Notes 1/12: Binance Hires, Bitcoin Bonds

Binance is on a roll.

After increasing its headcount by 5,000 people last year, the world’s biggest cryptocurrency exchange by trading volume plans to ramp up its hiring by between 15% to 30% this year, according to its chief executive officer and co-founder Changpeng Zhao or CZ as he is popularly known.

Binance claims to have 8,000 employees currently, meaning it will hire somewhere between 1,200 to 3,600 new staffers for its operations.

Binance Don’t Care

Where will it get the money to pay their salaries?

CZ told audiences at a conference in Switzerland that the exchange is “pretty big, pretty profitable”. The source of its profits, however, is a mystery.

Binance’s financials and operations are opaque, and its proof of reserves report is a sham. It also does not have a high valuation in private markets to justify further investments.

According to recent reports, the exchange is also “bleeding” assets amidst investor fears about its stablecoin. A crypto winter of declining prices and its promise of another big domino to fall in the ecosystem has added to their fears. The state of the global economy, where experts are warning of an impending recession, has further crimped business prospects for firms.

In one respect, Binance is like Bitcoin. It [and its business] don’t care.

El Salvador’s Bitcoin Bonds

Another entity that doesn’t care about the prevailing economic sentiment is the El Salvador government. The country wants to be an “epicenter of Bitcoin adoption.” To that end, it has passed a Digital Asset Issuance Law that allows sales of bonds to enable it to play around with cryptocurrencies.

President Nayib Bukelele’s government announced plans for 10-year Bitcoin bonds, later renamed Volcano Bonds, in November 2021 to raise money to buy the cryptocurrency, develop a renewable energy-based bitcoin mining industry, and fund construction of “Bitcoin City”.

It was supposed to have an annual yield of 6.5% and was backed by the government. For context, at the time the announcement was made, the country’s 10-year bonds carried a 13.5% yield. Controversial exchange Bitfinex, sister company to notorious stablecoin Tether, was supposed to serve as bookkeeper to the issue.  

Generating Additional Yield

Samson Mow, one of the bond’s architects, produced fancy charts and outlined a trading strategy to generate additional yield. It involved other countries following El Salvador’s lead and issuing bonds to purchase bitcoin. That would push up the crypto’s price and enable El Salvador to offload its stash at a profit.

Of course, the entire plan was predicated on a rising curve for bitcoin prices. That didn’t happen. After setting a price record last year, the cryptocurrency’s price has crashed by more than 70%. The value of El Salvador’s existing bitcoin holdings had crashed by 60% as of last November. Meanwhile, the Central American country had to repurchase some of its earlier debt to quell fears of a possible default.  

Since its 2021 announcement, El Salvador has repeatedly postponed issue of the bonds. The latest move should remove one more bottleneck for the country to make its planned issue. Given the number of red flags in crypto and El Salvador’s economy, however, it is hardly likely that investors will rush to subscribe.

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