Bitcoin – Compendium of knowledge – Part 1

At the beginning, I would like to point out that this text is not investment advice. All information contained in it are my immanent thoughts on the cryptocurrency market. This text is 100% free. I have been thinking for a retentive time about gathering all my cognition in one place. I wanted to create a collection of cognition about cryptocurrencies so that I could plainly refer to this text when repeatedly asked the same questions by group members and friends. In this text, I tried to provide an answer to each of the possible issues so that after reading it all ( which will take you about 30-60 minutes ) you will have arrant cognition that allows you to consciously invest in the cryptocurrency market.

You will learn the indicators that will make you feel incomparably more confident with your investments in this market. frankincense, you will understand that cryptocurrencies are not a gamble, but a advanced asset in which nice investment gives higher returns than any other exist asset in the earth .

Why Does Bitcoin Have Any Value?

Lots of people don ’ deoxythymidine monophosphate sympathize why Bitcoin is worth therefore much. Why would person pay tens of thousands of dollars for some virtual numbers ? To understand this, we must realize that the value of the money we use on a daily basis is besides contractual. In fact, it is bazaar to say that dollars, pounds or any other currentness in the world are besides worth nothing. Why? For something to be of value, it must exist in finite measure and be difficult to obtain. For a identical long time, gold was such a commodity serving for trade and meeting these requirements for a very hanker meter. Gold still meets these requirements but is barely ever traded on a daily basis. As amber itself is heavy and unmanageable to transport, at one point the idea was to keep it in a bank and in reappearance experience confirmation of how much gold we deposited. That confirmation was dollars. You could come to the bank at any time and substitution it back for gold deposited there. When person wanted to make a leverage, they simply paid in cash and the person receiving it knew that they could exchange it back for amber at the bank at any time. It was a very estimable system. There was as much cash as amber, while amber was ( and still is ) scarce. We can ’ thymine find it on the street. unfortunately, in 1971, President Richard Nixon announced that he would henceforth suspend the dollar to gold. What does this mean in practice? From nowadays on we can not exchange dollars for aureate, it means that banks merely do not have this gold. On the early hand, if there are dollars and there is no gold to cover them, that is, the dollars were plucked out of the breeze. A small-scale example

  • Suppose there is $1000 in circulation.
  • The state has $500.
  • Citizens have the remaining $500.
  • There are only 100 products to buy, priced at $10 apiece.

At the moment when the dollars were covered in gold, the department of state could buy $ 500/ $ 10 = 50 pieces of the intersection and the citizens would buy precisely the same. Meanwhile… If the money is not backed by gold, the state of matter simply prints another $ 200 when it needs money. What is the calculation now?

  • We have $1,200 in circulation.
  • The state has $700.
  • Citizens still own $500.
  • There are still 100 products available for purchase.

so the state can buy $ 700/ $ 10 = 70 products. In turn, citizens can buy $ 500/ $ 10 = 50 products. Something is already wrong because we lone have 100 products, and if we wanted to use all the money we have in circulation, we could buy deoxyadenosine monophosphate many as 120 products. Then there are two options:

  1. The state buys products with money plucked out of the air. There is a shortage of products on the market, so citizens are no longer able to get them. Thus, the $200 that citizens have is useless, because nothing can be bought with it.
  2. The product owner states that since there is so much interest, they will raise the price to $12.

then the state can buy $ 700/ $ 12 =~ 58 products. In turn, citizens can buy $ 500/ $ 12 =~ 42 products. As you can see from the fact that the state of matter printed $ 200 plucked out of the air, it is now able to buy 8 more products but citizens – 8 fewer products. This way, the state took your money without evening touching your wallet. Venezuela is an exercise of a country with inflation that has gone besides far. There are much no products in the stores, and if they are, they are so expensive that a month ’ s worth of work allows you to buy food that is enough for 2 days. money has become so useless that people make baskets and wreaths out of it. They literally do it ! What does this have to do with Bitcoin? Bitcoin is programmed then that its sum in circulation is limited in advance and amounts to 21 million coins. What ’ s more, once every 4 years there is Halving, which means that every 4 years the reward for Bitcoin miners is twice smaller. Thanks to these two factors, we get a good that is perfect like gold because it is more and more difficult to mine and its quantity is limited ( the utmost you can mine is 21 million coins ). In addition, no one can ever take this thoroughly from us because we do not keep it at home but in a decentralized net supported by miners ’ computers. The merely room to lose your Bitcoin is if the electricity is turned off all over the world. however, then the hale organization would collapse and thus you would not be able to choose your funds even from a criterion trust .

What is a decentralized network?

The value of a decentralized network is that there is no one person who rules it. No one can suddenly come and order an extra 1 million Bitcoins to be added to the net. precisely like the governments of all countries in the populace do. Everything is already programmed, the code is freely available, and cipher can abruptly change it on their own. In the case of centralized institutions such as banks, corporations or states, everything is supervised by a group of several people who can make you have $ 0 in your score with one click of the sneak .

Can you create a second Bitcoin?

Yes. Bitcoin code is freely available, and anyone can create their own Bitcoin. The problem is that no one will use it. Can you create a second Facebook? Of course ! If person is an know programmer, they are able to reproduce the most authoritative functionalities even during a work week. The motion is who will use this chopine ? The hardest job to do is attract millions of users, not barely programming the Facebook platform. The like goes for all alternatives to Bitcoin. They can be created but no one will use them, and frankincense they will be completely worthless. The same mechanism applies to metals. You can ’ t take a random musical composition of metallic and say it ’ randomness worth equally much as amber because it glows excessively. It is accepted around the world that gold has value and no other glowing alternate will be accepted .

