Welcome to Bitcoin
There are a couple key things to understand with bitcoin. I will briefly outline what bitcoin is, then give you a (4) reading assignments. I understand any skepticism and disbelief you probably have which is good, as I had the same thoughts. However, once I started diving into what is bitcoin I was blown away by how fragile our current system is and how bitcoin can help store wealth and create a level playing field for all people. It is the money of the people.
Bitcoin is complex. It will take much time and thought to make sense.
What is Bitcoin?
The first is that it is something that is not physical nor backed by a government, gold or hard asset, which means it is backed by nothing. At first glance this is troubling, however what is the US dollar backed by? what is any fiat currency backed by? Once you answer these questions and start to understand what money is, the understanding of bitcoin and its monetary policy becomes more plausible. Bitcoin is the largest payment network in the world, value can and is transmitted on the network daily. Value or money can be transferred to anyone in the world for pennies, which is great for global markets, remittance and commerce. There will only be 21 million bitcoin ever created on the Bitcoin network, not all of the 21 million have been released, every 10 minutes about 6.25 bitcoin are released and rewarded to "miners' on the network who validate transactions using specialized computers called ASICs. Every 4 years the number of new bitcoin released is cut in half, this is called the "halving" and has been the catalyst for price and scarcity. Bitcoin is not controlled by a company, government, or central authority.
It was invented 11 years ago by an anonymous person, calling himself Satoshi Nakamoto and the technology was released to the world through a white paper. The key break through was the solution to the "double spend" problem. Meaning a single bitcoin couldn't be just copied and sent to multiple parties. It was secured through blockchains and cryptography, the same cryptography invented by the NSA called SHA256 (encryption). Now many people want to know who is Satoshi, and how have they kept this a secret for 11 years. There are many theories but the leading one is that it was created by a guy named Hal Finney. Hal was the first person to run a node on the bitcoin network back in 2009, along with Satoshi. Many think that Hal is Satoshi, but no one knows and we may never know as Hal Finney died of ALS. The other theory that it was the US government, because bitcoin was created just after the banking collapse in 2008.
Now understanding the history of bitcoin, back in March 2019 it was discovered that the bitcoin price can be modeled by using the following equation: Bitcoin price = exp(-1.84)xSF^3.36. The SF is the stock to flow, this is a way to measure scarcity of a commodity. Today, gold has the highest stock to flow (SF) of about 50. the stock to flow is how long it would take in years for the new supply (inflation) of a commodity to reach the current amount of stock or supply available today. In other words, it would take 50 years of mining gold (current mining is 1.5% inflation) each year to match the current supply above ground that has been mined. Today bitcoins stock to flow is 50 and after May 2024 it will double to 100 or so. Now using the above equation the bitcoin price and bitcoin stock to flow model equation can be plotted. The breakthrough was this equation has been accurate to 95% using the R2 method. Go here to see the charts.
Now to the reading assignments.
The first is the white paper, its worth at least reading through it, its short and sweet.
Now to some major concerns, will Bitcoin be outlawed? will the creator of bitcoin come forward and dump his supply on the market? since china has most of the mining operation could they try and control it? Will all transactions be tracked? is this the one world currency talked about in the bible?
If you get to the point where you want to purchase some, there are numerous trusted places to buy. My personal favorite is Coinbase. Coinbase is a company from San Francisco and is a US based cryptocurrency exchange. There are other options to purchase as well using Square cash app, Robinhood, Voyager, Abra, and Gemini. My favorite for the lowest fees is Voyager. The point is if you want to buy some it’s not too challenging.
Buy from Voyager, sign up and get 25$ after spending $100.
What do I get out of this? well nothing. I just want to share what I have learned with others, remember the saying treat others as you want to be treated...well I wish someone set me aside years ago and told me about bitcoin and the revolution of money years ago.
Of course, with 10x gains on the table there is significant risk in this new and small asset (200 billion market cap). This is not financial advice never spend more than you could lose. Many investors are putting 1-5% of their net worth in this asset. Especially with stocks getting back to all-time highs, and the government printing 6 trillion dollars…taking a little of the table and putting in a non-correlated asset like bitcoin could be a good move.
As you learn more you will discover there are other currencies that try and compete with bitcoin. bitcoin has been tried and true, and has maintained market dominance. Bitcoin is a must own before buying and holding any other cryptocurrencies. I personally own litecoin as well.
This space is moving fast, just this week the federal reserve posted a job looking for a manager to help them with a "digital dollar"...don't be surprised if we see central bank digital currencies (stable coins) in the next 2 years from Turkey, Canada, Spain, China, ...the USA and Russia.
As bitcoin rises there will be peaks and valleys. There is a good chance the price hits 16-19k by December of 2020 and expect a 30-40% pull back, then a parabolic move up that will peak in 2021. I expect the price to be 50k-250k
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Disclaimer: This is not financial advice, this is for entertainment purposes only. Do your own research.