Bitcoin (BTC) remains bullish and a multitude of metrics support this claim.  Is this a trend reversal?  Over the past week investors’ short-term sentiments about Bitcoin’s prospects appear to have improved. While last week’s market update made the case for why top investors and analysts are overwhelmingly bullish on Bitcoin’s predicted long-term price action, the fall from $13,800 to $9,100 did shake retail investors confidence for the short term.  Prior resistance levels that were obliterated throughout Bitcoin’s ascension from $4,000 to $13,800 proved to be weak support and many investors expected Bitcoin to drop to $8,500–$7,500 before reversing course.  Investors will have noticed that Bitcoin formed a double bottom around $9,100 and some believe that the expectation that Bitcoin will drop to $7,500–$8,500 will be a non-event as larger hands will front run a trend reversal from $9,000.  Since July 28, Bitcoin pulled off a low-volume upside move and the 19.6% gain brings the digital asset back to $10,800. $10,800 is a significant price point as it aligns with the 38.3% Fibonacci retracement level and is a few hundred dollars away from the $11,200 resistance.  Even more important from a psychological and technical point of view, a sustained move above the $11,200 resistance places Bitcion back into the rising wedge formation that carried Bitcoin from $4,000 to its 2019 all-time high.  The majority of crypto-media analysts have focused on the 21-EMA being a good indicator for gauging the strength of bullish and bearish momentum. Keeping this in mind, it’s worth noting that the most recent surge brought Bitcoin above this point.  One should also note that the majority of this week’s action occurred on low volume and more intuitive traders like Alessio Rastani advised caution as Bitcoin could ascend to $11,200–$11,500, quickly retract, and prove to be a bear trap.  Currently, Bitcoin is tightening as the weekly chart shows the digital asset setting higher lows. A more convincing move would be the achievement of a weekly close at or above $11,150. A sharp increase in bull volume would also provide some confirmation of a trend change.  Multiple indicators show Bitcoin is well-situated for additional gains As Bitcoin reversed from the $9,100 double bottom, the daily RSI also leapt out of the descending wedge and back above 50 which has served as a reliable oversold bounce point since the rally from $4,000 began. The daily MACD also crossed over the signal line and the histogram is positive again, which is a bullish signal. Over the past few weeks traders have also pointed to the astonishing number of USDT minted since June and the lagging impact of this on Bitcoin’s price action.  Tether printed more than $750 million USDT since June and careful observation of the following chart shows that Bitcoin’s market cap tends to follow Tether’s. One can see that Bitcoin’s market cap has yet to catch up with Tether’s increases.  Regulatory rumors empower Bitcoin  Over the past few months Bitcoin’s dominance rate has also been on a steady rise. Facebook’s Libra reveal quickly drew the ire of United States lawmakers and U.S. Treasury Secretary Steven Mnuchin went out of his way to say that strong regulations will be placed on Bitcoin.  These statements may have impacted investor confidence, but other events impacting altcoins have helped Bitcoin maintain a dominance rate above 66, which above Bitcoin’s November 2017 dominance rate. Travis Kling of Ikigai Asset Management attributes the rise in Bitcon dominance to:  “BTC is separating itself from the rest of the crypto asset landscape in terms of institutional investability.” A recent report from Coin Metrics also pointed out the absolute culling that altcoins have taken and the analytics firm concluded that a continued onslaught of regulatory, macro-economic and geopolitical pressures are negatively impacting altcoins. Picture 6Coin Metrics cites recent actions from Binance, Poloniex and Bittrex. Each exchange implemented new policies restricting U.S.-based traders from derivative instruments and a range of digital assets. The Commodities Futures Trading Commission also has opened an inquiry of BitMex over allegations that the exchange permitted U.S. residents to trade on the platform.  As crypto analyst Alex Kruger points out, altcoin to BTC pairings and altcoin to U.S. dollar pairings tend to perform poorly when FUD is in full effect. It’s clear that investors jump into Bitcoin and the top stablecoins during these times, hence Bitcoins growing dominance rate. Taking a look at the monthly chart, regardless of whether one factors in the blow-off tops or ignores them, 2019’s all-time high is not too far away from Bitcoin’s 2017 high.  While not discussed as much by those obsessed with price action, Bitcoin’s hash rate continued to explode to new highs month after month. This is significant as it shows the growing strength of the Bitcoin network. A higher hash increases network security and increases the difficulty of launching a 51% attack.  Bitcoin transactions are also on the rise and in May the transaction count surpassed 450,000 per day. During 2017’s mega rally transactions reached 490,000.  Earlier this week Adamant Capital founding partner Tuur Demeester retweeted a post from Nic Carter pointing out that Bitcoin is closing in fast on its billionith dollar charged in transaction fees.  Demeester added that increasing transactions are a “measure of success as a settlement layer.” Exciting times await investors As one can see, an assortment of metrics and technical analysis tools make a strong bullish case for Bitcoin. Unexpected sharp 20% to 40% corrections will continue to happen, and they will be scary.  There are other metrics to consider, like, increasing monthly trade volume across exchanges, growth in unique Bitcoin addresses and increases in Bitcoin’s volatility.  As a note of encouragement for those of us who are wage slaves until the next moon event, dollar cost averaging into Bitcoin is a tried a true method to take advantage of Bitcoin’s volatility without having to monitor charts all day. It was not too long ago that Fundstrat Head of Research Tom Lee tweeted that Bitcoin historically generates the bulk of

