Tag: crypto facts

These are some of the topics we’ve covered in this series, focusing on cryptocurrencies, changes that have already taken place, and opportunities for you to be ready ahead of time. The crypto world is in the spotlight these days and we want to know what we can expect in the new year. Actually, the crypto market has been getting increased attention for quite some time now. In the past few years, we have seen a rise in investment professionals’ interest in cryptocurrencies. We now have central bank digital currencies and institutional investment vehicles for crypto as well.

In the near future, we could also see some big companies buy much bitcoin. Square invested 1% of its total assets to get 50 million USD worth of bitcoin; Grayscale reported impressive inflows towards the end of 2020; and, even some affluent figures such as Paul Tudor Jones trusted bitcoin to fight against inflation in the past year. Last year also closed with unprecedented events, leaving the crypto community with renewed hope and more questions on the future of money.

At the end of 2020, with cryptocurrencies soaring to new heights and receiving more investor attention than ever before, the largest cryptocurrency exchange in the US – Coinbase – announced its plans to go public. Recognizing cryptocurrencies’ long-term potential, Coinbase strived to provide investors with safe, easy, and regulated access to bitcoin from the very beginning. The significance of the company’s expansion plans also lies in their ability to show us whether there is any interest in something like this. Based on this transition, which also attracted increased media coverage, 2021 could bring other companies towards achieving similar goals. Having private investors and venture capitalists recognize Coinbase’s high growth potential and providing funds for its development could also signify an opportunity for the public market to value the company as well. The dynamics should render both Coinbase and its investors flushed with cash that could also be eventually reinvested smartly in 2021.  

Many people wonder if the impressive 2020 rise of bitcoin, as a global network and financial system, is going to drive an even greater spike in the market. With over trillion USD market cap public companies, gold amounting to a similar height, real estate soaring trillions upon trillion, and derivatives market equally thriving, among others, bitcoin may as well join the club at some point this year. We are still hundreds of percent away from this goal, which is why we may anticipate some expected volatility in the upcoming period.

Central bank digital currencies (CBDCs), along with the accompanying technology, comprise another important topic for 2021. As we discussed in the previous article of this series, the US Federal Reserve mainly talked about its discoveries, apparently without really putting its foot down and making any lasting commitment. Still, there may be more happening under the surface than we can see at the moment. The question of regulations comes up as the first step in trying to see how Americans can even start to rely on the Digital Dollar. 

The US central bank seems to prefer to take things slow, being cautious about its next step. However, some other central banks (e.g. China) are already testing and preparing to release their CBDCs for the public. Any information disclosed regarding these events can certainly be of use to the rest of the world, but we should also understand that central banks generally refrain from sharing everything before any product is completely ready to launch. People’s reactions always pose a concern in the early stages and any misinterpretation, especially in the loud crypto community, could just hinder the process, affect safety levels, and make things more difficult for the central banks. 

In terms of blockchain, experts claim how we can always find a new use, and 2021 may be an interesting year for investable assets too. We can expect to see more discussion on immunity passports this year as well as how to track the vaccinated population and regulate their movement geographically. Interestingly enough, a decade ago, it was predicted that tokenization would be a major theme for the following 10 years, covering an array of assets from the things people own to digital money and identification as well. We have entrusted more of our information to the digital sphere than ever before, allowing our personal identification, such as medical records, to be more trackable. In the past few years, we have seen numerous nations become more open to microchip implants, happening concurrently with an elevated desire to preserve privacy. This is where blockchain comes in handy, giving you the option of sharing personal information (e.g. vaccination) only with the chosen group of people and institutions. Blockchain has the potential to draw the line between what should be shared in public databases and what should not be as transparent to greater audiences, which we can expect to see more of in 2021 and the upcoming years as well.

