in a while if I know which one is being referenced.. and even better yet if the reference tells me which part of the video to watch or tells me the reasons why I should watch / listen to the whole thing.

Your link (fillippone) referenced the BitcoinExplorers channel which has three videos (two of them are 16 minutes and one is 18 minutes).. one of them has an El Salvador title.. Is that the one or do you want me (us, we) to watch all three of those to figure out the reference.. hahahahahaha.. not trying to pick on you... and by the way, if there is an audio podcast of bitcoiners, I don't mind subscribing to it and listening to all the updates.. even though sometimes if I just hear about one, then it can take a while to listen to some of the back issues.. but I had never previously heard of this one.. BitcoinExplorers..... even though their first video says "We're back".. Back from where?  I did not listen to (or watch) it.. hahahaha .. I need direction to be inspired "where to start?" and/or "will it be worth la pena (la tristezza)?"...