The United States has always been the global financial leader in my lifetime. But at the moment, government leaders are missing an opportunity to empower Americans to utilize digital currencies. Our incomprehensible unwillingness to embrace digital currency puts our mantle of leadership at risk. Bitcoin, in particular, is primed to become the premier currency of the 21st century. Its scarcity makes it, quite literally “digital gold” and it has a jumpstart on institutional adoption. Bitcoin is ready for the world economy, and it is imperative that the United States leads the world in the Bitcoin adoption revolution or else risk losing out to countries that are already embracing innovation. While there are myriad advantages to embracing Bitcoin in an increasingly digital age, there are two prominent incentives in this exact moment in time. Firstly, to echo countless leaders in the financial industry, Bitcoin presents a better hedge against inflation than gold and other traditional assets. Joe Biden and Chuck Schumer have made it abundantly clear that they are committed to spending taxpayers to the brink. Democrats in control of Washington are willing to mortgage our childrens’ and grandchildrens’ futures to pay back political patrons. As a direct result of their irresponsible spending, we have runaway inflation, currently reaching record levels. Bitcoin is a powerful financial tool for individual investors to hedge against that inflation in a way that was not historically available, and perhaps more importantly, it is less capital-intensive than hedges like real estate. A firm understanding of Bitcoin is not necessary in order to see how innovative the technology is and recognize its ability to democratize finance and securities. And yet, as recently as August of this year, the U.S. Senate was spending its legislative time devising new ways to punish not just cryptocurrency brokers, but anyone who buys, sells, or trades cryptocurrency. The second glaring advantage of Bitcoin is its ability to handicap China in this existential race to see who will lead the world economy forward for the remainder of the 21st century and into the 22nd. From the pure innovation standpoint, America has the chance to futurize much more quickly than China. We know China will do everything it can to quash the adoption of Bitcoin because it is decentralized and democratized, tenets that fly in the face of the Chinese Communist Party. For the simple reason that we would gain a competitive advantage over China, digital currency makes sense. But from an even more technical standpoint, over the long term, if the dollar continues to be weak, it will be at risk of losing its status as the premier reserve currency around the world. If we do not make Bitcoin a legitimate alternative, we risk letting China become the preferred reserve currency for banks. The national and global implications of such a move are grave, to say the least. From both an individual and an institutional standpoint, there are immediate benefits to incorporating Bitcoin. Our government’s unwillingness to accept digital currencies is, in a word, unconscionable. The land of innovation is actively turning her back on the single greatest innovation in the financial industry in many lifetimes. And we will continue to do so at our own peril.
BTC WHALE WITH LINKS TO WELL-KNOWN EXCHANGE MAY HAVE TRIGGERED BITCOIN PRICE DROP | BY HEIDI
Cryptocurrency whale activity is usually associated with big price movements, particularly when whale transfers are taking place between an external wallet and an exchange. There are many whale alert tools which market participants monitor to gain insights into what’s happening in the market. A whale that transfers large amounts of BTC to an exchange usually does so to sell their holdings. Whenever a whale withdraws bitcoin from an exchange, the market interprets the transfer as an intention to hold it as a store of value. The BitInfoCharts list of the richest wallets shows exchange wallets among others, and we aren’t particularly interested in what happens there. While exchanges may not disclose their other wallets, they often use them for internal purposes like collecting users’ deposits before moving them on. In other words, they have a suite of algorithms to help them execute customers’ orders. Whale bots and alerts cannot identify who owns wallets, whether it’s an individual, a business or an exchange that uses them internally. Yet, they signal big movements informing the market that a whale has moved. This is technically true. Who actually digs deeper? The news spreads, the market interprets it and that is where the market sentiment is formed. This was the case with the Bitcoin.com web portal, which reported a major whale’s move from a cold wallet to an exchange caught by BTCparser3, a tool that examines all addresses’ ins or outs of a total of 1,000 BTC or more over a 100-block period. It identified that a staggering amount of 36,645 BTC was received on December 2 and 10,547 bitcoin were sent from the wallet bc1qm34lsc65zpw79lxes69zkqmk6ee3ewf0j77s3h within a day: Yet another solid amount of bitcoin was sent on December 4: I investigated further and found that the funds were not received and sent all at once, but in stages: The most interesting part of this is that the profits