  2021 has proven to be a fortuitous year for the world’s second-biggest cryptocurrency Ether (ETH), which has seen a fourfold increase in value over the past 12 months. In doing so, Ether has outperformed the appreciation of the preeminent Bitcoin and has gained an increased percentage of the overall cryptocurrency market by capitalization. While the wider cryptocurrency markets have enjoyed a year of relative gains, ETH’s increase in value has been in tandem with upgrades to Ethereum’s core protocol, laying down the final pillars for its transition to a proof-of-stake consensus protocol in 2022. Certain Ethereum Improvement Proposals (EIP) have been the center of attention for the wider Ethereum community and have proved to be pivotal for “The Merge” with the proof-of-stake Beacon Chain set to take place in 2022. The London hard fork was the most anticipated upgrade that introduced a handful of EIPs. EIP-1559 proved to be contentious due to the change of fee structures earned by miners and paid by users, and there were both positive and negative aspects brought about by the upgrade. A crucial factor was the built-in ETH burn mechanism introduced that destroys a portion of Ether used to pay a transaction fee. While some miners were unhappy to see a reduction in fees, the upside of the London hard fork was the deflationary action of the ETH burn mechanism. It is believed that this EIP and its deflationary mechanism will help increase the value of ETH in the months and years to come. The Altair upgrade followed London toward the end of the year, serving as the first update to the Beacon Chain since its launch in December 2020. This allowed various teams involved in the ongoing development of the Ethereum ecosystem to carry out a dry run of “The Merge.” Another driving force in Ether’s strong performance in 2021 has been the burgeoning decentralized finance (DeFi) sector, which has attracted a significant amount of capital. Ethereum’s blockchain runs a number of the largest DeFi platforms and this has had a direct effect on the value of ETH and the increased activity on the blockchain. Reap what you sow Ethereum’s popularity as a blockchain platform is a direct result of the smart contract functionality underpinning the ecosystem. Smart contracts allow for a variety of applications to be created and run on the blockchain, allowing users to create their tokens, applications and platforms. While ETH is the proverbial lifeblood of the Ethereum ecosystem, the projects and applications running on the blockchain are largely responsible for the value being derived. As the saying goes, you reap what you sow, and the ecosystem is reaping the benefits of a blockchain system that has allowed seeds to blossom into valuable and popular DApps and platforms. Ben Caselin, head of research & strategy at cryptocurrency exchange AAX, offered some insights into the main factors that have amplified Ethereum’s strong year. Caselin first highlighted the variety of use cases that have helped ETH’s cause throughout the year: “We’re referring to stablecoins, DeFi, GameFi, nonfungible tokens (NFTs), meme coins, digital bonds, central bank digital currency initiatives, yield farming, liquidity pools and the metaverse.” He further added: “Ethereum carries each of these sectors and the associated capital with outsized market share. Ethereum’s value is established differently based on the activities it powers, while Bitcoin grows steadily as it sees adoption as a base-layer savings technology for a new global economy. Each moves somewhat in unison but they are fundamentally driven by different forces and conditions.” Mattias Nystrom, community manager at Ethereum layer-two payments platform Golem Network, shared his insights with Cointelegraph. Nystrom highlighted the sum of activity on the Ethereum network as the catalyst for its success this year: “While Bitcoin is primarily built for just payments, Ethereum is unique because of its underlying technology and this is starting to catch on as Web 3.0 begins its journey to mainstream adoption.” Mati Greenspan, crypto analyst and founder of Quantum Economics, told Cointelegraph that the performance of Bitcoin (BTC) and Ether are difficult to compare, given their widely differing use cases and ecosystems. Nevertheless, he admitted that the latter has seen a clear uptrend in value over the past 12 months: “Bitcoin and Ethereum are about as different as any two assets can be, aside from the fact that they’re both digital currencies. They have vastly different functions within their respective networks and each has unique buy and sell pressures.” Influential EIPs As Cointelegraph explored in November, Ethereum is on the final road to its move away from the energy-demanding proof-of-work (PoW) consensys algorithm to the proof-of-stake (PoS) Ethereum 2.0 chain. The Beacon Chain went live in December 2020, initiating the creation of the PoS Eth2 chain, which now has over 8,600,000 ETH staked and a little under 270,000 validators online. These validators will essentially take over the work of current-day miners in Eth2, processing transactions and maintaining the operation of the blockchain. Becoming a full node validator requires a user to stake 32 ETH, while smaller amounts can be staked in pools. One of the most anticipated Ethereum Improvement Proposals went live midway through 2021. EIP-155 was the subject of much debate, given the changes it introduced to the fee structures earned by miners and paid by users. A sore point was the built-in ETH burn mechanism that destroys a portion of Ether used to pay a transaction fee. Miners weren’t impressed, given that fees form a part of their incentive to maintain the network. The upside of the London hard fork was the deflationary effect introduced by the ETH burn mechanism. As a result, every transaction sees a percentage of ETH destroyed, leading to more ETH being gradually removed from the ecosystem, a process that is envisaged to increase the scarcity and value of ETH as an asset. Caselin believes that the implementation of the London upgrade has played its part in attracting positive sentiment from investors, but also highlights some key distinguishing factors between Ethereum and Bitcoin:

