The crypto market is growing. The market is expanding. This means that it is ramping up with those who have been in the space, and daily it is ramping up with new people entering the space. For those who were at least around from 2017 forward, we should be the menial visionaries to offer numerous warnings of traps you newcomers are falling into.
I am writing this, because over the past week, the number of brand new 'investors' or pump traders entering the market, who have expressed avoiding top coins because they 'cost too much' is not only alarming, it is a statement of a failed school system. If a person is not grasping basic units of measure, they are in serious trouble, especially in crypto.
I do actually hear some of the "experts" sounding the alarm on their YouTube channels, but not nearly enough. Most of the more popular channels are pop-up channels jumping in to tell you which poop coin to grab for your 100X, and the advice is always the same, it has not changed, and it is completely wrong. But, let's back up before you should even be at that stage of asking "which" poop coin you should buy next. You need to learn a few basics first.
Now, if you already "get it" about what I share here, don't think this is a waste of an article. I jumped here to write this because I've been watching the little flame wars, trolls, and newbie-know-it-alls and I know what they are thinking. It didn't take me any special insight; they are quick to tell us.
My message is simple: understand your numbers, understand the market, know why you do what you do.
Understanding your basic units of measurement in trading is a prerequisite. If you do not know how numbers correlate to your asset, you must stop, paper trade, think through the math, and seriously wait it out for weeks or minutes, however long it takes for you to "get it".
Just a week ago, Crypto Twitter was attempting to tell you this in a short-lived, but sure to reoccur campaign #SatCoin because the Doge crowd literally did not understand the concept of owning a fraction of a Bitcoin. You may think this is an "us against them" scenario. If it is, that point will follow below. But the tribal campism of "my coin can beat up your coin" is a manipulation of markets at a higher echelon than you and me, and in the trenches people buy into it with vicious aggression against one another, but you, the newbie, are being steered towards specific projects because of the buying power to pump and completely destroy that "asset".
1 Sat = 1 Sat. 1 Doge = 1 Doge.
What Is A "Sat"?
A Sat is a single unit of a Bitcoin. It is named after Satoshi, the mysterious creator(s). If you think Bitcoin is old-school uncool, I don't care, It is about to get even more "grandpa's" coin as institutions are buying in. It doesn't matter what you think, your coin came later, and it is extremely unlikely to be "the one" to do the thing you think it is going to do. Nope- this is not us against them. We are all in the same asset class. But, I just made a mathematical statement that has already been tested and proven. This is not coming from a Bitcoin Maxi. I analyze hundreds of coins, and take dozens seriously. But, we are talking about the fundamentals of being in this investment space. If you can't get past Bitcoin, you really must, MUST understand your niche, unless it is 100% laughs and giggles and not a single penny you invest matters to you.
If you are a newbie, and you wish to learn about the market you have entered, you may feel like I'm being all "ahhh" about schooling you, but again, take this as a favor, as advice from someone who has done literal thousands and thousands and thousands of trades. If you think we are different because you want to invest, or HODL, not trade, you are using a different strategy, but we are in the same market. Same journey; different boat, or different paddles in the same river.
The "Sat" unit of measurement was one of many important elements of Bitcoin's design that make sense. It is directly tied to every single feature that was well thought out. Even people who have been in crypto since the beginning miss the brilliance of the economic model. The original code that succeeds in following the whitepaper's instruction was not off-the-charts complex, but the principles underneath are clearly the right ones. We're going on 12 years in a market that the traditional sector has tried to smash, ban, destroy, and discourage since it was of little threat to fiat.
There are two angles to view this. First, how big can Bitcoin get, and how small can a Bitcoin be.
How big, related to scale and scarcity, is about "how rare is a Bitcoin?". You might think that it doesn't matter, because "we all pumped Doge and it was going to go to $1". I would argue, that especially if you think Doge was going to $1, you need to understand digital scarcity.
Before Bitcoin, the internet did not have a product which could transact like money, that was the answer to "printer go brrr". Satoshi did not know if the idea would work. They had to have had an inkling that it would die just like everything other than PayPal before it. But, if it were going to survive, it was to be an example, a standard, a success story, and it would drive markets in a direction likely to form an industry.
Digital scarcity is proving that a Bitcoin, over time, scales from less than a penny, to $1, $10, $100, $1000, $10,000, and now holding at a very low, troubling $35,000. The scarcity is but an idea, a thought, a vision, but it was built into the math, so it works based on belief but also in its function. People who do not understand, see the price action, and they want it. People who do understand, want more, and they want it now.