column is always negative, and all outgoing and incoming transactions always produce a pattern of precisely repeating figures, which proves the computer-generated nature of these movements. Currently, the address holds 58,858.35 BTC worth around $2.82 billion. Overall, it received 219,199.8354 BTC and sent 160,341.4759 BTC since October 2021. Clearly, this move sparked a strong signal that exchanges received huge inflows that day: While the owner of the address cannot be determined with certainty, crypto transaction analysis websites can match it with other similar addresses, indicating who it might belong to. It appears to be owned by Binance cryptocurrency exchange. Isn’t that strange? Interestingly, analyst Willy Woo suggested that spoofing, a disruptive algorithmic trading activity aimed at manipulating markets, was occurring on Binance and might have caused BTC price to slump. This is a brief story so you can better understand what spoofing is. An individual (or group of individuals) was suspected of manipulating Bitfinex prices in 2017 using this strategy. Spoofing consists of placing highly visible orders but not intending to keep them. A second order of the opposite type is placed shortly after or during the spoof order. In the same way, BTC price fell after this whale’s moves on December 2, 2021, dropping by 1.28% on that day and extending losses to 13.9% in three days to December 4. It would be unwise, however, to point the finger at just one Bitcoin whale rather than consider too many fundamental factors that led to a drop in the crypto market. Several other factors could also contribute to BTC’s decline, including increased leverage on the bitcoin futures market, with investors and speculators using mortgage loans to purchase more bitcoin in anticipation of a rally at year’s end. Moreover, market concerns about the slowdown in U.S. labor market growth, the outbreak of the omicron coronavirus, and what this might mean for the global economy were reflected in the crypto market. But could that whale be a trigger for the sell-off? From the looks of things, yes. Even though the address is technically a whale, it behaves differently. “Normal” whales tend to accumulate assets during dips and then sell them at a peak. The whale in question didn’t do this. However, it’s unclear if this was intentional or just an internal technical thing. The fact remains that it did happen and might have sparked a cryptocurrency market downturn. It’s crucial that we do our own research and not just rely on media reports as our sole source of information. It’s possible that someone would like us to think and act in a certain way for their own benefit. Making an informed and weighted decision always starts with a cold-eyed analysis.
BTC WHALE WITH LINKS TO WELL-KNOWN EXCHANGE MAY HAVE TRIGGERED BITCOIN PRICE DROP | BY HEIDI
Cryptocurrency whale activity is usually associated with big price movements, particularly when whale transfers are taking place between an external wallet and an exchange. There are many whale alert tools which market participants monitor to gain insights into what’s happening in the market. A whale that transfers large amounts of BTC to an exchange usually does so to sell their holdings. Whenever a whale withdraws bitcoin from an exchange, the market interprets the transfer as an intention to hold it as a store of value. The BitInfoCharts list of the richest wallets shows exchange wallets among others, and we aren’t particularly interested in what happens there. While exchanges may not disclose their other wallets, they often use them for internal purposes like collecting users’ deposits before moving them on. In other words, they have a suite of algorithms to help them execute customers’ orders. Whale bots and alerts cannot identify who owns wallets, whether it’s an individual, a business or an exchange that uses them internally. Yet, they signal big movements informing the market that a whale has moved. This is technically true. Who actually digs deeper? The news spreads, the market interprets it and that is where the market sentiment is formed. This was the case with the Bitcoin.com web portal, which reported a major whale’s move from a cold wallet to an exchange caught by BTCparser3, a tool that examines all addresses’ ins or outs of a total of 1,000 BTC or more over a 100-block period. It identified that a staggering amount of 36,645 BTC was received on December 2 and 10,547 bitcoin were sent from the wallet bc1qm34lsc65zpw79lxes69zkqmk6ee3ewf0j77s3h within a day: I investigated further and found that the funds were not received and sent all at once, but in stages: The most interesting part of this is that the profits column is always negative, and all outgoing and incoming transactions always produce a pattern of precisely repeating figures, which proves the computer-generated nature of these movements. Currently, the address holds 58,858.35 BTC worth around $2.82 billion. Overall, it received 219,199.8354 BTC and sent 160,341.4759 BTC since October 2021. Clearly, this move sparked a strong signal that exchanges received huge inflows that day: While the owner of the address cannot be determined with certainty, crypto transaction analysis websites can match it with other similar addresses, indicating who it might belong to. It appears