With all this information and ongoing events and changes, new market entrants may find it increasingly difficult to distinguish what is relevant and helpful. For these reasons, novice crypto traders should consider investing small amounts of money, professionals advise. Start trading with as little as 100—500 USD and take the learning stage seriously as if you had a much larger starting sum. After you commit to getting a small amount of bitcoin or ethereum, among others, choose an exchange such as Coinbase, Binance.US, or Kraken and seek help from them if you need it. The interest in crypto trading is definitely on the rise, which may propel these companies to establish a more user-friendly and supportive service. The post-pandemic surely supports the work from home concept and the crypto market, as we can see from the chart below, is leaving much room for more individuals to join.

While we are all impressed with the events that are taking place as you read these lines, we also need to be mindful of the impact of news events and possible market volatility. Make sure that you are taking every possible precaution as we described in the first article of the series and strive to make smart, not fast, money. Also, as we are seeing developments in other trading markets as well, diversifying trading skills and expanding to other markets could be a rewarding and intelligent move in 2021 as well. Digital currencies are certainly not going away; as a matter of fact, some finance connoisseurs predict that digital currencies will become as important as PCs or cellphones with time. It is only expected that 2021 is likely to bring more news on the long-term changes we are going to see in terms of technologies inherent in cryptocurrencies and related regulations on the national level, as we talked about last time. While cryptocurrencies are slowly but surely increasing their footprint on the global financial system, individuals should take their portion of responsibility to ensure safe trading and maintain the right attitude. 

The USD is losing its privileged status, many say. Others believe that it will never go away. Still, different financial books describe how the reserve status impacts reserve currencies, such as the USD, with time. The problem with these safe-haven currencies is that their issuing countries can borrow and spend as they please without facing an immediate backlash that other non-reserve nations would in a similar scenario. Decades of reckless spending and management may lead to severe consequences, rendering the reserve currency nations indebted and abandoned by the rest of the world. The loss of trust in one reserve currency’s creditworthiness inevitably leads to another currency acquiring this status. 

And, in the past few years, we have seen extensive attempts to reduce the dependence on the USD. Aside from the United States’ 27.45 trillion national debt, the worldwide frustration with the USD’s global monopoly has reached its peak. The US foreign policy, in particular, seems to raise concern in other nations, with Russia and China being the most vocal opponents to the US meddling in international trade. The US claim to its jurisdictional authority over any transactions settled in and out of its territory also drew the attention of the European Union, especially after the US took severe measures to control European banks’ and companies’ activities even though they abide by the local laws. 

Reserve currencies are believed to enjoy this privileged status for a period of approximately 80—100 years. As the USD has served as the global reserve currency since WWII, its rule may just be over soon. Many believed that the USD would lose its influence after the Bretton Woods agreement, which promised that the US would avoid trade wars, fell through in the 1970s. The new petrodollar system ensued and world oil exporters agreed to settle their exports in the USD and invest their profits in US Treasury bonds. While petrodollars helped the US maintain its dominance for more than half a century, the global oil trade dynamics are changing and a question mark hangs over the future of the USD once again.

These changes are already visible. China has begun trading a crude oil futures contract priced in the JPY instead of the previously used US dollars. And, if the USD has been replaced like this, imagine how much room there is for a cryptocurrency to take over. Naturally, it would be highly impractical to settle international trade or keep central banks’ assets denominated in all world currencies, which is why reserve currencies are not only useful but necessary as well. Throughout history, the world simply found it easier to pick one currency they could trust the most to serve as the global reserve currency, not because they necessarily wanted to have to trust another government. 

So far, reserve currencies have been chosen based on the strongest credit and military. However, after the distributed ledger has been invented (which we talked about in the previous article of this series), the world has a system that can scale to meet the needs of the global economy without having to trust any single nation to take charge. With the digital currency system, there is no need for having a reserve currency as we know them.

The world is still immersed in which cryptocurrency ranks better, while the role of the new reserve currency is there for the taking. The only requirement would be for different central banks to agree on using the distributed ledger system, thus limiting the power of any single government. The US, however, may not take these changes lightly because they would directly interfere with its foreign policy and affect its global position. The rest of the world would, needless to say, welcome the use of the new system with open arms. The possibility of adopting this new system also raises additional questions; for example, will the changes involve different countries building in features that could benefit them individually? 