  In less than two weeks after its previous bitcoin purchase, Microstrategy bought more bitcoins. The company has added 1,434 coins to its treasury, bringing the total holdings to 122,478 coins. At the time of writing, the company’s total bitcoin stash is worth about $6 billion. Microstrategy Purchases 1,434 More Bitcoins The Nasdaq-listed company Microstrategy has purchased more bitcoin. CEO Michael Saylor announced Thursday: Microstrategy has purchased an additional 1,434 bitcoins for ~$82.4 million in cash at an average price of ~$57,477 per bitcoin. As of 12/9/21 we hodl ~122,478 bitcoins acquired for ~$3.66 billion at an average price of ~$29,861 per bitcoin. Before this latest purchase, Microstrategy bought 7,002 bitcoins at the end of November. At the time of writing, the price of bitcoin is $48,736.87 based on data from Bitcoin.com Markets. This means Microstrategy’s bitcoins are now worth almost $6 billion. Saylor believes that bitcoin will become a $100 trillion asset class, noting that the cryptocurrency is winning against gold. “Digital gold is going to replace gold this decade,” he said. The Microstrategy CEO discussed the rising adoption of bitcoin globally on Yahoo Finance Live Thursday. Commenting on gold as an investment, he said that gold is threatened by bitcoin. “The best thing you could do is sell all $10 trillion of gold and buy bitcoin,” Saylor suggested, adding: “Gold is a dead rock. It’s the worst-performing asset, bar none, no debate. There is no hope for it.” He tweeted: Once upon a time, gold was the most desirable store of value. Now bitcoin is taking its place.

  The Bitcoin network’s share of global carbon dioxide emissions is only about 0.13% of the global annual total — approximately 47 million tons of a rough total 37 billion tons, by some estimates. But despite the fact that many bitcoin mining firms use renewables for a significant amount of their energy needs, Bitcoin is under sustained attack for its consumption. It is becoming clear that the biggest challenge for bitcoin mining right now is no longer just finding the best mining equipment (as Chinese miners have shut down over a regulatory crackdown and apparently freed up a significant amount of equipment). It is how to answer so-called environmental, social and governance (ESG) concerns about energy use and climate change. Throughout the U.S., there are regions that are expanding their nuclear power capabilities and numerous examples of bitcoin mining firms pivoting to nuclear power, a carbon-free source that should help to answer those concerns. In Ohio, in what the companies are calling a “groundbreaking climate-friendly agreement,” Energy Harbor and Standard Power are partnering to provide nuclear power to a new bitcoin mining center in Coshocton. Compass Mining has seemingly leapfrogged the competition, skipping the nuclear reactor step and going straight to nuclear fission in a 20-year agreement with California-based advanced fission company Okla to mine bitcoin with nuclear power. It also appears that the stage is being set for nuclear-powered bitcoin mining in Wyoming, which is partnering with Bill Gates’ TerraPower to build a “modular” new nuclear reactor to help reduce the state’s dependence on fossil fuels. CONVERTING AN ABANDONED PAPER MILL INTO A BITCOIN MINING CENTER IN OHIO Two companies in Ohio are pioneering a project that will bring a nuclear-powered mining center to Coshocton, Ohio. Standard Power, an infrastructure and hosting provider, is converting an abandoned paper mill into a state-of-the-art nuclear powered bitcoin mine. Energy Harbor, an independent power producer, is committing to supply clean, reliable nuclear power for five years, starting in December 2021, to this bitcoin mining facility and to stabilize the grid when necessary by reducing its power usage. “Standard Power will also be providing valuable reliability and stability to the transmission grid by completely shutting down operations when the electric grid and other Ohio customers need the power the most,” according to the announcement. COMPASS MINING GOES STRAIGHT TO NUCLEAR FISSION Compass Mining, an online hosting and retail service helping miners get set up, has signed a 20-year agreement to launch a nuclear fission mining operation. Conscious of the growing demand for “clean” energy, California-based energy company Oklo is pioneering the use of nuclear fission and, according to an announcement, is the first advanced fission company to have its license to construct and operate a power plant accepted for review by the U.S. Nuclear Regulatory Commission. “We are proud to blaze new trails on the commercialization of our powerhouses by partnering with Compass in decarbonizing Bitcoin,” said Jacob DeWitte, CEO of Oklo, in the announcement. WYOMING IS PAVING THE WAY FOR NUCLEAR BITCOIN MINING As one of the U.S.’s biggest net suppliers of energy (it produces 14-times more energy than it consumes), Wyoming is already well positioned in its quest to become a bitcoin mining mecca. As the state’s energy grid currently uses almost 90 percent fossil fuels, Wyoming is moving toward greener energy by partnering with Bill Gates’ company TerraPower to build a new style of nuclear reactor in an abandoned coal plant. According to TerraPower, its new modular reactor, called a Natrium, is the next stage of advanced nuclear power technology and will guarantee reliable, cheap power for future bitcoin miners. “Once operating, the Natrium plant is estimated to produce nearly 3 million megawatt hours