What are Bitcoin Cycles all about?

The Halving I mentioned earlier defines Bitcoin ’ s 4-year-cycles. You have probably heard more than once that the Bitcoin bubble has burst and it is heading to zero. namely, it breaks regularly every 4 years. It broke in 2013, in 2017 and will probably break at the change by reversal of 2021 and 2022. Later, I will show you on chain indicators to help you identify when approximately this is probably to happen. Cycles are characterized by the fact that a here and now before Halving the price begins to rise lento and immediately after Halving it accelerates importantly and this is the moment when we are in a full-fledged bull grocery store .Halvingi Bitcoina The boom lasts about 1.5 years from Halving. The last Halving took invest on May 18, 2020. consequently, it is estimated that the stream boom should close at the end of 2021. The future Halving will be on March 16, 2024. What happens at the end of the bull market? That ’ sulfur right… The bubble is bursting, and everyone is predicting the end of Bitcoin once again because they don ’ triiodothyronine know the cyclicality of this market and think something can grow everlastingly. Well, no. It is not possible for everyone to be in profit all the time. Every 4 years a reset occur ( the bubble bursts ) and the bicycle starts all over again. furthermore, even in the classic standard markets, there are cycles that normally last 10 years but that is not the subject of this article. It is worth noting that the end of the bull grocery store is not a jest and Bitcoin then drops by an average of 83%! however, the game is worth the feat because if you had bought 1 Bitcoin in 2013 when it cost $ 100, you would immediately have around $60,000 ( as of May 4, 2021 ). furthermore, you wouldn ’ t have to do anything during this prison term. It was enough to barely buy and keep it. You didn ’ thymine even have to sell it every 4 years at the end of the boom. This probably intelligibly shows that Bitcoin, despite the fact that people regularly predict its end ( not understanding its cyclicality ), grows in the long term like no early assets. Most people say that they would sell Bitcoin anyhow with a minimal profit and would have to forget about it to actually earn indeed much. today, fortunately, we have tools that show us with bang-up accuracy when we can expect a ripple collapse, so that we can sell our cryptocurrencies close to the top ( because we will never hit the acme perfectly ) and be able to buy them back after a standard spill of closely 83 %. Curiosity. I know that 2013 is quite distant, so I will give you a closer exercise. If you had bought 1 Bitcoin in March 2020 when it cost $ 3,000, you would now ( May 4, 2021 ) have $ 60,000. That is angstrom much as 20 times more in precisely over a class. And this is not the end of the boom ! If you had invested $ 50,000 – you would have already had $ 1,000,000 .

Stock to flow model

Taking into report the aforesaid Halvings, the Stock to flow model was created .Bitcoin Stock to Flow Model This graph can be found on the web site : https://www.lookintobitcoin.com/charts/stock-to-flow-model. This model shows what the clean price of Bitcoin is for the day. The closer to the following Halving, the more expensive Bitcoin should be because as you already know, after Halving it will be 2 times more difficult to mine. When you hover over the chart, you will see the date and the price in dollars telling you how much Bitcoin should cost on a given day – besides in the future. As you can see, the monetary value of Bitcoin follows this model, so it is very reliable. At the bottom you will find a smaller chart that shows whether the current real price is below the model ’ south price ( k ) or whether the price is above the model ’ randomness evaluation ( red ). In curtly, if the right contribution of the little graph is presently green, then Bitcoin is undervalued. In turning, if it is bolshevik, it means that it is excessively expensive for this day and we may face a correction. Remember that the price resulting from the mannequin increases day by day, then today Bitcoin may be overvalued but if we wait a few days, its price may be adequate to the price resulting from the exemplar .

How much can Bitcoin rise to during the 2021 boom?

Whenever people estimate how much Bitcoin will cost at the end of the boom, this one always surprises them. During Halving on November 28, 2012, 1 BTC cost $ 10. Most people estimated the top would be $ 100. interim, at the end of 2013, 1 BTC already cost $ 1,237. This is an increase of about 123 times in equitable over 1 class ! At the fourth dimension of Halving on July 9, 2016 1 BTC cost around $ 520. On the other handwriting, at the acme of the boom in December 2017, it was already $ 19,345. This is an increase of over 37 times since Halving. How is it now? many people predict that Bitcoin will cost $ 100,000 at the conclusion of the thunder in 2021. In my impression, it will continue to surprise us and ultimately its price will be much higher. however, we will not rely on reading tea leaves. In the trace sections, I will describe how to check what phase of the taurus grocery store we are at. OK, so on May 15, 2020, 1 BTC was around $ 8,570. If we are to repeat the increase from 2017, the price from Halving should increase by 37 times. so $ 8,570 * 37 = $ 317,090. Of course, I am not taking it for granted by any means. I fair want you to understand that there are chances even for such increases. It might seem that it is even quite elementary to achieve when unprecedented amounts of money are printed as if plucked out of the air all over the world, which in turn must lead to inflation. meanwhile, in times of senior high school inflation, people have to resort to non-depreciating assets to protect their capital. Bitcoin is such an asset .

Where to watch the Bitcoin chart?

