💴 Bitcoin's legal tender moment

Thursday, June 10, 2021 by Robinhood Snacks | Disclosures
_Bitcoin's tender embrace [Linda Raymond/Moment via GettyImages]_

Bitcoin's tender embrace Linda Raymond/Moment via GettyImages

Yesterday’s Market Moves
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Hey Snackers,

The most expensive home bought with crypto cost $22.5M — and of course, it's a penthouse in Miami Beach.

The S&P 500 closed just below its all-time closing high yesterday. Happy Friday, S&P 500.


1. Making crypto history: El Salvador becomes the first country to approve Bitcoin as legal tender

Return of the coin... Earlier this week, crypto prices fell after US officials recovered $2.3M in Bitcoin ransom. Yesterday, Bitcoin surged 9% after El Salvador became the first country to approve the cryptocurrency as legal tender. El Salvador currently uses the US dollar as its official currency. Expect some cryptic changes:

  • 1. Businesses will have to accept Bitcoin as payment.
  • 2. Salvadorans will be able to pay taxes and bank loans in BTC.
  • 3. Salvadorans who convert BTC to other currencies won't pay capital gains tax.

A new idea indeed... El Salvador's President and his New Ideas party say the move will improve financial inclusion among the 70% of Salvadorans who don’t have access to traditional financial services. Introducing BTC as legal tender could also ease the "remittance fee" burden:

  • One in four Salvadorans live abroad, mostly in the US. Extreme poverty and criminal violence has caused mass migration from the country, home to 6.5M.
  • Nearly three of every 10 dollars in El Salvador's economy come from remittances — aka: money that family living abroad sends back home.
  • $6B: Remittances sent to El Salvador hit a record last year. But money transfer through banks often comes with fees that can add up quickly. BTC is often cheaper and easier to transfer.

This could be a valuable experiment... for developing countries considering crypto as legal tender. But analysts are worried about the economic risks posed by BTC’s extreme volatility. El Salvador is one of Central America's poorest countries, and has struggled to manage its finances. It could benefit by converting BTC to $$$ when the crypto's price is high, to help cover its huge deficit. On the flip side, things could go sour if BTC moves the other way, as it has over the past month.


Bombshell... The nonprofit publication ProPublica dropped an investigation revealing how the 25 richest people in the US pay little to no income taxes compared to their net worth. The story is causing a stir, partly since leaking tax returns is a federal crime. ProPublica says it obtained IRS data from an anonymous source. The data = tax returns of thousands of America's wealthiest, spanning 15+ years. The Treasury Department is investigating the leak. From 2014 to 2018:

  • Warren Buffett paid $24M in taxes on $125M of reported income, while his wealth grew by $24B thanks to investments. His "true tax rate" = 0.10%.
  • Jeff Bezos paid nearly $1B in taxes on $4B+ income, while his wealth grew by $99B. True tax rate: 0.98%.
  • Elon... Musk we say it? Elon shelled out $455M in taxes on $1.5B reported income, while his wealth grew $14B. True tax rate: 3.27%.

Here's how... In the US, income is taxed – net worth isn't. So while Elon's wealth grew by billions as Tesla stock rose, he wasn't taxed on investments that he didn't sell (aka: unrealized gains). ProPublica calculated “true tax rate” — taxes paid as a percentage of total wealth gains.

  • Still, ProPublica says that the 25 richest Americans paid an average personal federal income tax of only 16% from 2014 to 2018 — less than many "regular" people pay.
  • How: Billionaires avoid forms of income like wages, that are taxed at 37% for their income bracket. Also: accounting gymnastics.

This scandal could help fuel Biden's policy... Many Americans are shocked to see billionaires' ultra-low tax rates. President Biden is seeking tax increases on the wealthy to fund proposed spending on infrastructure and social programs, including nearly doubling the capital gains tax rate to 39.6% for Americans earning $1M per year or more.

What else we’re Snackin’

  • Whoa: JBS, the world's largest meat supplier, paid a whopping $11M to cyberhackers who temporarily knocked out its plants last week.
  • Vax: Biden will send 500M doses of Pfizer's Covid vaccine to 100 countries over a year.
  • TokOn: President Biden revoked Trump's exec orders to ban new downloads of TikTok, WeChat, and other Chinese apps.
  • Yikes: The Covid "Delta Variant" that was first found in India is quickly spreading across the globe.
  • HopIn: In a bet on the longevity of remote events, LinkedIn invested in Zoom competitor Hopin, valued at $5.7B.

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The average American household has 25 connected devices


  • Weekly jobless claims. Earnings expected from Chewy and Signet Jewelers

Authors of this Snacks own shares of: Tesla

ID: 1680905