to be owned by Binance cryptocurrency exchange. Isn’t that strange? Interestingly, analyst Willy Woo suggested that spoofing, a disruptive algorithmic trading activity aimed at manipulating markets, was occurring on Binance and might have caused BTC price to slump. This is a brief story so you can better understand what spoofing is. An individual (or group of individuals) was suspected of manipulating Bitfinex prices in 2017 using this strategy. Spoofing consists of placing highly visible orders but not intending to keep them. A second order of the opposite type is placed shortly after or during the spoof order. In the same way, BTC price fell after this whale’s moves on December 2, 2021, dropping by 1.28% on that day and extending losses to 13.9% in three days to December 4. It would be unwise, however, to point the finger at just one Bitcoin whale rather than consider too many fundamental factors that led to a drop in the crypto market. Several other factors could also contribute to BTC’s decline, including increased leverage on the bitcoin futures market, with investors and speculators using mortgage loans to purchase more bitcoin in anticipation of a rally at year’s end. Moreover, market concerns about the slowdown in U.S. labor market growth, the outbreak of the omicron coronavirus, and what this might mean for the global economy were reflected in the crypto market. But could that whale be a trigger for the sell-off? From the looks of things, yes. Even though the address is technically a whale, it behaves differently. “Normal” whales tend to accumulate assets during dips and then sell them at a peak. The whale in question didn’t do this. However, it’s unclear if this was intentional or just an internal technical thing. The fact remains that it did happen and might have sparked a cryptocurrency market downturn. It’s crucial that we do our own research and not just rely on media reports as our sole source of information. It’s possible that someone would like us to think and act in a certain way for their own benefit. Making an informed and weighted decision always starts with a cold-eyed analysis.
BITCOIN MARKET ENTERS ‘EXTREME FEAR’ TERRITORY AHEAD OF FED MEETING | BY HEIDI
The Bitcoin market has tip-toed into “extreme fear” territory as the Federal Reserve prepares to meet Wednesday to decide its next move regarding interest rate and quantitative easing policies. BTC is trading at around $48,000 at the time of writing, nearly 30% below its November all-time high of $69,000. The Fear and Greed Index analyzes market sentiment and emotion from different sources to crunch a number from zero to 100. The closer the index is to its lower bound, the more fearful the market is at the moment. The inverse is true for greed, when people begin purchasing bitcoin out of fear of missing out (FOMO). The metric is currently at 16, denoting extreme fear. As mainstream media reports expectations for the Fed’s meeting, citing a reasonable probability that the central bank will attempt to curb inflation through a faster interest rate hike, financial markets stand ready to switch its investment thesis. Although the move isn’t likely to come until next year, the Fed has been moving quickly to prevent consumer prices from soaring well above its 2% target. The market expectation for a faster wrap-up of asset purchases isn’t speculative. At the end of last month, Federal Reserve Chair Jerome Powell said the central bank’s bond-buying program could end sooner than planned amid rising inflation rates and a more robust U.S. economy. Powell added that he and his fellow policymakers would discuss whether it would be appropriate to “wrap up our purchases a few months earlier.” However, tapering is just part of the deal, and an increase in interest rates is the natural follow-up action. Ever since the beginning of the pandemic, the Fed has kept interest rates near zero in an attempt to further increase market liquidity and economic relief to participants. Altogether, that dynamic prompted investors to seek riskier assets as their traditional investments couldn’t yield big profits any longer. If the Fed raises interest rates quickly and before anticipated, the broader market is expected to switch to risk-off mode and plug into “safer” investments as the risk-reward ratio favors traditional money-making strategies. For most investors, Bitcoin is still considered a risky investment. Although the digital monetary network has demonstrated time and again its ability to shield investors from inflation and loose economic policies and enable true financial sovereignty for those who can’t access traditional banking, its early stage in the adoption curve and status as a young development has many remaining skeptical. As a result, a broader risk-off movement is expected to affect the Bitcoin market as well. It’s unclear whether that would play out, however, as Bitcoin has demonstrated an ability to swiftly recover from somewhat harmful events. After China banned bitcoin mining and then bitcoin trading, the network is now stronger than before and has even more hash rate power backing its consensus protocol. An eventual sell-off in Bitcoin caused by a more aggressive take by the Fed might end up having the same result — a sharp upside after irrational fear is flushed out of the market.