The best and clearest charts can be found on the web site : https://www.tradingview.com/chart. After launching the above foliate, suction stop on the currency pair in the upper left corner :Tradingview - Search Symbol then enter „BTCUSD” in the search field and select the first item from the acme .Tradingview - Searched Symbol

How to distinguish a correction from the end of a bull market?

Every meter there is a correction, you will see a billow of panic-strikers who will herald the end of Bitcoin. This is because they do not have basic cognition about this market, and their investments are based on… well, it ’ second intemperate to say what. It looks like most people invest in the same way as betting on a red/black box on a casino roulette. They don ’ thymine trust on any indicators and entirely buy because the price is rising. typically, this purchase is made at the local exceed, followed by a 20-38 % discipline, and they sell at the bottomland, telling the world that THIS IS THE END! In turn, educated investors nowadays buy more cryptocurrencies in accordance with the principle : ‘ Be greedy when others are afraid, concern when others are avid. ’ by and large, novitiate investors prefer to invest when everything is growing and enjoy the profits for 2 days, and then war cry for a whole calendar month that they are at a loss because there is a correction. however, it is wiser to buy when everything is falling and see losses for two days ( because we never aim for a perfective moo ), and then enjoy the profits for a calendar month. Before we go any far, it is worth taking a attend at the chart showing the corrections during the bull marketplace in 2017 .Korekty na Bitcoinie Of course, every meter there was such a 38 % correction, the end of Bitcoin was foretold. feel investors, on the other hand, used these moments as investment opportunities. So how to distinguish whether this is the end of the bull market or another investment opportunity? I will try to provide you with as many spare charts as possible. unfortunately, not all of them are available for free. Some of them can be found at : https://studio.glassnode.com in a subscription of $ 29 a month. If you have bombastic amounts of money to invest, it may be worth considering a subscription. On the other hand, if you intend to invest lower amounts, then of course such a subscription is pointless. anyhow, you can easily cope with using only spare tools. so lashkar-e-taiba ’ s act on to one of the most authoritative sections .

On chain indicators

The on chain data is publicly available and can be read from the blockchain. You don ’ t need to go into this topic. In abruptly, the point is that the marketplace behaves in a particular way at each stage of the bull market. Thanks to the on chain data, we are able to check if it ’ south clock to sell our cryptocurrencies. NUPL NUPL You will find this indicator on the absolve web site : https://www.lookintobitcoin.com/charts/relative-unrealized-profit–loss. The NUPL ( red course ) shows whether the marketplace as a whole is presently in profit or loss. The bootleg line is plainly the monetary value of 1 Bitcoin. Values below 0 % ( Capitulation ) mean that if all current Bitcoin holders sold it at the current price, they would be losing money. This means that most people in the marketplace have bought Bitcoin at a higher price and are now losing out. On the price chart, this means lows and a good meter to buy. Let ’ s take into account, however, that the price is only going green during the bear commercialize. If person wants to enter during the boom in 2021, they will have to buy at the higher tiers. In the follow chapters, I will describe when to do this. note that historically, when the bolshevik cable exceeded the value of 80 %, and therefore even slenderly entered the pink plain meaning ‘ Euphoria, ’ it meant the end of the bull market ( in 2013 and 2017 ). It is said that in 2013 there was the alleged ‘ double clear ’ or ‘ juke top. ” This means that all indicators showed the end of the bull market, and in reality there was alone a identical deep correction of 67 %. In the same year, far increases began, and only when the NUPL hit the level of euphoria for the second meter, a full-fledged bear market began and continued until the adjacent Halving. Regardless of whether the entrance into the level of euphoria will mean the end of the bull’s eye market or a deeper correction – it is worth evacuating from the market at this point in arrange not to suffer large losses. so you already know the inaugural indicator. In unretentive : if you see that we have entered the pink zone, it is deserving taking profits because it is identical likely that we will end the bull market .MVRV-Z Score MVRV Z-Score You can find this indicator at : https://www.lookintobitcoin.com/charts/mvrv-zscore beginning, let me describe some points :

  • Market Cap – this is the price of 1 BTC multiplied by the amount of BTC in circulation.
  • Realized Cap – this is the price of 1 BTC at the time of the last move, multiplied by the amount of BTC in circulation.
  • Last move – suppose you sent 1 BTC to your friend when it was worth $10,000. Your friend did not send this BTC anywhere else and it is still in the same wallet. The price at the time of the last shift in this case will be $10,000 because the last time Bitcoin landed in this wallet, it was just $10,000.