While many predict that bitcoin is going to take the role of the new global reserve currency, we mustn’t forget that it was solely created as means to settle private financial transactions without having to deal with law enforcement. Nonetheless, it is a rather far-fetched idea that governments, which are tasked with overlooking and regulating any financial transactions, are going to let go of this power so easily. The truth is, governments still have a say and will hardly opt for bitcoin or any other cryptocurrency to replace the existing monetary system just yet. We may, however, expect to witness the enactment of some stringent laws that would limit or completely prohibit cryptocurrencies. While governments may find it hard to silence the crypto community, they are far from powerless to impose any regulations that would help their cause of maintaining power.

Central banks across the globe seem to have already recognized the potential gain of the crypto world, as they issued CBDCs – central bank digital currency, a blockchain-based variant of current currencies such as the USD. Interestingly enough, in the United States, a future CBDC is commonly referred to as a Digital Dollar. While the US Federal Reserve has only recently started to openly communicate their years’ long CBDC research findings, the information shared in the past year commonly points towards the digital currency’s benefits – increasing efficiency and transparency and reducing illegal activity.

Big US companies, such as Facebook, also seem to be seeing the benefits of engineering their own cryptocurrency and, considering their impact on the global scale, we can expect to see some interesting long-term ramifications. Re-engineering money may become one of the strongest pursuits of the financial industry, and the USD’s current struggles may just shove it aside even more.

Yes, the US witnessed some unprecedented moments concerning its official currency in the previous year. Interestingly enough, 21% of all USD (M2) was printed in 2020 alone. This impressive surge in the USD stems from the US government’s freedom to print more money to help its economy. The entire conundrum began in March last year with liquidity issues sparked by the Russia—Saudi Arabia oil price war. Upon the breakout of the COVID-19 pandemic, economies and global trade found themselves at a complete standstill. 

While the US was not alone in this money-printing craze, the USD is facing quite a few challenges at the moment. We are currently seeing the USD at the largest short position since 2014, which only means that investors are betting against the currency at record levels. The net positioning of non-commercials presented in the chart below reveals how the wall of shorts piled up all year long, weakening the USD and leaving room for real assets to soar. Gold and silver markets also saw unbelievable spikes in 2020, along with bitcoin that continues to impress traders even in January of 2021, making the USD rather pale in comparison.

Still, should we give up on the USD? Well, the USD continues to dominate as a global trade payment currency, with a 79.5% inter-regional currency usage share. Despite the past year’s scenario, the USD maintained its global importance. And, if all currencies happen to go down, the USD still seems to be the best choice to hold on to. 

Since even the FED admitted to having been testing the CFDC for years now, we may just relax for now and trade as we did so far. The onset of a new monetary era is there, yet more time should pass before we can all start to see any major changes in our everyday lives, which is why we are better off polishing our crypto trading skills and diversifying our coins’ spectrum as we explained in the first article of this series.

Digital currencies will change the world we live in so profoundly that everyone will be taken by surprise. Yes, it is true and it is already happening. Some are convinced that precisely this year, 2021, is going to force these changes that we have been hearing about lately.  Bitcoin is already believed to be a thing of the past, technologically. With bitcoin skyrocketing these days, it is almost impossible to believe the things you are reading, but just bear with us and maybe discover a different perspective you have never seen elsewhere before. It is just the fundamental analysis we need for long-term investing.

As the ground-breaking precursor to many new coins, Bitcoin served to show the path, to pave the way for innovative tokens, opening our eyes to a whole new world of possibilities. It was a breakthrough invention that changed the world, like the first cell phone or the first TV. Still, it is important to distinguish between a predecessor and emerging inventions because we all long replaced our brick cell phones with devices that can meet our present needs.

When Bitcoin first appeared, it was a true revolution in many different ways. We finally had a new technology and decentralized digital currencies, and such an information technology breakthrough mustn’t be understated. The invention we now know under the name of decentralized distributed ledger eliminated the need for a centralized body or intermediary, like banks, to process or validate transactions. Blockchain technology is thus as important to the world as the first car, having changed the options available and the way different processes are managed.