GERMAN SAVINGS BANK TO OFFER BITCOIN TRADING | BY HEIDI
The market leaders among German financial institutions are reportedly working on a bitcoin trading feature, which could launch in 2022. The Sparkassen are centuries-old regional institutions with about 370 branches and 50 million customers. The offering would cut down intermediaries and enable Sparkasse customers to trade BTC from their checking accounts. Sparkasse, a German savings bank, is working to implement a bitcoin trading offering for its 50 million customers, according to a report by Finance Forward. The old municipal institution is reportedly preparing a service with which clients could start buying and selling BTC as early as next year. The report said the previously secret project is located at the center of the DSV Group, the Deutsche Sparkassenverlag, whose subsidiaries and associated companies are closely involved with the savings bank organization Sparkasse. A dedicated team at the S-Payment division, where payment solutions for private and corporate customers of the savings banks are developed and marketed, is working on the project. The Sparkassen are centuries-old regional institutions run by local supervisory boards composed of city council representatives and management boards consisting of banking professionals. Savings banks only provide services to their region and focus on loan activities and regional development. According to a local news outlet Stern report, the savings banks are the market leaders among German financial institutions. Their entrance into the Bitcoin market would enable a broader target group to trade BTC as other large banks have not ventured into the nascent sector. Sparkasse committees will reportedly vote on the project at the beginning of 2022. If approved, the first version of the bitcoin trading offering could be launched later that year. However, given the regional principle of the savings bank, each of the 370 branches will independently decide whether or not to introduce the new feature. The offering would cut down middlemen like bitcoin exchanges and not require additional verification procedures or intermediary transactions. Sparkasse customers would reportedly be able to access bitcoin trading directly from their checking accounts.
CAN WE DEFINE BITCOIN AS A RELIGION? | BY HEIDI
There’s been much discussion surrounding the question of determining whether or not Bitcoin is a religion. To truly understand the depth of this question, we must discuss belief, religion, organization, and dogma. Let’s answer this question beginning with a linguistic lens, and then continue through a philosophical discussion. WHAT IS RELIGION? This seems a simple question, but the solution is full of character, and definition is required for the sake of categorization. If we mean to categorize, or not categorize Bitcoin as religion, it must be defined. Formally, Merriam-Webster defines religion as “an organized system of beliefs, ceremonies, and rules used to worship a god or a group of gods.” Informally, they define it as “an interest, a belief, or an activity that is very important to a person or group.” Archaically, it is referred to as “scrupulous conformity.” Linguistically speaking, we can rule out the formal definition of religion in regard to Bitcoin, as there are no gods affiliated with Bitcoin. Though, some may make claims to its story of creation; of God and gods, there are none, though we will return to this definition to speak on organization. Archaically, there are many descriptors I would associate with Bitcoin, however “conformity” is not among them. Satoshi’s Whitepaper begins: “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.” At its heart, the creation of Bitcoin was meant to separate currency from financial institutions. Considering conformity is viewed as compliance with particular systems, rules and regulations, and Bitcoin means to nullify the necessity of legacy financial institutions and systems, we can agree that Bitcoin is not “scrupulous conformity.” Then we are left with the informal interpretation of religion as a belief, interest, or activity that is important to a group of people. On the surface, one could be forgiven for following a logical path that describes Bitcoin as a system of beliefs that are important to a small portion of the public. But that is an oversimplification, and not even remotely close to the actual answer. UNDERSTANDING BELIEF In the Stanford Encyclopedia of Philosophy, when speaking on what belief is, Eric Schwitzgebel in “Belief” said “Contemporary Anglophone philosophers of mind generally use the term ‘belief’ to refer to the attitude we have, roughly, whenever we take something to be the case or regard it as true.” This depiction of belief is quite revealing when it refers to the act of believing