The crypto currency space has been getting a lot of attention again this year after the 'Crypto Winter' of 2018 going into 2019. After having left, or rather forgotten, about the market and my trading accounts for 2 years, returning to them this year to find a nice little incentive was enough to turn me back onto the blockchain hype train. What I've found in the last few months during re-researching the whole game has been quite an interesting series of discoveries for me personally. It has sparked my interest so much that I started researching finance in general, listening to podcasts and audio books including Robert Kiyasaki's Rich Dad Poor Dad, the author of the record breaking book from 2002.
Since going on the information hunt I have found countless people that are all jumping back on the train or grabbing their tickets for the first time due to the highly speculative yet seemingly inevitable forecasted crash of the current financial system. Think back to 2008, the GFC, the housing market bubble, the fall of Lehman Brothers, the worst financial crash in history since the great depression of the 1930's. If you don't know exactly what they are, a financial bubble refers to a situation where a relatively high level of trading activity on a particular asset class at price levels that are significantly higher than their intrinsic values. In other words, a bubble occurs when particular investments are bid up to prices that are far too high to be sustainable in the long run. In the case of 2008, when the banks ran dry and couldn't hold the legal tender they were required, mortgages defaulted, assets were seized and a lot of people lost their homes.
As history tends to repeat itself, another financial bubble is happening again now. Some current world events are causing dramatic changes on the US dollar as a backed source of currency.
- China, the world's 2nd largest economy, recently decided to relieve it's dependence on the US dollar due to trade conflict and sanctions against Beijings big trading partners.
- India, the world's 6th largest economy, is following suit, canning the use of US dollars for trades with Russia and using rubles instead as a result of US economic penalties introduced against Moscow.
- Turkey's President, Recep Tayyip Erdogan, recently announced plans to terminate the US dollar monopoly via new policies that aim at non-dollar trading with the country's international partners.
If just these 3 countries alone were to completely drop the american fiat currency that has been in circulation for almost 250 years and backed up by gold until 1971, it would cause immense devaluation of the US dollar and would drive prices up causing a mass flux of inflation.
Through constant innovation and evolving minds that are affected by events such as the 2008 housing and banking crisis, good things seem to come eventually...in this case, bitcoin was invented.
Post crisis, January 2009, Satoshi Nakamoto, who's identity remains anonymous, released the first digital trading asset called Bitcoin and simultaneously created a brand new asset class; a user based monetary system where there is intrinsic value based on a finite number of units (BTC) that can be traded as a store of value. This eliminates the need for a third party bank to handle transactions for you and therefor reduces time, cost, labor, interest and fees created by the third party for the service. To put it simply, a digital currency has a value induced by the people who use it and it's use has countless benefits. You can now pay for flights with bitcoin and there are more and more bitcoin ATM's springing up around major cities.
You may think, oh it's fake money, it's just digits on a screen, it has no real value. To understand why this is inaccurate I first need to explain a few things.
Take your wallet and tell me...what inside your wallet has an actual value that is backed by something you could trade with to someone who doesn't know what Fiat currency is? The money system we all use day to day, where it be cash, credit cards, bank transfers or cheque's...are all part of a system that we give a value to, not because it is worth it's defined value in gold or silver or any type of material that's usable or rare, but because we have been taught that this bank note has the value of $50 and I can use it to trade with anyone who understands this imposed value.
It has been this way since 1971 when Nixon dropped the Gold Standard.
Why then, does the value of the US dollar, European euro, Great Britain pound, Australian dollar go up and down all the time on stock exchanges? The answer is because there is no gold standard anymore making fIat currency volatile to the market considering how much is printed and in circulation. This is the same as bitcoin; a monetary system where the users believe it is worth something and therefor it can be traded for things where it is accepted. Fiat currency does however have one distinct difference...it can be printed infinitely.
Banks are able to create currency as well.
Fractional Reserve lending is where a bank is only required to hold 10% of a deposit from a customer for it to loan out the rest. This means that a $100 deposit can yield a $90 loan to another borrower yet retain the value of $100 in that account via the initial 10% held plus bank issued credits. The bank utilizes it's own bank credit IOU's with which they replace your initial deposit minus the 10% to be reserved so now they have $90 of IOU's and $10 currency and as they can lend out $90 there is now $190 in existence.
A new borrower takes the $90 and spends it and therefor eventually that $90 is banked. The bank then holds 10% of that, $9, creates IOU's for the other $81 and reloans the rest which brings the $100 + $90 + $81 together for a grand total of $271 being printed into existence.
https://www.youtube.com/watch?v=iFDe5kUUyT0&t=505s
The link above is a fantastic video from Mike Maloney demonstrating how exactly this occurs.
Our whole monetary system is glorified IOU's being swapped by the Treasury and Federal Reserve with big banks as middle men who create profits out of thin air.