This chart shows the difference between the stream Market Cap and Realized Cap. The higher the rate, the more Bitcoins are transferred between wallets at that point, which means more and more people are buying and selling their Bitcoins rather of holding them long term. If you think about it, it ’ sulfur easy to conclude that long-run investors are keeping Bitcoin in check. They have already seen declines of 40 % and some vitamin a much as 90 %. What if people conversant with the market sell their Bitcoins to beginners who have no feel and do not know how explosive the market is ? Of naturally, the big sell-off is starting as new investors are afraid of downs by up to 5 %. More and more new investors start selling out of fear. Some of them will sell after a 5 % drop, another by 10 %, and thus the avalanche begins. only long-run and inform investors could stop the declines without panic and inactive holding Bitcoin. Except that they already sold it at the top with this new… This way a behave grocery store starts and the crimson line on the MVRV Z-Score is moving towards the green zone. When we get to it, we can talk about an opportunity to buy. Coming to this line means that most newfangled investors have already got rid of their Bitcoins. There are practically only old traders left in the market, who do not tied think to sell their Bitcoins, and investors who sold at the top and bought binding from the inexperienced ones at a lower price. On the other bridge player, if you pay care to the moments when the loss line was above the pink zone – then we are dealing with the top out of the talk through one’s hat market. These are the moments when most of the BTC in the market is owned by new people and it is worth evacuating at this indicate because a bear market is likely to start at any moment. Reserve RiskReserve Risk You can find the index here : https://www.lookintobitcoin.com/charts/reserve-risk here we chiefly pay attention to the belittled chart at the bottom. This indicator shows the risk-reward ratio based on assurance in Bitcoin by long-run investors. This is very exchangeable to the MVRV Z-Score. The longer investors keep their cryptocurrencies in the wallet without moving them, the closer the red argumentation is to the moo levels ( in the green zone ). In short, the green tiers are ideal levels to buy during a bear grocery store. On the other hand, pink levels are ideal levels for selling during a talk through one’s hat market. aSOPRASOPR This is an indicator that is unfortunately only available on a paid subscription ( you can view it for complimentary, but only historical data ) : https://studio.glassnode.com/metrics?a=BTC&m=indicators.SoprAdjusted&resolution=24h As already mentioned, if you are investing with little capital, do not buy access ( at least until you multiply this total ). On the other hand, if you intend to invest more money, I think it is deserving investing in this tool, because $ 29 per month is not an excessive amount in relation back to the returns this grocery store gives during a bull marketplace. There are besides all the other pointers I ’ ve been describing on Glassnode. The most crucial in this index is the horizontal black tune marking level 1. If the orange argumentation is above level 1 ( the black horizontal line ), then most of the commercialize is selling Bitcoin at a net income at this point. conversely, if the line is below level 1, most of the market sells Bitcoin at a loss. During a bear market, the orange line is below level 1 most of the time. During a bull market, the orange line is above level 1 most of the fourth dimension. aSOPR is useful for identifying two things : Trend reversal If we have a bearish market, as I mentioned, the orange wrinkle is under level 1 most of the prison term and most people sell at a passing. then the orange credit line bounces off the bottom of the black horizontal line .ASOPR w czasie bessy This is because the here and now aSOPR goes from the bottom to level 1, most people have zero or minimal profit with their investment and sell their cryptocurrencies immediately. They are mindful that there is a bear grocery store and are beaming that they managed to get at least what they invested. thus, the price of Bitcoin is going down and the orange line is going bet on down. however, when aSOPR is reaching charge 1 from the bottom and Bitcoin ’ south price is not starting to fall, it may be the consequence when the bull’s eye market begins. Since the price is not falling, then most of the commercialize nobelium longer accepts it to break flush. Everyone feels that the price will continue to rise and they prefer not to sell, but to wait for more net income. frankincense, the orange line passes over point 1 and the bull market begins. During the bull market, the orange pipeline is above the horizontal black note most of the clock time, which means that most people are selling Bitcoin at a profit. If the orange line comes to level 1 from the acme ( meaning most of the market goes to zero ), we bounce back up immediately .ASOPR w czasie hossy This is because most of the market believes there is a bullish commercialize and they have no intention of selling Bitcoin at zero. After all, since there is a bullshit market, they prefer to wait for the price to rise in ordering to sell at a profit. however, when aSOPR reaches charge 1 from the acme, and the Bitcoin price does not start to rise, we may be dealing with a bearish phase. This means that most of the market accepts that they are at zero or slightly losing. Investors are sol afraid of far declines and the bubble abound that they are selling anyhow. frankincense, the orange note returns to the lower regions and the bearish phase begins. Local lows During a bull market, aSOPR resets many times, so it touches point 1 to bounce up again. If the remaining indicators discussed ( NUPL / MZVR-Z Score / Reserve Risk ) do not point to the end of the bull grocery store, and aSOPR is about touch or has touched level 1 ( black horizontal line ), this is the perfect time to buy. This means that, on average, the market sold out at a net income and now people would have to accept the sale at a loss. Of course, they do not do it, because other indicators show that the bull market is still going on. consequently, there are no sellers, so the price stops falling. If you buy your BTC at this point – bravo! Most probably, the commercialize will start to rebound at any moment ( within a few days ) and grow aggressively, and it will generate huge profits for you. Do you already know when it is just a correction and when the bull market ends? Knowing that in the past corrections on BTC were even 39 % and taking into account the indicators discussed hera – from now on you will be able to easily distinguish whether it is a correction or the end of a bull marketplace. From now on, you can use adjustments as investment opportunities. Most of the people in this market behave in a very amusing means. At the moment when everything grows, they are waiting for a correction. On the early hand, when a correction occurs, rather of taking advantage of the opportunity they have been waiting for, they prefer to announce the abound of the house of cards once again ? ? ? ? I hope that these indicators will allow you to become a conscious investor. Cryptocurrencies are not a casino as most ignorant people believe. The indicators that operate on this market are more accurate than on any other market .

When to buy Bitcoin?

Of run, it ’ sulfur best to buy Bitcoin when we have a bear market, and the indicators I mentioned appearance lows ( they are in the green zones ). however, we are presently in a bull market and you will not be able to buy anything in the green zones until the next hold market. In turn, the following thunder will not take position until 2025. You would probably prefer to take advantage of this boom. There is still a adept gamble to earn 100 % on Bitcoin entirely ( I ’ meter writing this on April 29, 2021 ) and a bunch more on altcoins.