So, the scarcity model worked, and we have not bumped into the limited supply; not yet.
Why... you may ask, does the price not moon when big announcements are made for Bitcoin? It takes enormous amounts of money to pump Bitcoin, but FUD has a heavier force of gravity. The sheer amounts of money on the order books for Bitcoin, and the price all factor together to make it the most expensive to move.
For the "how small can it be" part of the model, we have the "Sat". A sat is a single unit of measurement for a Bitcoin, and for the first decade of the coin, it was rarely necessary to explain this to others in the market, which is why a few of us are so concerned about the new investors that have plopped down into the arena only to silently get rekt and crawl away. You may think that isn't happening because you are still here, HODLing, and you got some Doge at 20X and you're HODLing until Elon says something else. There's a reason the whales always need new blood. No matter how much they have, they need someone else on the other side of the order book they can crush, and it is a lot easier to wield popularity and get masses to dump on, than to play chess with another whale.
1 Sat, was designed with the idea that if people bought into digital scarcity, again, for the first time in history, then eventually they were going to need to scale extremely low, as much as it needed to scale extremely high. With a limit to the number of coins ever to be owned, Bitcoin needed to remain easy to denominate, and thus the Sat is a literal 8 digits away from the whole. That means a Sat is 0.00000001 of a Bitcoin.
Let's do that in maths.
For the super easy version, I like to always premise an example where Bitcoin is worth $10,000. For the majority of the past 4 years, this example has been towards the high side. Ever since institutions and first major retail hit, it is 3X undervalued.
At $10,000, 1 BTC = $10,000
0.1 BTC = $1000
0.01 BTC = $100
0.001 BTC = $10
0.0001 = $1
Take a breather. An extremely rare digital item, the original NFT, is only at 4 digits to the right of the decimal, and at current price the reality is it still only represents $3.50.
0.00001 = $0.10
0.000001 = $0.01
0.0000001 = $0.001, or 1 tenth of a penny
0.00000001 = 1 one hundredth of a penny
Let me explain what that means as it pertains to maximum scalability. According to this mode, when Bitcoin reaches $100,000, the smallest unit you can break it down to easily, is still one tenth of a penny. This means, at $100,000 we are still at 10X the units by which a bank can make their system divisible. Satoshi was right in his model. The institutional world understands this.
When a Bitcoin is worth $1 Million Dollars, a Sat will be worth $0.01. It would take a single Bitcoin being worth $10 Million Dollars, in order for a Sat to exceed the basis point standard for the dollar, and at that point, no one will be thinking in terms of wanting to own less than ten cents worth of a Bitcoin.
Keep in mind, this was the economic planning of Satoshi before Bitcoin was worth 1/10th of a penny. Brilliant. Thus far, because a comparison does need to be made, Doge has made it all the way up to 0.00002 Bitcoin or there-about. The goal, is for the coin you are gambling on, to be worth as much as possible, and later I will explain why this matters in Bitcoins as much as it matters in dollars. But first...
21 million. That's all there will ever be (unless someone royally screws up and re-codes it). And, if you look at price speculation and price expectation, Satoshi chose the perfect amount. Any more, and we would never know the sentiment of how long a market would take for the price to be driven by scarcity and not just speculation. Any less, and everyone who did not mine in the first year would seek other strategies in the market as it grew, not in addition to Bitcoin, but instead of it. There are just over 18 million of the 21 million in circulation, and at the point of growth where Bitcoin only rewards miners fewer than 7 coins as a block reward, multi-million dollar companies are fighting for the world's best energy sources and government incentives to fight for those coins. As the difficulty increases, and the price goes up, this relation to scale is vital to the miners and their ability to generate revenue from new coins. Again, this was Satoshi's actual vision, not BS...V.
We have to see more than $150,000 per Bitcoin before the institutional trading of Bitcoin reaches the first bump against scarcity. Most in fact, I dare to say almost all of the industry does not understand this. I hear a few talking heads at the Bitcoin Miami conference understanding this, but I don't know the audience picked up on it.
If the economics of the pump matter, and they do, then scarcity of supply is going to be the magic sauce that places Bitcoin in every significant portfolio on the planet. With my disclaimer, unless the governments blow it up, and they rightly could.