an idea as an action of “attitude.” Attitude is a choice made from perspective and subjectivity. Attitudes are not considered truth, or objective information regarding any particular idea. Attitudes are a subjective experience only understood by the perceiver at the time of experience. In this depiction we can see that belief requires subjectivity in the understanding of a particular ideology. Let’s look at some common beliefs of Bitcoiners: · Money Printer Go Brrr. Most, if not all Bitcoiners will tell you that the central banking systems of the world are allowing a minority to benefit from the endless increase of monetary supply resulting in the debasement of global currencies, and Bitcoin prevents these institutions from being able to do this. · Small Blocks Win. In the Block Size Wars, two factions within the Bitcoin community went to civil war over the data size of blocks in the blockchain. Most in Bitcoin now will explain that smaller blocks allow for low-cost entry and keeps the nodes decentralized by not having massive hardware requirements. · Not your keys, not your coins. Bitcoiners will often speak to sovereignty in reference to storing bitcoin off of exchanges, with the belief that one day bad actors might act maliciously, from their own intent or the government’s, or suffer attacks from security breaches, resulting in the loss of your bitcoin. None of these beliefs are Bitcoin. They can certainly be defined as “propositional attitudes,” as Eric outlines in “Belief.” In short, a propositional attitude is presented as (SA that P): S for subject, A for attitude, and P for proposition. “Ahmed [the subject] hopes [the attitude] that Alpha Centauri hosts intelligent life [the proposition].” Here Eric outlines our subject, the attitude they have towards a given ideal, and the proposition (or thing to be believed). Shall we create one? Larry [subject] agrees [attitude] that the Federal Reserve Board central banking system has printed money and debased the value of the U.S dollar [proposition]. This can be categorized as a belief. It is an attitude towards a specific ideal. Bitcoin is not an attitude. WHAT IS BITCOIN? Is Bitcoin a blockchain? No. While its data structure is a blockchain, that does not mean we identify it as only that. Many other platforms use decentralized ledgers to store data, known as blockchains. This is not unique to Bitcoin, so we cannot claim that Bitcoin is a blockchain as its defining factor when others utilize the same data structure. Is it currency? No. Bitcoin, the asset, can function as a currency and is most assuredly going to continue down a path of adoption. But it does not exist as a currency, that is a function that can be used if others accept its premise. This is a belief. Is it a hedge against inflation? No. Using the exact same logic above, the belief that one can use Bitcoin as a hedge does not make Bitcoin a hedge. You can choose to utilize this as a function you believe, but it does not make it true or remove the perpetuation of the ideal from being anything more than belief. We must remove the subjectivity of our attitude and ideals to understand what Bitcoin is. BITCOIN IS SOFTWARE, BELIEF IS WEAK Programmatic objectivity based on a consensus model. While a consensus model does not necessitate truth, it does necessitate agreement. The history of Bitcoin exists and is wildly available to anyone willing to learn. All of this may sound simple, but it does
What are the Differences Between Forex Demos and Real Accounts? | BY HEIDI
Your Demo Orders are Always Executed You do not have liquidity problems, and Forex brokers rarely requote prices, in demo accounts. However, live trading answers to real counterparties and if you want to sell a position, there must be a buyer. Sometimes, liquidity is tight, and brokers are forced to requote prices. Execution Speed As demo accounts just mirrors of what is going on in the real trading world, traders do not have to deal with counterparts or broker liquidity or volume differentials. In that way, orders made in demo accounts are usually executed almost instantly. You click it, and you get it. However, when it comes to real trading accounts, retail traders are competing with thousands of other traders who want to make money. In that framework, execution can be slow depending upon market conditions and your Forex broker’s operations. Slippage Demo accounts respect your orders; you enter and exit at the exact price you see when you click the button, because why not? The broker has nothing to lose. However, in real money live accounts, slippage can happen. Sometimes you can get a different entry or exit price than the one you actually see when entering a market order or from a stop or limit order you have already input at a specific price. This can happen because brokers