There will be a freestanding section about altcoins. First, let ’ s focus on Bitcoin, because its behavior is the most important in the integral cryptocurrency market and it affects all altcoins. The first and most important rule. Never buy on top! induce in this market does not pay off. Always wait for a correction before bribe, and when it arrives, average your purchase! We ’ ll talk about averaging in a here and now. At the same time, remember how explosive the market is. correction, it is not a rebuff reduction of the price somewhere at the top by 5 %. The discipline is a decrease of 20-40 %. This is a correction:Prawidłowa korekta And not this:Nieprawidłowa korekta If you invest larger amounts and can afford a Glassnode subscription, the aSOPR indicator, which I have written about above, will help you determine the local low .

Purchase averaging

Let ’ s try not to invest all the capital we have at once. Suppose you decided to invest $ 1,000 in cryptocurrencies. If, for example, BTC drops by 15 %, then make a purchase for 50 % of this amount, so $ 500. then wait a few days. Often then there is a price consolidation like here :Konsolidacja If the price goes up, that ’ mho capital. You are already in the market and your $ 500 is earning. Leave the remaining $ 500 for a better opportunity and put them in for Flexible Savings ( this is the situate I will write about belated ). On the early hand, if the price drops by another 10-15 %, this is the perfect clock to buy for another 50 % of your capital. What do you gain from this approach? Imagine 1 BTC costs $ 1,000 and you buy it for the entire sum you have for investment. The next sidereal day, the price of 1 BTC drops to $ 700. unfortunately, you have a passing of $ 300. now, to break even, the price has to go rear to $ 1,000. only when it is $ 1,001 will you earn your first dollar. Now with averaging The monetary value of 1 BTC is $ 1,000, but you only buy it for half your capital, which is $ 500. BTC is divisible to 8 decimal fraction places. You can only buy 0.00000001 BTC. The price of 1 BTC drops to $ 700. however, at this target, you are using your moment $ 500 and buying BTC at the lower monetary value. So the average price you bought BTC for is : ( $ 1,000 + $ 700 ) /2 = $ 850. Without averaging the price, it would have to rise back to $ 1,000 to make up for the personnel casualty. Thanks to averaging, the break-even point is when the monetary value rises from $ 700 to $ 850. On the other hand, when it reaches $ 1,000, you already have $ 150 in profit .

  1. If the price starts to rise. Cool! You already have $500 invested and you can enjoy the profits.
  2. If the price starts to drop, you keep investing another $500 averaging the price, and only a slight bounce back up makes you profitable.

Cryptocurrency Taxes

In most countries around the worldly concern, cryptocurrency tax is charged on a similar basis. Nevertheless, be sure to check what it is like in your country. namely, in most countries, the tax obligation occurs merely at the clock time of selling cryptocurrencies for FIAT currencies. These are the currencies we use every day, such as EUR, USD, GBP, etc. Suppose you bought cryptocurrencies for $ 1,000. then you sold them for the exact lapp sum. Do you have to pay tax? No. We pay tax lone on the profit we have earned. In this case, you bought cryptocurrencies for $ 1,000 and sold them for $ 1,000, then you didn ’ t make any profit. immediately suppose you bought cryptocurrencies for $ 1,000 and sold them for $ 5,000. How much will you pay tax on? tax is lone paid on profit. Since you sold cryptocurrencies for $ 5,000, but beginning bought them for $ 1,000, you will pay tax on the dispute, so $ 5,000 – $ 1,000 = $ 4,000. You will pay tax on the total of $ 4,000 .

Stablecoins

These are cryptocurrencies that always have a value of 1 to 1 to the dollar. The most democratic stablecoins are :

  • USDT
  • USDC
  • BUSD – stablecoin of the Binance exchange

All of the above-mentioned stablecoins are characterized by precisely the same matter :

  • 1 USDT = $1
  • 1 USDC = $1
  • 1 BUSD = $1

This means that if you have, for model, 100 BUSD, you can exchange them for precisely veridical $ 100 at any time. Why use Stablecoins? For three reasons :

  1. Some cryptocurrencies on the stock exchange can only be bought for stablecoins.
  2. Stablecoins are also a cryptocurrency, which makes it easy for us to transfer them between different cryptocurrency exchanges. We can also send them to an external wallet (more on that later).
  3. Some countries do not treat stablecoins as an asset, so if you convert, for example, BTC to USDT, you do not have to pay tax on profit. Only when you convert USDT to USD will you pay the tax. You must check how it works in your country.

Where to buy Bitcoin?

If you are a US citizen, the largest and safe exchange for you is : https://www.coinbase.com. additionally, you will get $ 10 if you create an account from the yoke above and make a leverage of cryptocurrencies for $ 100. In turn, if you are not a US citizen, it is worth using the largest stock exchange in the universe, i.e. : https://www.binance.com .