21 Million, with a few legacy addresses likely never to be acquired again, and thousands of early wallets lost for good. We are very close to knowing what a limited supply does to price, but for now, liquidity in markets spread that out wider than the amount of money available to pump the value.
You may not care, but the market does
So, the OG, Bitcoin, will always matter to the market, unless the entirety of its structure breaks down and is rebuilt. If that happens, trust me, none of us will be here doing what we do. Regulation never favors the little guy having more freedom to do a good job at what we do. The reason you need to care, is because every coin that is not Bitcoin, trades against stablecoins and Bitcoin. It could be a wrapped Bitcoin on the Ethereum network, on Binance chain, and it could be a layer 2 Bitcoin transaction on Lightning. It could be a Bitcoin ETF, derivatives, or you could even find a club to gamble on the price if that's your thing. But, every other market is a tiny fraction of trading pairs. Again, if you think it doesn't matter, you are not ready to trade.
Now, in truth, if a responsible adult is hearing about this "crypto" thing everyone is talking about, I can give them 3 minute financial advice and feel pretty okay about telling them what to buy, and according to their portfolio what percentage is smart. But, we're talking about all of you who learned everything you know about stonks or crypto from a free sign-up on Robinhood. I don't care about your age, I care about your education level in the market.
Even if no new institutional money were coming to crypto, there were no new innovations, and half the world's governments lowered the banhammer, the sheer amount of Bitcoin HODLing would keep it as a base trading pair against literally every other coin. You really may not know this, if you are just trading on Robinhood. You can't trade crypto against crypto there. Why? Because they are just a broker, and they are giving you access to Bitcoin price discovery on other people's platforms, without your actual ownership of your own coins. They say they are bringing digital wallets soon, but who knows.
The market says that it is optional, whether to let someone trade their favorite coins against Ether, against Litecoin, sometimes even XRP. That's usually it. In economics, there is a leveling effect that happens every time a currency is weighed against other currencies. For instance, if I wanted to trade Litecoin against Bitcoin, instead of BTC/USD or LTC/USD, there is a certain amount of Bitcoin AND Litecoin affecting both values. The only 'token' not affected in this manner, is USD and its stablecoin forms. Since the only massively important feature of a stable is to remain the same unit, everything will forever change while it remains $1 = $1. The more coins that are created every day (okay, we can call them tokens...), the more activity is taking place against BTC, a little against ETH, less against LTC, even less against XRP. In addition, these top coins are always trading 24/7 against USD(t) and a little bit in Japanese, Chinese, and a few Euro currencies. Much less of everything else unless India takes a firm pro-crypto stance and stays there.
Again, you may think none of this matters, and if that remains your position, you are simply not ready for trading. You may think you are, because you did a 10X, but the major fail is right around the corner. I'm trying to help you avoid that.
Us Against Them
Even though this part is not mathematical, it may be the most important thing for you to understand. It is easy to drive up price on coins when they have the least amount of momentum, liquidity, and volume. Popularity rarely equates to volume. Doge is the perfect storm of cool-factor and typically low volume. You may think that nah, Doge has arrived as a top 10, heck even a top 5 coin. It hasn't. It has been pumped to insane levels because the wide spread of popularity means that a little manipulation goes a very long way. Truth is, it is now on its first leg of the long Bitcoin-like journey, where it is exponentially, yes exponentially harder to pump than it was last week, and the week before, and the one prior to that.
If you do not embrace the lesson of the Sat, and you believe you do not NEED to know it because Bitcoin is an elderly camp of cultists on their way out, then please, please beg for your job at the fast food window back while they're still sympathetic to your cause, and leave this market. It is not for you. But, if you even dream of HODLing a meme asset until... whatever your goal may be someday, then it is time to understand and appreciate the assets that have gotten us here. Whether some assets are in fact superior to others, for good reason, we are all in this crypto thing together. Screw the plandemic, it doesn't get to own that narrative. We are all a cult to once extent or another, and freedom should be the ideal that sticks us like glue.
