Crypto Traders Guide

Written by Maurice Cardinal

The Bitcoin Paradigm

Crypto and blockchain protocols and definitions change faster than the weather, which makes it hard to keep up. Many people know the basics, but the reality is that even the basics change rapidly, so what you thought was gospel last year or last month, is old news that could hurt you.

A good place to start is Bitcoin, the grand daddy of them all!

Bitcoin is the first app to be developed on blockchain, and was the first example of an alternative financial tool that removed the middleman, bypassing banks and other financial institutions. Bitcoin is primarily used today as a tool to store value. The coin has potential to be a primary global payment currency as well as a security, but it’s still too early in the game to know how it will eventually play out. In some parts of the world, like China for example, the use and adoption rate for Bitcoin as payment for retail purchases is growing steadily. It indicates that cryptocurrencies currently have substantial interest and ecommerce value in developing countries where the banking system is immature. That dynamic and balance is changing fast however. The modern world is quickly developing crypto and blockchain ecosystems that will soon serve high caliber trusted global financial centres like London, New York, and Tokyo. With China as a test market, it won’t take long for the rest of the world to adopt proven strategies bench-marked and used readily in Asia.

A variety of global entities already accept Bitcoin as a payment, i.e., KFC – Kentucky Fried Chicken, Playboy, Subway, Microsoft, Expedia, CryptoCribs, Whole Foods, Lionsgate Films and a growing list, but it is still a very tiny slice compared to what it will grow into over the next few years.

One of the most under-reported, but possibly biggest current crypto and blockchain utilities is the gambling industry – poker in particular, which goes back to 2015. It has had fitful starts and stops respective of Bitcoin, but it’s now leveling out and moving to Ethereum, Bitcoin Cash, and other closed-source platforms. Look for huge offshore development in the crypto gambling sector. Deal me in!

DE-centralization is one of the main benefits of cryptocurrencies, which means that one central entity cannot control how a coin is managed or operates. Once the protocols are set into a block and placed into a chain, they are locked in preventing anyone from hacking the code to modify the parameters. Crypto is fast and can transfer digital currencies around the world almost instantaneously. It is also inexpensive and literally pushes traditional competitors like banks off of their lofty “centralized” podiums.

One of crypto’s greatest attributes is easy access. You only need a computer or phone to open a wallet. Registration is fast and free and gives you quick access to funds even if you do not have a bank, which is a major boon for developing countries.

You can buy and sell Bitcoin at a wide variety of exchanges around the world. The key is to ensure that “where” you buy it has adequate liquidity so you can also easily and quickly sell it. It’s critically important to carefully choose an exchange that is trustworthy and transparent. Speed is critical, so if your exchange lags, you could lose your fortune very quickly through no fault of your own.

Not all exchanges, even the largest, handle all coins, so you need to choose an exchange that meets your specific requirements. Many traders register with more than one exchange so they have easy access to all types of buy and sell scenarios.

Bitcoin is open-source, which means that with proper coding skills you can build a new currency – think of it like Linux. It’s important to remember that it’s not just technology that makes a great coin. Also as important, and even more critical in some cases is the network and brand supporting it. Image and trust are everything, as can be attested in part by the wild fluctuations of Bitcoin. Perceived value can cause a run that devalues or increases value at an alarming rate, which again is in part why in 2018 Bitcoin rallied from $3K to 20K in a few months, and then troughed even faster back to $3K.

Bitcoin has a field of competition of over two thousand coins, like Ethereum, Ripple, Bitcoin Cash, Dash, Litecoin, Monero, ZCash, and thousands more. Not all however, are of comparable quality.

Some coins have better privacy features, or scalability, security and function options, but Bitcoin is still the Crypto-King of stored value. Bitcoin is so powerful that almost every traditional financial institution has tried to discredit and block crypto from developing. Banks have been known to refuse loans if they know you invest heavily in Bitcoin. Banking executives are as fearful of cryptocurrencies as newspaper and record companies were of the internet back in the day. Paradigm shifts like this erode traditional networks and replace them with new leaders in new ecosystems, and that keeps executives, who don’t keep up, awake at night. It’s a boon for early adopters, and a career killing nightmare for others.

Crypto is Complicated

Crypto confuses those who only have passing interest and who are trying to make easy money. It’s not something you should enter into casually, because even the best built exchanges still, collectively, get digitally robbed of multimillions of coins. Not only does your exchange have to protect their and your funds, you also have to put protocols in place that pick up where they leave off by using HOT and COLD wallets that help eliminate the threat of hacking and theft.

For those old enough, think back and regard crypto like the development of the internet in the early 90s. If you recall, we are seeing and experiencing exactly the same growing pains, weak spots, and surprising returns for early adopters, as well as scam artists.

One serious challenge with Bitcoin is that its popularity has surpassed its technical capabilities. One of the solutions was to split, or FORK the coin into other variations that are more technologically sophisticated and diverse. Solutions like the Lightening Network promise instant payments, scalability, low cost, and cross blockchain swaps. Bitcoin also has a privacy challenge because it is on a public blockchain, but that issue is being addressed by coins like Monero. Volatility is also a serious issue in the short term, that hopefully will disappear when the coin finds it’s base. That however could take some time, and means the current price will still have to drop considerably. Some think Bitcoin needs to drop as low as $1.5K per coin, which seems steep, but it’s plausible when you compare it to the base prices of similar trading asset classes, digital or not.

Bitcoin is also an energy hog that eats up exorbitant amounts of power during the mining process. Other coins, like Ethereum have built in mining protocols that eliminate crippling electricity costs.

When this article was published, and according to Buy Bitcoin Worldwide, there were 3,516.662.5 Bitcoins left to be mined – 83.254 % have already been issued. There are 17,488,337.5 total BTC in existence with 1,800 new coins per day. The numbers change every ten minutes when new blocks are mined. Each new block puts 12.5 BTC into circulation. The total amount of Bitcoins that can ever exist are 21 million, which means that as of this date, there are 3,516,662.5 coins left to be mined. On average, 144 blocks per day are mined with 12.5 Bitcoins per block, which totals 1,800 each twenty-four-hour period. 558,667 blocks have been mined in total. As coins are bought it becomes more difficult to mine the blocks.

It is rumoured that a Japanese man, Satoshi Nakamoto, created Bitcoin, but it is pure speculation, and at this stage it is mostly irrelevant who started the crypto ball rolling. One concerning factor however is that whomever it is, they hold an estimate of anywhere from 300,000 to 1 million Bitcoins, which is sizable when you consider that selling high volumes have a direct and immediate impact on the value of the coin. It is claimed that whales are one reason Bitcoin fluctuates so wildly, and that major sell offs are purposely made in order to short the market and make huge profit on the dip. Interestingly, some people also think Satoshi is from the UK, maybe London – the world’s most powerful financial city.

Whomever this guy is, he holds incredible power. He also knows that remaining anonymous will feed speculation and drives interest even higher. Smart guy on a number of levels.