Altcoins

Bitcoin is the earth ’ randomness beginning created cryptocurrency. Its success has made many people around the worldly concern interest in blockchain technology and the benefits that stand behind it. From immediately on, businesses do not have to rely on one person or a group of several people to control them. They besides don ’ t have to be vulnerable to government action. For example, if a decentralized Facebook were created, it would be up to the community to decide whether or not to remove the content. not to a specific group of people like at present. The community would be people with voting cryptocurrency. You can say that altcoins are the equivalent of normal companies, but in a decentralized earth. In my opinion, the best place to check and search for altcoins for investing is : https://www.coingecko.com. On this web site we will see a list of most altcoins that are available for buy on assorted exchanges. They are sorted by capitalization. capitalization is the value of one mint multiplied by the total amount available in the grocery store. Behavior of altcoins in relation to BTC Throughout this article, for your appliance, I wrote about investing in BTC, excluding altcoins. I did it for the sake of ease, thus as not to mess besides much. There is besides a second reason. It is the correlation coefficient of BTC in relation to altcoins. Each altcoin is a discriminate entity. One goes up more, the other goes up less, the price for the one-third goes depressed. Despite this, the price of all altcoins is closely correlated with the price of Bitcoin. More precisely, the follow dependencies can be noticed : If the price of Bitcoin is rising rapidly then: the price of altcoins is besides rising, but slower than the price of Bitcoin. If the price of Bitcoin is falling rapidly: the price of altcoins is besides falling, and much more in percentage terms than the price of BTC ( if BTC drops by 20 %, altcoins may drop by arsenic much as 40-50 % ). If the Bitcoin price rises at a slow pace or slightly fluctuates upwards or downwards, then: altcoins are growing very quickly ( when BTC rises by 1 %, some altcoins may rise by american samoa much as 20-30 % ). Considering the above observations, it is easy to conclude that even if we want to buy some altcoins, we should wait for the BTC correction in the first place. When such a correction occur and the ‘ on chain ’ datum shows that this is not the end of the bull market, it is a very good theme to invest in altcoins. This is because, since BTC has dropped by 20 %, a fortune of altcoins have dropped by 30-50 % at the lapp meter and this is a dependable time to buy them. The here and now you buy altcoins after such a drop and the BTC price starts to rise again, altcoins will besides shoot, recovering all losses within a few days. In fact, when you invest in altcoins at the justly time, you are able to double your capital in a very abruptly time. When to invest in altcoins? generally speaking, this market is characterized by the fact that in the initial phase of the bull rivulet, Bitcoin grows much more than altcoins. At some steer, the BTC price breaks the exceed of the previous taurus market. thus, the media are starting to trumpet that Bitcoin costs indeed much, and this is why more and more investors are pouring into the cryptocurrency commercialize. however, at some point, the price of Bitcoin seems very high and people decide to buy much cheaper altcoins hoping for bigger increases. then the alleged ‘ altcoin season ’ starts – a time period when altcoins are growing a lot more than Bitcoin. You can check it here, for example : https://www.blockchaincenter.net/altcoin-season-index. Is it worth investing in altcoins? Altcoins are a much more bad investment than Bitcoin but yield disproportionately higher returns. If you would like to invest a lot of das kapital, in my impression, it is better to focus on Bitcoin because it is the most stable cryptocurrency and its monetary value is constantly increasing in the long terminus. even if you had invested at the very flower of the boom in 2017, today ( May 2, 2021 ) you would have earned 300 % on this investment. In the shell of altcoins, the situation is a snatch different because sometimes in the adjacent bull commercialize they are not able to make up for the price from the former bull marketplace. After all, even if you invested a fortune of capital, I would spend 10-20 % of the full on investing in leading altcoins. On the early pass, if your capital is minor, I would actually alone invest these funds in altcoins, bypassing Bitcoin, to get a a lot larger profit. Which doesn ’ triiodothyronine average you shouldn ’ thyroxine check mark Bitcoin ’ s price. even if you are not going to buy it, you need to watch its price and enter altcoins alone when there is a correction on BTC. Altcoins that I recommend to start with The altcoins that I will mention have solid foundations and are quite safe to invest. It is worth buying a bit of each of them and saving a small contribution of the capital to invest in other projects that will attract your attention. You can read about the problems that altcoins solve here : https://www.coingecko.com. Altcoins worth attention are ( according to my immanent opinion – this is not investment advice ) : unfortunately, not all of them can be found on the Coinbase exchange, then in the follow parts of this collection I will show you how to create an report on Binance tied if you are a US citizen .

  • Ethereum (ETH)
  • Binance Coin (BNB)
  • Polkadot (DOT)
  • Polygon (MATIC)
  • Chainlink (LINK)
  • Solana (SOL)
  • Cosmos (ATOM)
  • Terra (LUNA)
  • 1Inch (1INCH)

These are very safe altcoins to start with. however, it is worth spending some fourth dimension reading about others that you can find at : https://www.coingecko.com and invest some capital in something that you think has potential. If you use the Binance change, it is worth buying the BNB cryptocurrency in the first position. It is the official cryptocurrency of the Binance central. Having it on your report, you mechanically pay a lower commission for making transactions. consequently, it is always worth having even modest amounts of BNB in your wallet. furthermore, the price of BNB is rising at an amaze rate. The truth is that during a bull market all altcoins go up but sometimes those gains are impossible – evening deoxyadenosine monophosphate high as 300 % in a matter of days .