When we think of the software industry, we know how new generations upgrade their original versions. We can painfully recall the first version of Microsoft Windows 1.0, acknowledging and appreciating all the ways computing has changed since its debut. The thing with each new invention is that its purpose is to see if this item is going to work at all. Only after this point, engineers and concept designers can actually make changes to fix any bugs and enhance performance, launching newer and improved versions each time. 

Bitcoin inventors faced a much greater hurdle than building a graphical user interface, but the accompanying first version quality challenges remained more or less the same. Their first product, blockchain, immediately drew the attention of people and institutions all across the world, but the product’s quality is still questionable. 

To understand these matters properly, it is crucial to differentiate between the bitcoin cryptocurrency and blockchain technology. Blockchain, the first version of a decentralized distributed ledger, is a historically significant invention that has brought about unprecedented changes to all of us. However, and this is the main point, blockchain, as we know it is still version one, just like Microsoft Windows 1.0, was. Unfortunately, blockchain technology resides on a highly inefficient algorithm – proof of work (PoW), which we mentioned in the previous article when we talked about the way to secure extra income with crypto. Due to its imperfections and lacks, blockchain’s performance is far less than what it should be now, 12 years after its creation. 

What these concerns aim to point out is that we need a more sophisticated version of a decentralized distributed ledger that compensates for blockchain’s limitations. We still want to keep the essential functions of blockchain, yet we need faster and more efficient performance. To do so, the current PoW design that serves to keep the network safe needs to be replaced.

Staking, or mining, that we discussed in the first series of these articles on cryptocurrencies, may be an excellent way for traders to earn a few extra coins, but the system’s need for it to work only demonstrates a serious downside. The problem we are presented with here is why we need this feature in the first place to grant security to the system. Thankfully, we have seen some successful attempts to break this barrier in the recent past. 

A new distributed ledger – permissioned distributed ledger, which is used by XRP cryptocurrency, is able to process 10 times more transactions per second than any blockchain-based cryptocurrency. What it lacks however is the means to bypass the need for a central authority because the crypto community essentially needs a mechanism that will bypass the involvement of banks. That is why even this improved version of this technology is insufficient to meet the needs of crypto traders. 

The only reason why blockchain is still used lies in the fact that no one has managed to come up with a better, more efficient solution that will satisfy the basic requirements and speed up the process at the same time. However, in the past few years, we have been seeing different companies advertise their products that have supposedly managed to meet these requirements and overcome challenges inherent to the blockchain. A fully decentralized permissionless distributed ledger finally leaves room for engineering scalable digital currency systems that have the real potential to become, or even replace, major currencies in the global financial system one day.  

Blockchain-based cryptocurrency systems could never be apt at achieving this, but we finally have the stage ready for digital currencies to compete with conventional currencies on the global level. While this indicates global progression towards new systems and ways of operating and existing, it also poses a serious threat to blockchain technology and currencies such as bitcoin.

Are cryptocurrencies as we know them going to disappear? Well – not anytime soon. However, it is reasonable to assume that their importance is going to diminish slowly with time. In the next article of this series, we are going right into the lion’s den to see where digital currencies stand in comparison to the global financial system and what will happen with fiat currencies in the near future. Stay tuned. 

P.S. If you want to learn what you can do now to still make money in the crypto market, check out the previous article where we discussed how to make smart money trading crypto now. 

Bitcoin will do to the banks what email did to the postal industry, said Rick Falkvinge. Yes, we are certainly seeing gigantic moves in the cryptocurrency market these days. As we are waiting for Facebook to launch its long-awaited Libra (now Diem) digital currency, Bitcoin is skyrocketing like never before. Currency revolution is heavily speculated and we all want to see what’s behind the facade. Where is the crypto market headed in the long run and what impact is it going to have on the world? What’s the big picture and how can we ride this massive wave that is happening as you read these words? Stay tuned as we start a series of articles on crypto trading, providing objective facts and key advice that you can immediately apply in trading.