of carbon-free power each year and avoid almost 2 million metric tons of carbon,” the U.S. office of nuclear energy said of the project. “It will also avoid other pollutants that lead to smog and acid rain to improve the overall air quality in the region.” Recognizing that the new reactor will create thousands of construction jobs and hundreds of permanent jobs, the U.S. Department of Energy is investing nearly $2 billion to support the licensing, construction and demonstration of this first-of-a-kind reactor by 2028. And it seems likely that this growing emphasis on nuclear power will soon be enjoyed by Bitcoin miners, as the state’s U.S. Senator Cynthia Lummis, an outspoken advocate for Bitcoin, continues to foster the industry. “Wyoming powers America, and I’m proud of the work that Governor Gordon and Senator Barrasso have done to advance nuclear energy production here,” Lummis recently tweeted. “It’s great to see TerraPower and PacifiCorp recognize what we in Wyoming have always known: there’s no better place to do business.” IS BITCOIN’S FUTURE NUCLEAR? In the end, mining companies are looking for the cheapest energy available and it may be that nuclear power will become one of the most inexpensive sources in the years to come. If miners can access cheap power in nuclear sources, that will be a formula for long-term success. Mining consultant and cofounder of Citadel 256 Magdalena Gronowska believes that ultimately, a mix of renewables like wind and solar power along with nuclear power will be a best case scenario. “Nuclear is a carbon free, reliable and cheap energy source,” she told Bitcoin Magazine. “It’s not perfect in that it emits nuclear waste, but every energy source has tradeoffs between environmental footprint, reliability and capital and operating costs… We need a diverse mix of energy generation, to serve both baseload and peak load, as we transition to a low carbon economy.”

  Cryptocurrency hopefuls want to believe that Wall Street is just another eager investor, ready to pump money into the growing crypto market and enjoy the same returns that retail traders have seen every time the value of cryptocurrency has skyrocketed. But that projection misses the mark in two ways: first, Wall Street is already neck-deep in the cryptocurrency market; and second, the last thing Wall Street intends to do is pump the precarious market with its own capital. Institutional finance has had many opportunities to make money in the cryptocurrency space. But, as its influence spreads, the cryptocurrency market is transforming into something new. Whether intentionally (or as a byproduct of its own flaws), Wall Street could slowly be killing cryptocurrency. How Could Wall Street Kill Cryptocurrency? The short answer is hypothecation. In short, hypothecation is when a firm that owns equity shares in a company signs those shares away to a lender as collateral. For example, suppose that Fund A needs $100 million. Broker B agrees to lend Fund A the money in exchange for $100 million worth of the securities that they (Fund A) owns. This type of transaction is referred to as hypothecation. Rehypothecation occurs when Broker B reuses the assets they got from Fund A as collateral for its own business operations. In the traditional financial world, this is easy to do for a few reasons.  The first is that shares are not settled physically. Rather, they are written as certificates of ownership. This makes it easy to pass them along as an ‘IOU.’ Another reason is that accounting and tax laws allow the same asset to be attributed to different parties (as long each party records a different amount of debt on their balance sheets). Though counter-party risk increases significantly with a system like this, it’s necessary to grant increased flexibility to banks and brokers. Why This Matters for Cryptocurrency Now, consider that although many major cryptocurrencies claim to rely on a hard-coded proof-of-work (PoW) or proof-of-stake (PoS) system, they are actually traded on centralized exchanges. If a bitcoin were to be rehypothecated six times as brokers and exchanges trade debt and collateral, who gets to claim custodianship in the event that it’s needed? Who actually owns the cryptocurrency at the end of the day if multiple parties know the private key (or if no one does)? Consider that cryptocurrency enthusiasts live by this mantra: “If you don’t own your private key, you don’t own your bitcoins.” If a broker goes bust and someone needs to pay up, or if a hard fork occurs and someone needs to vote with their ‘stake,’ it’s unclear who actually owns the bitcoin because, at this point, the collateral chain is so long. Regardless, this complex model of transient ownership simply doesn’t work when it comes to ledger-based assets because it may result in multiple parties expecting remuneration at the same time. The chance of a meltdown in this scenario could be devastating. How Wall Street Could Make Bitcoin More Stable In the past, bitcoin was traded exclusively on fiat exchanges. This meant that users could only buy or sell; there was no way to short bitcoin and there were no futures or derivatives based on the cryptocurrency. All purchases were settled in bitcoin; anyone who bought a coin effectively removed it from the market. Bitcoin’s limited supply and deflationary nature made it easy for the price to rise exponentially, as more people bought and fewer people sold because they expected greater returns the longer they held on to the currency. This naturally contributed to volatility because the market was directly exposed to the forces of supply and demand. Mass fear of missing out could send bitcoin’s price soaring, while the same fear could bring it back down just as quickly. Wall Street’s introduction of bitcoin futures to its own brokers and exchanges significantly reduced volatility, simply because futures allow people to speculate on bitcoin’s downside as well as its upside. This balances the market and makes it just as profitable to suppress bitcoin as it is to pump it. Additionally, with instruments that merely mimic bitcoin’s price and aren’t cryptocurrencies themselves, the supply and demand factor is less relevant. Bitcoin’s spikes and swings become much less pronounced. High-frequency trading bots also now populate crypto markets, which further reduces their once impressive instability. Sophisticated bot programs like those employed by Wall Street can still be extremely profitable in low-volatility environments. Volatility is part of the reason that bitcoin is so popular and profitable for the average trader, and without it, the asset really has no fundamental or unique value to the masses.  