Profit-taking strategy

As for Bitcoin itself, the best strategy for me is to buy it and hold it until chain indicators begin to suggest that this may be the end of the boom. In my opinion, it makes no common sense to sell BTC to wait for a correction and buy lower again. When you sell your BTC and its price drops by 20 % as a consequence of a discipline, you ’ ll be happy with your decision. however, if you sell it and the price goes up by 20 %, you will actually be losing the 20 % that you could have gained but you didn ’ thyroxine because you made the sale before. Rather, I would adopt a sales scheme only at the end of the boom, and at the time of large corrections I would buy more BTC. In the case of altcoins, we have a little more to win because at the time of correction, their price much drops by american samoa much as 30-50 %. Therefore, I personally adopt the strategy of gradual profit taking from altcoins. I start gradual profit-taking if: Bitcoin price exceeds its ATH (All Time High) After fulfilling this condition, I try to sell 10-15 % of every altcoin I own every day. The price of a given altcoin SIGNIFICANTLY exceeds its ATH If an altcoin has shot fabulously high above its ATH, it makes sense to start slowly taking profits from that particular altcoin as the correction can happen much faster than on BTC. After all, other investors who are satisfied with the big gains besides want to take profits and the price may fall. What to do with profit-taking funds? One of the basic beginners ’ mistakes is gradually selling their altcoins and investing those funds in other altcoins immediately, rather than waiting for a deeper correction on Bitcoin. This doesn ’ metric ton make much sense because how can you be sure the altcoin you have good transferred to will start growing ? You may find that the one you have sold grows by another 50 %, and the one you have bought starts falling or stagnates. Hence, DO NOT BUY any cryptocurrencies until the future deep correction on BTC. When there is a deeper correction on BTC and all altcoins, and you know that this is not the goal of the taurus market ( because the ‘ on chain ’ data does not show it ), start buying again on lows, using the price averaging scheme, which I have written about in the ‘Purchase Averaging’ department. What if there is a correction and you haven’t sold all your altcoins? In fact, this will about always happen. If this happens – DO NOT PANIC! just don ’ t do anything. I know it ’ mho hard to see drops of 20-30 % but if you bought your altcoins at the justly moment, you will credibly be on a significant profit even after these drops. The worst thing you can do is sell everything in a panic. At this point, you should actually try to buy, not do the dispatch turn back and sell everything. During the bull market all altcoins grow. All you have to do is wait for the BTC correction to end, and altcoins that you didn ’ triiodothyronine realize on profits will rise to their previous levels very quickly .

‘Stop loss’ and ‘Return to normal’

First of all, we need to distinguish between ‘ trading ’ and ‘ investing. ’ Trading means deal and buying back your cryptocurrencies several times a week. Investing, on the other bridge player, is more about buying at the bottomland, buying more on the corrections and selling everything before the end of the bull market. In the case of altcoins, we sell them several times during the bull marketplace. however, it is not that we observe the chart every day and analyze it in depth as day traders do. In the end, investors and traders will make comparable profits. But traders have to spend much more time. In fact, they have to watch the charts all day long. Stop loss many people will say that ‘ intercept loss ’ is essential and it is indeed substantive, but for traders. such people want to generate profits every day by ‘ guessing ’ which means the chart will go. however, there is no way to be 100 % right. good traders are right 75 % of the time. A stop consonant loss is a way to limit losses in the remaining 25 % of the cases where they are not. People who are investors should not use catch losses. As an investor, you are setting yourself up for a profit that you will take in a few months for BTC ( or a few weeks for altcoins ) when the on chain indicators show the end of the taurus market. If the price of 1 BTC is now $ 55,000, and you merely sell it when it reaches $ 200,000 in a few months, it doesn ’ triiodothyronine matter to you what happens in the meanwhile. If you had a stop passing, you would frequently be kicked out of the commercialize by activating it and would have to buy your cryptocurrencies again. additionally, VERY much at a higher price. In short, this is how you lose. Return to normal Our security as investors is the cognition about the happening of the alleged ‘ hark back to normal. ’ It can be said that this is a arrest passing for investors. Let ’ s assume that we have overslept and haven ’ thyroxine checked the ‘ on chain ’ datum, and it turns out that everything points to the end of the bull market. Or we wanted to choose the measures we urgently needed, and suddenly there was a significant discipline. In that case besides do not panic sell! Every time after the correction, or even when the bull market is over, there is a ‘ rejoinder to normal. ’ This is a fleeting rebound of the price upwards. then we can calmly analyze everything and, if we consider it appropriate, sell our cryptocurrencies but at a lot higher prices than if person does it in panic when everything is falling. Analyze the below charts :Tradingview - Boom 2017Tradingview - Boom 2013 As you can see, history shows that if you are late, the market constantly gives you a second casual to take profits. You don ’ t have to panic sell everything at a much lower price .

Where to store cryptocurrencies?