have to deal with liquidity and third parties to fill your trade order. Stop Loss Orders Real accounts can experience problems executing stop loss orders as sometimes prices available will not match the prices traders want in fast-moving markets. That does not happen in demo accounts as it is a controlled environment. Prices are Different Most brokers offer real-time prices in live accounts, but when it comes to demo accounts, prices can be delayed by a few minutes. Even though a different price feed is used, the demo feed is still based on the live feed but is sometimes delayed in its reflection of prevailing market prices. Although major banks have their own Forex price feeds, with no central price feed, they typically cannot deviate by too much, or would be arbitraged away. Differential Spreads Live and Demo Forex Trading Accounts Demo accounts usually offer smaller and lower spreads that do not vary at all. Most brokers use standard spreads in demos so as not to be too misleading with their marketing. However, the same broker might use variable spreads in real money live accounts which widen at moments of high volatility or decrease in extremely liquid markets, while spreads in demo accounts tend to stay the same regardless of real market conditions. Spreads in live accounts are created through the interaction of different variables such as volume, volatility, time of trading, between buyers and sellers. It fluctuates every moment. In demos, this does not happen as quoted prices are simply replicated, not generated by any real dynamic or interactive processes. Even when both platforms work with the same spread conventions, sometimes demo accounts fail to replicate real accounts’ spread structures. Remember that demo and real accounts tend to have separate data feeds at most Forex brokers. Hidden Fees Demo accounts do not have the same price structure that the brokers have in their real accounts. These include deposit, withdrawal, overnight fees, rollover, margin fees, etc. so the overall fee experience is different. For example, if you fund your portfolio with $10,000, your broker or even your bank may deduct a deposit fee. So, you would start trading with less money than what you actually deposit, perhaps $9,900. In addition, brokers charge rollover / overnight fees, which means you will have to pay to hold your position for more than one day. This is often not applied realistically in demo accounts. For example, rollover fees are typically skewed against the trader, but demo accounts often charge rollover fees which do not reflect honestly on the real rollover fees being charged by that same broker that day in their demo accounts. Of course, rollover fees can fluctuate from day to day. Another important topic to keep in mind is that all profits in your demo accounts are gross. You will not have to deal with withdrawal costs or currency exchanges from the money you deposit into your account and the base currency you will use in your real account – not to mention taxation. Psychology There is a huge difference between trading successfully in a demo account and a real live money account. Even if the prices are basically the same, and you should be able to trade profitably just the same in one as in the other, psychological factors make the two experiences feel completely different for the vast majority of human beings. The difference is perhaps best illustrated by the old trading joke about a trader who boasts he can hit a wine glass with a gun from one hundred yards away. Another trader replies, yes, but can you do it while the wine glass is aiming a bullet at your heart? In trading terms, the bullet at your heart is represented by the prospect of losing real money – a real prospect in live accounts, but something that cannot happen in a demo account. Bottom Line It is definitely a good idea to start your trading career by opening a Forex demo account. If you take it seriously, you will begin the process of learning how to trade, and you will benefit from it. It is not hard to find reputable Forex brokers offering free demo accounts. However, it is important that you understand that there are skills you will not develop until you trade a real, live account, with your own money at risk – because of the differences between Forex demo and real accounts. You can compare starting Forex with a demo account to learning to ride a bicycle with training wheels. You need the training wheels when you start, but you still have a little to learn even after you take the
Bitcoin Halving | BY HEIDI