Why Investors Want a Bitcoin ETF A Bitcoin ETF represents the real pipedream for crypto enthusiasts for two major reasons: first, ETFs are settled in an underlying asset; and second, they’re plugged into the traditional financial market via brokers. With an ETF, bitcoin would become more accessible to retail investors who still don’t have the patience or wherewithal to buy bitcoin on cryptocurrency exchanges or operate a blockchain wallet. Simply put, it’s the secret ingredient for mass adoption.  Those bullish on a bitcoin ETF saw a glimmer of hope in October 2021 when trading began on the NYSE of the ProShares Bitcoin Strategy ETF (BITO).1 This ETF isn’t directly tied to bitcoin and instead tracks Chicago Mercantile Exchange (CME) bitcoin futures—the contracts that speculate on the future price of bitcoin.2  On the other hand, ETFs that are directly tied to Bitcoin from several firms have been flat-out denied—including from early bitcoin investors Cameron Winklevoss and Tyler Winklevoss—or have not yet received approval from the SEC.3 Even though there are avenues for profit in crypto, and the field has enjoyed an increase in popularity in recent years, the future of cryptocurrency’s relationship to Wall Street and the greater investing public contains many uncertainties. Compete Risk Free with $100,000 in Virtual Cash Put your trading skills to the test with our FREE Stock Simulator. Compete with thousands

  Should we all go zero fiat? I’ve seen this idea gain prominence on Bitcoin Twitter recently, discussed by people like LaserHodl and Heavily Armed Clown. Personally, I’m open to the idea, and I believe that we all will eventually #GetOnZero. But not just yet. As much as I’d love to live in the hyperbitcoinized world today, we’re not there yet. Put in simple terms, I still have fiat-denominated obligations with individuals or businesses that do not directly accept bitcoin. So, while I generally minimize my fiat exposure, there are valid criticisms and concerns about literally going to zero fiat today. And what about using the fiat system’s debt for your own benefit before it collapses? So, as I write this in December 2021, I don’t believe “the juice is worth the squeeze” for many bitcoiners sitting on something around 99%, to go all the way to 100% bitcoin and zero fiat. STEELMANNING #GETONZERO Let’s try and present the charitable version, or “steelman,” of the case. The main point of #GetOnZero is to maximize bitcoin exposure, and obviously minimize fiat exposure. The #GetOnZero gang have a good point in that by continuing to hold fiat, you have not “truly left” the fiat system and you’re in some sense supporting the fiat system. In economic terms, we could argue that if you still hold fiat, you’re still contributing to fiat liquidity by chipping in to the reservation demand for fiat. One worthwhile insight from the #GetOnZero gang is that, while there are capital gains taxes headaches associated with selling your sats, at least the reporting can be mostly automated. For example, your exchange or bitcoin broker service should provide you with a transaction export CSV list, and then you could take that to a tax accountant or automated software solution to automatically calculate taxes payable at year end. I believe this is a point that few had really considered up until recently. Still, there are many bitcoiners sitting in a solid green position, and if they had to liquidate some for an emergency fiat obligation, they would now have to pay capital gains taxes that they otherwise would not have had to. What’s the rejoinder from the #GetOnZero stance? Well, you might still come out ahead even after taxes because of the additional bitcoin exposure. So, let’s say you are a diligent saver and planner and you’ve stacked a six-month emergency fund. Instead of maintaining say, a six-month fiat emergency fund, you, the #GetOnZero adherent, would rather not bother and simply HODL bitcoin. As bitcoin is going up very quickly (155% per year on a 10-year basis as of December 18, 2021, or let’s say around 60% to 70% per year going forward for the medium term), it’s clear why you want to maximize bitcoin exposure. So, let’s say you had $10,000 in fiat stashed in an account, well you’d now be exposing that emergency fund to the 70% return per year. So, in the years that you didn’t need to draw on this emergency fund, you might well have $7,000 extra on a $10,000 emergency fund. Pretty nice, right? SO, WHERE DO I PRINCIPALLY DISAGREE? When your obligations are fiat denominated (and the person you owe does not take bitcoin payment), you will generally need to sell some bitcoin. In these cases particularly, you are bringing a whole new world of tax and reporting into your life that previously did not exist relative to paying with fiat. In other cases you might be conflicting with other objectives of using the fiat system. Let’s summarize some situations where you might be: Cushioning yourself against an extended bear market or job loss Using the fiat system for loans to stack more sats Interested in staying more under the radar by legally not incurring capital gains tax events Unable to access the services that help you stay zero fiat LONG BEAR MARKETS COULD LEAVE YOU REKT I say this because the 2014, ’15, ’16 bear market was brutal. Bitcoin went from around $1,200 