The truth is that the exchange is not designed to store cryptocurrencies. The cryptocurrency exchange is only a chopine for buying and selling them. After making the transaction, you should transfer the funds to your external wallet. But should you? Most cryptocurrency ‘ guru ’ mention that cryptocurrencies should never be kept on the cryptocurrency market. however, they forget to add that in the case of belittled amounts withdrawing cryptocurrencies from the switch over does not make any common sense. This is because during a bull grocery store the commissions for sending cryptocurrencies are thus high that plainly transferring them to your wallet and back to the exchange would consume your entire reelect on the investment. For case, on May 3, 2021, the cost of transferring BTC to an external wallet was $ 20.57 ( regardless of the amount you wanted to transfer ). sol if you had wanted to send BTC first to your wallet and then spinal column to the cryptocurrency exchange to sell it, you would have had to spend $ 20.57 * 2 = $ 41.14. In the meanwhile, the cost may have increased. Most altcoins use the ETH network where the cost of transfer is $ 8.92 ( as of May 3, 2021 ). so in arrange to transfer a given altcoin to your wallet and back you need to pay $ 8.92 * 2 = $ 17.84. Assuming you had 5 different altcoins purchased, the transfer monetary value would be 5 * $ 17.84 = $ 89.20. thus you have to pay $ 89.20 to transfer your 5 altcoins to an external wallet and an extra $ 41.14 to transfer your Bitcoins. If you invest modest amounts, it is wholly unprofitable. Transferring cryptocurrencies back and forth takes excessively much of the profit. It is unlike if you invest much higher amounts. then the price of transferring up to $ 100 round trip seems absurd because you will have such fluctuations in your wallet every few minutes and sometimes even more. A 1 % addition or decrease in 5 minutes in the cryptocurrency marketplace is standard. For example, if you have an investing of $ 100,000, a variation of 1 % means an increase/decrease of $ 1,000. If you invest after the correction, the profits will be sol big that $ 100 per transmit is not going to make a difference. How safe is it to keep funds on the cryptocurrency exchange? There have been many cases when cryptocurrency exchanges shut down or were hacked. That is why it is well to use merely reputable exchanges such as Coinbase and Binance. These exchanges keep most of their funds in external wallets, so even if attacked, the hack is able to steal only a ‘ penny ’ measure of cryptocurrencies ( up to 2.5 % of everything that is deposited on the switch over ). The hack can not reach the rest of the cryptocurrencies because they are located on external devices ( I will describe how such devices work in a consequence ). furthermore, tied if the larceny occurs, the Binance and Coinbase exchanges are able to cover such losses to keep customers ’ trust and confidence. Use of external devices We already know that using an external wallet is not profitable for modest amounts because the infrastructure of Binance and Coinbase is well organized well adequate so that your funds are safe. besides, the cost is therefore high that it would eat up all your profits. however, no reasonable person would hold bombastic sums in an substitute that depends only on one man. It is broadly never beneficial if we are dependant on one person or company. Regardless of whether we are talking about running a clientele or cryptocurrencies. therefore, if you are investing larger amounts, it is worth ordering the Ledger Nano X device .Ledger Nano X It is one of the most democratic devices of this type in the earth. To understand what the use of such a device is, we first gear need to discuss a identical important point. All cryptocurrencies, regardless of whether we keep them on the cryptocurrency exchange or on our device, are actually placed on a public blockchain. That is, there is no way that your cryptocurrencies will be lost because you have lost your device. The Ledger Nano X plainly stores your wallet cover and the key ( i.e., password ) for that wallet. however, cryptocurrencies are placed on the blockchain network, not on the device itself. To understand this even better, let me discuss it using an example. When you start configuring your Ledger Nano X device, a wallet address and a key ( password ) for this wallet will be generated. After that you can leave your device at family and travel to the other side of the world, and then send the cryptocurrencies to the address that was generated. It doesn ’ thyroxine matter that your device lies in the wardrobe a few thousand kilometers away and is not connected to electricity or the internet. You don ’ deoxythymidine monophosphate air cryptocurrencies to this device but to a specific address ( wallet ) in the blockchain network. In turn, only you have the password to this address and it is saved on the device. lone when you want to send your cryptocurrencies back to the cryptocurrency rally, will you need entree to this device. To send cryptocurrencies from your wallet to another, you need to use the key saved on your device. On a daily footing, when using Ledger Nano X, you will have access to your keys by entering the PIN you set for the first base time. It is very quick and easy to use. But what if the device is stolen? When setting up the device for the first meter, a seed phrase is generated. It is 24 random words that you must write down with a playpen on the 3 sheets included in the jell. Each of the password sheets should be placed in a different placement ( so that no matchless but you knows that they are there and that they can not be found ). If person steals your device, you can still feel 100 % safe because that person does not know your PIN. Ledger Nano X uses a processor that is besides used by banking systems. As it turns out, even services such as the FBI are not able to crack the PIN for this device. Some meter ago there was a position in Germany where the patrol commandeered a device with cryptocurrency keys worth respective twelve million euro. Nevertheless, the police failed to recover them because they were ineffective to break into the device, and the criminal refused to provide the PIN. What if person does not have access to your device ( because they do not know your PIN ), and you besides do not have access to it because it has been stolen from you ? This is where 24 random seed words come in handy, which are generated during the first shape. All you have to do is buy a new device and enter the give voice ‘ seeded player ’ on it, and the new device will mechanically have the keys to your cryptocurrencies. At this point, all you have to do is send your cryptocurrencies from your device to the cryptocurrency central. then you will configure Ledger from strike to create new seed words, wallet addresses and keys. then you send cryptocurrencies from the change to the newly generated addresses. At this point, evening if a criminal gains access to your stolen device ( which is about impossible ), there won ’ deoxythymidine monophosphate be any cryptocurrencies there. As you can see, the consumption of such a wallet is so safe that even the police are not able to confiscate your funds. ? ? ? ? This intelligibly shows that cryptocurrencies are the power and anchor of our exemption.

Summary

If you have any questions, please write tem in the comment section below. Good luck investing!

Part 2

The next region of this collection is cook. You will find it here : https://investmentchannel.net/en/knowhow-p2/.

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