The gold standard was abolished in 1971, meaning you can't take cash to a bank anymore and have it replaced with gold. Combine this with the fact that the Federal Reserve can and is printing billions of dollars weekly and pumping it in to the economy, will not be sustainable forever. The more money we have, the more prices will rise. This will eventually lead into the dollar collapsing...but what are the effects of the Dollar Collapse? A quick search on google led me to this explanation:
A sudden dollar collapse would create global economic turmoil. Investors would rush to other currencies, such as the euro, or hard assets, such as gold and commodities. Demand for Treasurys would plummet, U.S. import prices would skyrocket and interest rates would rise causing inflation.
It is precisely because of these reasons that Bitcoin was invented. After the crash of 2008 the bitcoin revolution took place, although it wasn't really perceived by many until late 2013 and then started really gaining traction after 2016....and then boom.
The rate and acceleration of growth that bitcoin has had is tremendous. Whilst still being highly volatile in short terms, every year it has been active has had a new high-low meaning no matter how volatile, every year has seen a massive overall gains. More of the population are starting to understand the utility Bitcoin provides: A decentralized, deflationary form of digital currency in which the ledger of transaction is maintained across a seas of users eradicating the need of a bank.
There's a growing list of big names and companies holding Bitcoin and other crypto currencies, utilizing the block-chain technology it's based on.
- Peter Schiffe, the CEO and chief global strategist of Euro Pacific Capital Inc, a stock broking giant and dealer
- American Express and Mastercard
- Birkshire Hathaway (that's Warren Buffet kids .....even he who thinks BTC is rat poison squared)
- ICBC China bank
- JP Morgan
- Microsoft
Over the last year the market of bitcoin and its altcoin (alternative crypto currencies) have been subject to fairly big losses, coincidentally meaning that it's a great time to buy at a relatively low rate. If you look at the grand scheme of things, it has always increased in value considering a longer timeline. In my recent research I have become aware of a 4 year cycle in which a certain amount of blocks on the chain are mined generating the bitcoin for trade. When a certain amount of blocks have been mined (210,000 blocks), which is approximately every 4 years, the reward granted to Bitcoin miners for adding a block to the block-chain is cut in half. The Bitcoin halving was designed by Satoshi Nakamoto to keep Bitcoin’s inflation in check.
This chart portrays the 4 year cycle that bitcoin continues to go through:
Since the halving basically cuts the supply of new Bitcoins in half, many believe this event will have a dramatic effect on Bitcoin’s price due to the reduced rewards of mining the block-chain afterwards. Less supply means scarcity and rarity, which in turn means increased value.
Currently, in Q1 of 2020, we are in a critical period of the cycle where we are seeing a big rally of bullish investors taking initiative during this 'lower value' dip in the market. This is because the price of bitcoin has hit it's lowest point of the 200 day moving average which is historically similar every 4 years, or rather every 210,000 blocks mined.
There has been a lot of news recently surrounding banks and big corps opting for bitcoin and altcoin technology. Websites such as Cointelegraph.com have stories that have been exploding in the crypto communities of Youtube, Reddit and Discord. The Youtube channels Altcoin Daily, DIY Investing, Kevin Cage and Moon Lambo all have incredible views, reviews and anchorage of all the best up to date information that is available as it comes.
Right now is a fantastic opportunity to buy and expand on your investment assets as, in the next 8 months leading up to the halving, more and more people are going to catch the trend and buy. We may see the value drive through the roof like it did during the bull run of the previous halving.
Ultimately, there is risk involved here, as there is with every investment, but going off the combination of historical findings and future endeavors of companies that are realizing potential of crypto, signs are pointing towards a bright future for bitcoin, block-chain technology and altcoins most notably, XRP, with it's lightning fast, cross-border payment technology and impressive list of 220+ big names clients and partners i.e. HSBC, CIBC, IMF, Bank of America, Bank of International Settlements...to name just a few. The adoption of Ripple technology is having tremendous impacts on banking systems around the world and it won't be long before the tokenization of currency.
It's exciting times in this world that I have rediscovered and although no one can tell with 100% certainty what will happen, it is looking extremely likely that even a small investment into this market would be a great financial decision and given that it has never been easier to withdraw crypto from any exchange back to fiat, there's no reason to not put a percentage of your income into some of this currency.
I hope this article has given some scope of the importance of the crypto currency market. Personally it is at the point for me in where I aim to inform as many friends and family about it as I can in the hopes that they make some time to research the changing financial future and the possibility of a new kind of wealth creation.
Notable Youtubers:
Kevin Cage:
https://www.youtube.com/channel/UCPDw-Qz0dd4tIaoolCN7ttQ
Altcoin Daily:
https://www.youtube.com/channel/UCbLhGKVY-bJPcawebgtNfbw
DIY Investing:
https://www.youtube.com/channel/UCvts9csZ03FZXsuMnOIQ4VQ
Moon Lambo:
https://www.youtube.com/channel/UCf3Vlkhhxrwr3A8IYN8KVkw
Notable News and Chart Analytics:
Trading View:
Coin Telegraph:
Coin Market Cap:
Coin Desk:
Decrypt:
https://decrypt.co/
Coindesk:
Peace and happy researching!