in late 2013 down to around $200 or so. It wasn’t even clear that bitcoin would recover in those days. At this time, if you were zero fiat and lost your job or income, you would have been spending down bitcoin at the worst time. This is the time that a fiat emergency fund of say, three to six months of living expenses would be most helpful. While the scenario might be more on the bearish side, I’d generally prefer to keep more resilience in my overall life and not be so reliant on selling or spending down sats at the worst possible time. Consider also that you might have large upcoming fiat obligations. Would you be willing and able to sell bitcoin to meet them if you lost your job? What if the scenario is that the Federal Reserve or other central banks try (even temporarily) to raise interest rates, and the market tanks, and there are mass layoffs? Losing your job at these times would be even worse if you didn’t have a fiat emergency fund. Now, the #GetOnZero rejoinder here might be: save up enough sats such that you have enough to ride this out. But how much is actually enough? While you might think, “sure I’ve saved up two-years’ worth of sats to live on should things go bad,” what happens when bitcoin tanks 80%? If your fiat purchasing power drops to one-fifth of what it was, does that mean you now need to have 10-years’ worth of salary saved in bitcoin? How comfortable would you be trying to ride out two years without a job, spending down a significant portion of your stack? Now, in fairness, the six-month emergency fund might not tide you over for two years, but I’d view this as part of the overall mitigation approach: cut expenses down and spend fiat rather than spending bitcoin while looking for a new job or income. While the 2018, ’19 bear cycle wasn’t

  A defining feature of the Digital Era has been the rise of digital entities of incredible complexity, which manage to maintain such simplicity that your grandmother can use them. Famously, the iPhone arrives in a box with no user guide. It is so well designed and self obvious in function that a child is capable of deftly navigating the control interface and can fill your camera roll with off-angle selfies, or drain your bank account with a few loose settings in the App Store. The same applies to algorithmically-based organizations. Google, Facebook, Twitter and Instagram, among others, have highly-intuitive user interfaces. For the lay user, certain strings of words or visual inputs are expected to produce certain types of outcomes, and the “feed” itself has a non-random feel to it that even the most casual scroller can sense. There’s a machine in there behind the pixels, but you never get to see it directly. You never really need to. You don’t crack open your iPhone to understand how to best use it, or peer into the code base of your favorite social media platform to understand which selfies and tweets to post (though every influencer knows which posts will perform well with the algorithm). In this sense, the technical innovation is almost completely hidden, and the simplified experience you get from the product itself reigns primary. One ready example is Google: The innovation was keyword indexing, but the value and experience on the user side was natural language search. Nobody cares about your comprehensive technical index, but everyone wants to know how to bake a pie or make a martini. When we consider how product development typically occurs in companies, we run into a problem applying the same use logic to Bitcoin. We would normally run surveys, talk to customers, study usage data and advocate within our organization to build X or Y product or service to better serve the customer. But the nature of Bitcoin is decentralization. There is nobody to send the survey to, no master list of phone numbers to call. Innovation in Bitcoin is emergent, as opposed to the centralized ideate, build, beta test and launch techniques of most companies around the world. So how do we get our grandmothers to grok Bitcoin like the shadowy super coders we always wanted them to be? In a world where tech companies have always intentionally developed products and refined them for a set audience (see: the Facebook ”like” button), everything happens exactly via emergence in Bitcoin. Today, there is no perfect user experience solution for Bitcoin, no killer app that ties everything neatly together, but by presenting and explaining how three key elements of Bitcoin operate in your physical space, I contend that you can begin to teach even your grandmother about Bitcoin over tea and brownies. PIECE ONE: THE MINING RIG Counter intuitively, we should start our journey with the mining rig. Whether you head into the basement, out on the covered patio, or into the side yard to open up your Black Box mining enclosure, you should begin the Bitcoin journey with proof of work and decentralization. Your mining rig is there, converting electricity into digital security and processing the transactions of the entire network, maintaining digital scarcity and immutability alongside hundreds of thousands of other miners scattered around the world. From this vantage point, we grasp decentralization and permissionlessness. We are participating in a digital game, and this machine runs the code that allows us to play the game. Nobody can stop us from converting our electricity into digital efforts, and we can’t infringe on the right of anyone else to play this game either. And do we play this game out of the goodness of our hearts? No! We play this game because by playing the game we secure our own participation while achieving a financial reward for playing. The more efficiently we can play the game, via cheap electricity or climates conducive to mining, the bigger that reward. Everyone knows the rules to play, and anyone who cheats is immediately disqualified from the rewards of the game via the code itself. We have just described a Nash equilibrium, a state where our incentive is to play the game as