They say it is not important when you enter the market as long as you forever maintain the buy-and-hold mindset. What we don’t want is instant gratification compulsion, especially now when the market is moving erratically. Money management and trading psychology will prevent you from interfering with your trades, collecting profit prematurely, and taking major losses. If you are new to crypto trading, following these essential tips will make a significant difference in the short and long term. In this market, the upside is extraordinary, while the downside is limited. Therefore, let’s see what steps you can take to make the most of it.

Luckily, we can now go both long and short and crypto already has an inherent upside that we can benefit from immediately. We need to see if we are in a buyer’s or seller’s market and determine where we can make the most profit. Still – and this is imperative now more than ever before – we can always make a mistake in our estimations. That is why we absolutely never go all in. And, equally importantly, we never give in to the market’s community hype, fortifying our sense of independence and self-reliance. The key is to make smart money and, to do so, the best strategy is to spread out. Diversify your coins and that way, even if something falls through, you will always be safe. This also means that you will not overleveraged and, thus, take a smaller (5-15%) fraction of the entire portfolio to hold crypto. 

Always come up with a plan and make sure you stick to it. Keep your anxiety and other emotions aside and set key points ahead. Determine your stop-loss and take-profit, and then move your stop-loss to break-even when it gets there if you want to scale out. Scaling in and cost averaging can be something you can apply but then you would need more attention and research. Rely solely on your system to tell you when the right time to make a move comes and do not deviate from the initial plan. Additionally, besides the daily chart, you can also use the weekly and the monthly ones for long-term trading. Just remember not to let the fear of missing out get the best of you, especially in the midst of this crypto craze.

Holding is used by the richest traders on the globe, who know how to allot their investments to reap benefits continuously. Allocate 70% of your finances to long-term buy and hold and 30% to your short, more aggressive trading strategy. Then, decide how you are going to spread out to ensure risk is reduced. For example, you can have the majority of investment in commodity stablecoins as a protection in case everything else falls apart. The second in line could be bitcoin or ETH or, preferably, both. Next, 5—20% could be distributed across different altcoins. Your final layer should be your longshots or the coins you use for your long-term strategy.

With crypto, we may not know exactly when the best time to start trading is. However, if you do feel that something is to go up, crypto’s upside and downside ratio allow you to invest your money more freely than in other markets. You can also use Trailing Buy, which helps us determine entry signals. To enter a new trade, move the trailing line down only if the price goes lower than it is right now (i.e. if it breaks down upon the candle close). When the price finally hits the trailing stop, you are getting the green light to buy.

Whether a trade renders great results or not, you need to set a defined exit strategy. Like in any other market, you need to align your exit point with your overall strategy; hence, your exit strategy is going to vary depending on the type of trade. You must maintain consistency and refrain from making any changes in the middle of a trade. As cryptocurrencies are great for holding, your exit will then be contingent upon your idea of how long that trade should last. As long as you have a projection of how far you want to go, you will know exactly where you want to take your money off.

Staking is an excellent way to make passive income in the crypto market while holding them at the same time. This strategy implies that you hold some coins (keep them in a crypto wallet) and, therefore, strengthen the network for which you get a reward in the form of extra tokens. While not all cryptocurrencies permit this, the Proof-of-Stake mechanism requires that certain coins’ new blocks be verified by staking after production. What is important is that you can earn additional income when the coin you hold increases in value. Some blockchains have predefined minimum and maximum staking periods that basically determine the span during which you can retrieve your coins. To avoid dealing with all these requirements, traders prefer to delegate their coins to a validator (traders who stake their coins) running a staking pool. It is, however, important to mention that validators lose a portion of their stake if they double-sign or attempt to attack the network.

Since crypto is known to multiply in value up and down in only one year, what we are witnessing right now should not come as a surprise. What you can, and must, do is ensure all possible protection to minimize losses and ride the big waves. Money management, trading psychology, and the right mindset are your strongest tools to combat any unpredictability and volatility, regardless of the positive aspects this market bears. Announcements and predictions generated in the crypto community often come with an excess of falsehood and unnecessary drama, so to avoid this, just try to the best of your abilities to keep a cool head and be smart about each move you make. As they say – haste makes waste. Don’t be another failed promise of success but rather invest intelligently – both your time and money.