Understanding Bitcoin Halving To explain what a Bitcoin halving is, we must first understand a bit about how the Bitcoin network operates. Bitcoin’s underlying technology, blockchain, basically consists of a collection of computers (or nodes) that run Bitcoin’s software and contain a partial or complete history of transactions occurring on its network. Each full node, or a node containing the entire history of transactions on Bitcoin, is responsible for approving or rejecting a transaction in Bitcoin’s network. To do that, the node conducts a series of checks to ensure that the transaction is valid. These include ensuring that the transaction contains the correct validation parameters, such as nonces, and does not exceed the required length. Each transaction is approved individually. It is said to occur only after all the transactions contained in a block are approved. After approval, the transaction is appended to the existing blockchain and broadcast to other nodes. More computers (or nodes) added to the blockchain increase its stability and security. There are currently 14,616 nodes estimated to be running Bitcoin’s code.1 Although anyone can participate in Bitcoin’s network as a node, as long as they have enough storage to download the entire blockchain and its history of transactions, not all of them are miners. Bitcoin Mining Bitcoin mining is the process by which people use their computers to participate in Bitcoin’s blockchain network as a transaction processor and validator. Bitcoin uses a system called proof of work (PoW). This means that miners must prove they have put forth effort in processing transactions to be rewarded. This effort includes the time and energy it takes to run the computer hardware and solve complex equations. The term mining is not used in a literal sense but as a reference to the way precious metals are gathered. Bitcoin miners solve mathematical problems and confirm the legitimacy of a transaction. They then add these transactions to a block and create chains of these blocks of transactions, forming the blockchain. When a block is filled up with transactions, the miners that processed and confirmed the transactions within the block are rewarded with bitcoins. Transactions of greater monetary value require more confirmations to ensure security. El Salvador made Bitcoin legal tender on June 9, 2021. It is the first country to do so. The cryptocurrency can be used for any transaction where the business can accept it. The U.S. dollar continues to be El Salvador’s primary currency.2 Bitcoin Halving After every 210,000 blocks mined, or roughly every four years, the block reward given to Bitcoin miners for processing transactions is cut in half. This event is referred to as halving because it cuts in half the rate at which new bitcoins are released into circulation. This is Bitcoin’s way of enforcing synthetic price inflation until all bitcoins are released. This rewards system will continue until around the year 2140, when the proposed limit of 21 million is reached. At that point, miners will be rewarded with fees, which network users will pay, for processing transactions. These fees ensure that miners still have the incentive to mine and keep the network going. The halving event is significant because it marks another drop in the rate of new Bitcoins being produced as it approaches its finite supply: the total maximum supply of bitcoins is 21 million. As of October 2021, there are about 18.85 million bitcoins already in circulation, leaving just around 2.15 million left to be released via mining rewards.3 In 2009, the reward for each block in the chain mined was 50 bitcoins. After the first halving, it was 25, and then 12.5, and then it became 6.25 bitcoins per block as of May 11, 2020. To put this in another context, imagine if the amount of gold mined out of the Earth was cut in half every four years. If gold’s value is based on its scarcity, then a “halving” of gold output every four years would theoretically drive its price higher. Coin Metrics Bitcoin Halving Halving Implications Halvings reduce the rate at which new coins are created and thus lower the available amount of new supply, even as demand increases. This has some implications for investors as other assets with low or finite supply, like gold, can have high demand and push prices higher. In the past, these Bitcoin halvings have correlated with massive surges in bitcoin’s price. The first halving, which occurred on Nov. 28, 2012, saw an increase from $12 to $1,217 on Nov. 28, 2013. The second Bitcoin halving occurred on July 9, 2016. The price at that halving was $647, and by Dec. 17, 2017, a bitcoin’s price had soared to $19,800. The price then fell over the course of a year from this peak down to $3,276 on Dec. 17, 2018, a price 506% higher than its pre-halving price.4 The most recent halving occurred on May 11, 2020. On that date, a bitcoin’s price was $8,787. On April 14, 2021, a bitcoin’s price soared to $64,507 (an astonishing 634% increase from its pre-halving price). A month later, on May 11, 2021, a