efficiently and fairly as we possibly can, because cheating in any way can only hurt us. So, we see that mining is a game of securing and deploying computing power efficiently and creatively. PIECE TWO: THE NODE Coming in from the backyard, or up from the basement, we can head over to the router or office, where our node lives. It may be a Nodl, Umbrel, Start9 or even an old laptop running Linux and Core, it doesn’t matter. What matters is that our node allows us to explore the state of the participants of the game. In this sense, we are the referees of the Bitcoin network. By logging into our node, we see our current block height and all of the verified transactions that live within each block on the chain. By using a block explorer like mempool.space (often from our node), we can dive into the transaction data that we know to be 100% accurate and verified on the blockchain. (I also recommend https://symphony.iohk.io/ for exploring the Bitcoin blockchain, it is an incredibly beautiful audio and visual representation of Bitcoin) Here we have immutability and verifiability. Every node runner is keeping an eye on the state of the game being played, and rejecting any transactions that does not operate by the rules of the code. Because of that, they can not only verify every transaction that has happened on the Bitcoin blockchain, but they can have confidence that should they want to submit a transaction to the mempool and be included in a block, it would be executed in accordance with the rules of the game. We have made real the hard working security team and the ever observant referee, so how do we now actually participate in this

  Bitcoin can be a daunting thing to learn about. It involves the study of several different fields, from computer science to economics. At Bitcoin Magazine, we always hope to be able to educate our readers on the basics of Bitcoin. We offer a guides section, and have a large selection of books in our store. One of my parts about the magazine are contributor articles designed to simplify complex ideas. Nameless, one of our contributors here at the magazine, has sent in several of these articles, including “A Gentle Introduction To The Lightning Network,” “So, What Are Bitcoin Miners Actually Doing?” and “An Overview Of Bitcoin’s Cryptography.” All of these articles are extremely high quality, and they take some of the more difficult to grasp subjects in Bitcoin and simplify them for the reader. I highly recommend you give his articles a read, listen to the podcast above and check out the written interview below. What’s your Bitcoin rabbit hole story? I bought bitcoin at the ATH of 2017, did a bunch of panic selling and buying, and have slowly been learning about Bitcoin, and learning how to HODL, ever since. How has Bitcoin changed your life? It represents the most reasonable chance at escaping fiat debt and getting out from behind the eight-ball of skyrocketing home and asset prices. What is your process for writing your articles which explain technical concepts in easy to understand ways? Throwing things at a page very quickly, and then spending a lot of time untangling it, and doing a lot of learning in the process. What are you most looking forward to in the Bitcoin space? The lightning network, associated routing algorithms, and the economics of routing node fees. Price prediction for the end of 2021, and the end of 2030? By the end of 2021, $70-90k. By the end of 2030, $500k.

  Bitcoin embodies Schumpeterian creative destruction. Bitcoin also behaves like a physical natural resource, with unique differences that make it a driving force for effecting fundamental change, much like gold, oil or electricity has done. Bitcoin goes through periodic cycles of varying lengths that inspire a creative rejuvenation of its ecosystem with new ideas and innovations at various timescales and magnitudes. Here we will apply the idea of a Schumpeterian business cycle to Bitcoin and construct a Schumpeterian Bitcoin cycle based on three componential waves: a multi-decade Bitcoin Kondratieff cycle; a Bitcoin Juglar cycle that is shorter than a decade; and a Bitcoin Kitchin cycle that corresponds with the halvings. Associated with these sub-cycles are three ratios that capture their logic: stock-to-flow (S2F), installed capacity-to-capital investment (IC2CI) and inventories-to-sale (I2S). 1. CREATIVE DESTRUCTION Joseph Schumpeter would have loved Bitcoin. He would have seen in Bitcoin a living representation of his theory of capitalism, so often quoted but rarely understood. Creative destruction is the process by which capitalism continually rejuvenates itself. It is what drives markets forward and allows them to be constantly refreshed with new ideas that destroy extant structures and erect better ones in their stead. There are countless elements in Bitcoin that structurally instill the process of Schumpeterian creative destruction in its ecosystem, making it an excellent model for the cycles of capitalistic rejuvenation that formed the basis for Schumpeter’s theory of economic growth. For instance, consider the process of the halving of block rewards. Every 210,000 blocks, Bitcoin forces a creative destruction of itself, urging its participants to either reimagine their competitive edge, seek hidden efficiencies and eradicate waste or risk being left by the wayside. Bitcoin’s worth is rooted in the intrinsic value of capitalism, liberated one cycle of creative destruction at a time. If there is creative destruction inherent in Bitcoin, then where are all those new products that eventuate when extant markets are destroyed by new ideas? Wasn’t that Schumpeter’s point after all? The answer is simple. Bitcoin evolves into a new product — a new version of itself — with each cycle of creative destruction. Since we are so used to thinking of a bitcoin as immutable, we tend to look past this essential characteristic feature it possesses to reinvent itself. Bitcoin started off as electronic cash native to the Internet, but has since become many things besides. It has become the most sound platform for the definitive settlement of contracts; it has become a savings account for individuals and corporations; it has become a useful tool for international remittances; it has inspired an ecosystem of financial instruments, cryptocurrencies and much else. None of these were imagined as core features for Bitcoin in 2008. Yet, with each cycle of creative destruction, Bitcoin was reimagined. 