Pitting groups against one another is a tactic. If you want to flip off the bankers, and think the dog is the way to do it, then realize that your rising temperature against the old school tired withering coins of yester year have been pre-built for you to bite into. You are buying a bill of goods for a bridge in a land with no water to cross. You, are the target, and you are only being used for the pump and to provide a platform for a billionaire popularity game. I am not saying Doge is a loser. Maybe it grows and grows and grows. The mathematical necessities required for that to happen are infinitely harder for Doge than it was for Bitcoin, just so you understand. The sheer will it will take if someday the climb is from $1 to $2, or $2 to $5. It will require trillions, not billions, of dollars for this to take place, granted that there are equally distributed people HODLing no matter how many 100X they are ignoring, as there are millions of newcomers to enter the game just as you did. Except, these newbies will be entering where your 100X just began. Someone has to be on the other side of the order book offering up liquidity, while simultaneously more people HODLing than the new dogs being minted. It is a complex pyramid, notice not saying scheme, but when someone tells you their coin is a joke, a fun fun joke, believe them. It serves a purpose, but then it can't be used beyond that point. Buyer warned.
This is not us against them. This is not Bitcoin vs. Doge. But, this is an explanation of why you simply must understand the principles of one, in order to make an educated move against the other. When you trade Doge, even if against USD, technically you are still, also trading it against Bitcoin, because both chains are actively pressuring one another's price values.
So, why so much pump pressure on Doge Reddit, Robinhood, CT and Telegram? Because pitting millions of people against the target is the only way for a billionaire whale to unload millions of dollars in bundles at a time. By playing into the tribal game, people miss the fact that they have an undefined plan, a strategy for their trading goals. Until neuralink programs people to think differently, the developing 25-and-under mind sees the world differently, and often has been living according to a post-teen, pre-serious-about-the-future rebellion that suits the Libertarian mindset surrounding crypto quite well.
I have read enough comments in the interwebz to know that there are thousands, if not tens of thousands, banking on low cap miracle coins without a rational goal of gaining profit. For many, a win is if their meme is better than your meme. Sorry, but that is not the reason to gamble. At some point in a person's life, money is going to matter. It could be now, while you build your wealth at a young age and outperform ALL of us who entered crypto a few years ago. Or, you can ignore our advice, having learned what happens next, and go the "have to learn by feeling" road and hope there is a decent entry point in 2-3 years. Take my advice, learn from this now. Understand the numbers. Learn the rules that even most personalities in crypto will absolutely never understand. Become a trader or investor, IF you get it, and serve to have a talent doing so. Otherwise, trade Doge like a collector card against other Shiba coins and do so with your friends, but don't do it with real money. You're going to need that for later.
See, the bottom line lesson for all of us here in crypto, is that we are all taking a huge risk. Even if you bought Bitcoin at $1, and have 10,000 of them. Every time you don't take profit, you are running the ultimate risk that we all simply don't know the one thing that could take it permanently to zero. Let's hope we never find out what that thing is.
The absolute best estimation of value, in principle, is measured by the entire top-level sector of our asset class. For us, that is cryptocurrency. Under this lies a structure, with different values for different coins. There are stablecoins, there are utilities, DeFi, program-ability, cuteness, trendy, memes, securities with an expectation to pump, and even those seen as a commodity while other cryptocurrencies may actually be... strangely enough... currency. We have privacy coins, and we have internet-of-things coins. Within each subset are people who invest because they study the team, study the whitepaper, believe, and those who are just there for price action. Those who do not grab a 10X, almost all the time, end as unintentional HODLer bag holders, unless we're talking Bitcoin and 20 others tops.
My lesson here, is for you to understand things like smaller units of Bitcoin are an equally relatable investment to a gazillion Doge at the same trade size. $100 in Bitcoin, with the anticipation to sell at 3% profit, is exactly the same as $100 in Doge with the same expectation. Bitcoin is not too expensive to invest in, because of the big price. To the same degree, a very popular coin with 129 billion available in circulation, with a truckload more incoming, may be easy to grab a few thousand of, with the belief they will all go to $1, but the metrics are based on the ability to pump against volume and popularity. That is likely to get harder to mimic as time goes on. It truly becomes limited by how much money is available in the world.
If you know why you are here, then you must, simply must, decide why you are investing or trading, and stick with that rule, until you have discovered whether it works or not. The truth is that more than 90% of everyone who ever enters a trading market, leaves at a loss, never to return. So, I care, that we capture as much of the newbie market, as a successful new entry level. If this were easy, and you were the first in your crowd to discover the pump, we'd all be billionaires eating your lunch already. There is a slight wisdom of the crowd buried beneath the noise. Filter out the noise with knowledge, and you may still be here next year.
And on that note of red flashing light before you enter please read... crypto Gordon Freeman, for now... out.