bitcoin’s price was $54,276, representing a 517% increase that seems more consistent with the behavior of the 2016 halving.4 Halving and Its Effects The theory of the halving and the chain reaction that it sets off works something like this: The reward is halved → half the inflation → lower available supply → higher demand → higher price → miners’ incentive still remains, regardless of smaller rewards, as the value of Bitcoin is increased in the process In the event that a halving does not increase demand and price, then miners would have no incentive. The reward for completing transactions would be smaller, and the value of Bitcoin would not be high enough. To prevent this, Bitcoin has a process to change the difficulty it takes to get mining rewards, or in other words, the difficulty of mining a transaction. In the event that the reward has been halved and the value
MICROSTRATEGY BUYS 1,434 BTC FOR $82M, NOW HOLDS 122,478 BITCOIN BY HEIDI
Software intelligence company and bitcoin accumulator MicroStrategy has increased its BTC holdings with a recent acquisition of 1,434 coins, according to a Securities and Exchange Commission (SEC) filing Thursday. The purchase was made between November 29 and December 8 for $82.4 million in cash, valuing each BTC bought at about $57,477 on average. The acquisition came a little over a week after the company announced it had purchased more than 7,000 BTC for $414.4 million. MicroStrategy said it now holds approximately 122,478 bitcoin acquired at an average price of $29,861 per coin, an aggregate purchase price of $3.66 billion. At the time of writing, the company’s bitcoin holdings are worth about $6 billion. “MicroStrategy has purchased an additional 1,434 bitcoins for ~$82.4 million in cash at an average price of ~$57,477 per bitcoin,” MicroStrategy CEO Michael Saylor tweeted on Thursday. Saylor is known in the Bitcoin community for his HODL mentality, a relentless push to acquire as much BTC as possible and not lend it out. MicroStrategy could earn significant passive income with bitcoin-backed loans with such a big bitcoin stack. However, Saylor has made it clear that the company’s objective is to reduce counterparty risk, which is considerably high with bitcoin loans, and increase its bitcoin holdings. The new purchase puts MicroStrategy at around $500 million worth of bitcoin bought as the price dropped by nearly 30% from $69,000 in early November to $48,400 at the time of writing. Long-term thinking based on the fundamentals of Bitcoin, which Saylor equates to “digital property,” led the company to be greedy as the market turned fearful. MicroStrategy bought more than 290 BTC per day during the 29-day price dip, about $7 million destined to bitcoin on a daily basis.
WHY I BELIEVE THE BEST OF BITCOIN IS YET TO COME BY HEIDI
I can’t help but take pride in the Bitcoin community’s relentless optimism. In many other industries, whether it be through the direct decline of the industry, or a sense of general nihilism that so often accompanies our fiat-based world, optimism is not nearly as present. But Bitcoiners wake up each day ready to work on solutions to the world’s toughest challenges, not in a vain attempt to “save our planet” but in true belief that we are creating the world’s next Golden Age, the best times humanity has ever known. My discussion with Q Ghaemi was a fantastic display of this optimism, as we touched on the potential for Bitcoin to change the world. We also discussed his introduction to Bitcoin, and the life lessons he has learned from Bitcoin. How were you first introduced to Bitcoin? I really started diving down the rabbit hole at the end of 2017, top of 2018. Christian Keroles helped orange pill me and since then I keep reading as much as I can about Bitcoin and the technology being developed in the space. What’s the primary “life lesson” that you have learned from your time in bitcoin? If you think you know everything, you know nothing. If you think you know nothing, you know something. Do you believe that bitcoin is truly capable of changing the world for the better in a lasting manner, and why or why not? Yes, but only if the Layer 2 (Lightning) and subsequent layers continue to develop and grow their capabilities. Complacency will be the downfall of Bitcoin — like anything else. What are you most looking forward to in the Bitcoin space? Technological advances that will change the way we interact with everyday things. It was not until the smartphone came to be that we really began to appreciate the development of web and mobile applications (apps) — I believe we are only at the beginning of what Bitcoin technology is being developed. Price prediction for the end of 2021, and the end of 2030? $100,000 bitcoin by New Year’s. By the end of the decade, a minimum of $5,000,000 per coin.