2. A NATURAL RESOURCE WITH A DIFFERENCE Bitcoin can usefully be examined as just another exhaustible natural resource that has held the power to alter the course of human civilization, such as gold or, even more aptly, crude oil. Crude oil underwent several cycles of creative destruction since its discovery in antiquity. In its long history, crude oil has at various times been used predominantly for heating and cooking, asphalt paving, lighting, lubricating and powering machines, transportation, plastics, aviation and so on. Of course, there are key differences between Bitcoin and natural resources, but the similarities are just as interesting. Bitcoin can be imagined as a physical field of exploration where prospectors dig for coins. The field has the following characteristics. First, the total yield from the field is fixed at 21 million coins, and no matter how hard the prospectors may dig, the field simply won’t yield any more coins. All prospectors know this to be true in advance, which puts a very definite terminal point in time to their activities. Second, prospectors know with certainty that it will get increasingly harder to find more coins as they dig. That’s because they also know that this field cannot be gated and thus prospecting cannot be regulated. So prospecting for coins will take the form of a “gold rush”; extraction of the in situ, unmined coins will be an extremely competitive activity. Well, it will almost certainly keep getting harder. The only way in which it will ever get easier for any given prospector is if, for some reason, his rivals decide to reduce their efforts. If that happens, then for a short time the prospector gets just a bit more of the field to himself to mine for coins using his current digging equipment. Before long, though, his rivals observe his obvious fortune and come rushing back in. This squeezes him back to a smaller area on the field. Now he simply must invest in better equipment if he wishes to outcompete his rivals. Third, the fiercer the competition, the less space each prospector will have in the field. To extract coins he will need to try even harder than before. It gets exponentially harder for him to dig deeper, and he has to bring in more and more sophisticated digging equipment to extract coins. He started off with a spoon, upgraded to a spade, then an excavator, then a vertical drill and so forth. We paint this picture merely to underscore the point that Bitcoin is a rare and non-perishable natural resource like platinum, gold, iridium or even rhodium. It is a singular kind of natural resource even among that illustrious group, but it is one all the same. And yet, two things about Bitcoin make it a rather exceptional natural resource. First, since available market supply is known to be fixed and the extraction rate asymptotically approaches zero, future demand is met increasingly with already obtained inventories and decreasingly through new production; until roughly 2140, after which all demand must be sufficed by a globally fixed inventory alone. Thus, hoarding Bitcoin in inventories is rational even before all its possible uses have been discovered. Imagine if the costs of storing in inventory were similar for

  We’ve been keeping track of Weimar signs in this rag since April of last year when it became evident that we were headed into an extended lockdown that included artificially restricted economic activity and money printing. Yesterday’s rag was an example of a Weimar sign because it highlights the fact that the administration currently in charge of the federal government is beginning to point fingers at industry for causing rising prices instead of showing a bit of introspection, assessing the massive overreach the government and central banks have embarked on over the last two years (and five decades really), and raising their hand to admit they might be at fault to at least some degree. Today, we are here to highlight another Weimar sign that was surfaced by our friend Alpha Zeta and highlights what’s going on for small businesses on the ground. Having personally lived through a hyperinflationary event in Brazil, Alpha Zeta has had his antennae perked to recognize some pattern recognition between what he lived through in Brazil and what is happening at the moment in the US. As you can see from the email above sent by a boutique bike shop in Brooklyn, small businesses are beginning to panic and are actively warning their customers that they should buy sooner rather than later if they want to purchase their goods at relatively reasonable prices. This is not a good sign and highlights the one part of high inflation and hyperinflation that many in the mainstream financial media and think-sphere tend to dismiss; the social contagion that breaks out when people expect prices to rise. “Weimar signs” that the fiat money system is entering hyperinflationary territory keep appearing, making the case for bitcoin. Once inflation begins, it is a self-fulfilling disaster. Source: Twitter. I hope we’re not at the point where the dam has broken and the self fulfilling disaster isn’t in motion, but it’s hard not to believe otherwise. The first sign of the dam being broken came in September when a NY Fed survey showed that consumers were expecting inflation to run higher than projections. A few months after that we’re beginning to see small businesses panic in a way that makes it seem like the doom loop is well in motion. At this point, the money may literally be broken beyond repair. Prepare accordingly.