👑 The King buying bitcoin

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GM everyone. This is 2036, the newsletter that makes you smart on crypto in 3min/day.

The Kingdom of Bhutan is known primarily for:

• its sick landscapes

• mountaintop monasteries called dzongs

• its Gross National Happiness Index that trumps GDP

But what you might not know is that:

a) Bhutan has a sovereign wealth fund worth nearly $3 billion
b) it owns a cheesemaker, an airline, and a ton of bitcoin.

Let’s dig in.

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Our scars still haven’t healed - but in case you need reminding - two of the biggest crypto lenders, Celcius and BlockFi, went bust last year.

It was part of a larger shit show that went down all year and frankly made 2022 look like the worst year in memory.

Turns out, the whole saga was bad for a lot of people - including us AND the Kingdom of Bhutan.

The sovereign wealth fund of Bhutan - named Druk Investments, after a Bhutanese magic dragon called Druk - was a BIG customer of Celcius and BlockFi.

In February 2022, Bhutan used BlockFi to borrow $30 million of USDC.

But they defaulted on their loan and lost nearly 2,000 BTC in the process.

Royally rekt.

On Celcius, the Kingdom deposited over $65 million and withdrew $18 million in crypto over the course of 3 months.

Now - that’s all we know because it’s been publicly released in court documents.

And not to speculate - though who doesn’t love some good ol’ speculation - but:

1/ It’s likely that Bhutan has other investments in digital assets. 

We only know of the crypto that was used on BlockFi and Celcius.

But Bhutan probably wouldn’t stuff all their assets there. It’s likely they were involved in other ecosystems and probably hold some crypto in cold storage too.

On top of that, Bhutan also has abundant, cheap hydroelectric power that it could use to… I don’t know… mine bitcoin? Who knows.

2/ It’s also likely OTHER governments and wealth funds own bitcoin

Purchases of digital assets by governments and sovereign wealth funds are typically not made public.

Only investments in publicly traded companies are.

That’s how we know the Norwegian Sovereign Wealth Fund - the biggest in the world - owns bitcoin indirectly through its investment in Microstrategy, a company run by bitcoin maxi Michael Saylor who’s borrowed billions to turn his software business into a bitcoin holding company.

But everything else is just a guessing game. Singapore’s sovereign wealth fund is rumored to own crypto, along with a bunch of other, smaller nations. 👀

3/ If a bigger country purchases bitcoin (and announces it), it’s game over for the bears

Look - we like Bhutan. In fact, we love Bhutan. It’s cute, has a magic dragon on its flag, and monasteries that are called dongs.

But Bhutan is tiny. It’s got 730,000 people and an economy a quarter the size of Vermont.

It’s on the right track, and we applaud it for that. All hail Druk the Dragon.

But the news of Bhutan’s digital fever hasn’t yet driven hyperbitcoinization around the world.

If a bigger country does, however, it would be game over.

If Singapore, Brazil, India or South Africa announce they’re buying bitcoin, it’s just a matter of time before everyone else will need to - for fear of being left behind.

Bitcoin could be used both as a settlement currency for large international transactions, as a hedge against the US dollar and for hard-money savings.

We know central banks are diversifying. Last year, they collectively bought more gold than during any year in history.

And non-Western alliances are making it clear they want to replace the US dollar for international trade and global reserve currency.

What could they use instead? The Chinese Yuan (don’t love it) - or gold, sure.

But some have realized bitcoin is already the hardest money in the world. It’s just a matter of time before everyone else sees it too.

Then the race to hyperbitcoinization will truly begin.

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