So after many months of watching Bitcoin’s price reach astronomous highs and calculating how much you could have made, if you had just invested 10 years ago, you finally decided to dive head deep into the crypto space.
You have watched several blogs and videos from self-claimed experts who seem to be very easy with giving away a secret to financial independence. Others tell you “if you care, whether BTC reaches 100.000USD you didn’t get the point.” People really believe this and spread the same message, thinking that they have become part of a revolution — it’s not a revolution, but a movement (which can go south).
Yes, with Crypto you can make nice profits and yes, the blockchain and digital ledger technology help us solve a problem of double-spending (the actual issue why Bitcoin has been invented in the first place - here is the whitepaper, if you don’t believe me).
So what is Bitcoin not?
Well, it is not a revolution as it used to be and as you might think. Right now we have many big institutional investors involved, who hold huge amounts of Bitcoin and with a high concentration, comes a higher risk for market manipulation.
How do you think Grayscale’s Bitcoin Trust (GBTC) generates the return on investment? Bitcoin is not like a company which is producing goods for a clientele and can then return the profits to the company and stock holders thru dividends. The only way Grayscale’s GBTC share can increase in value is by selling the owned Bitcoin for a profit, adding a fraction to the GBTC value and then buy Bitcoin back for a cheaper price.
So how can companies like Grayscale, Tesla, Microstrategy predict the rise and fall of the Bitcoin price?
It’s not as psychic as it sounds: if you own tens of thousands of a good and release it to the market, the demand will decrease and so will the price. Individual holders who have bought in late, will be driven by the fear of losing their savings, too and sell as well. Sounds too fictive? What do you think hedgefunds do by shortselling a stock?
Once the price has fallen enough (20 to 35%) they will buy back the now cheaper BTC, add a fraction to the value of their GBTC share and increase their Bitcoin holdings as they buy up (buying the dip) more and more Bitcoin to increase their leverage — then the cycle continues.
But what about mining Bitcoin ?
Apart from the possibility to buy Bitcoin with the high risk of price manipulation, you can mine Bitcoins and many other Cryptocurrencies.
In very simple words: With mining, a special program running on a computer, will solve complex mathmatical problems and once solved be rewarded with certain amount of Bitcoin or that respective cryptocurrency in return. This is called proof-of-work.
Satoshi Nakamoto (recognized as the inventor of Bitcoin) has introduced a complexity to mining Bitcoin in the hopes that it will prevent high concentration of mining power to individuals. As more and more Bitcoins have been mined, the complexity increases (approx. every four years) and thus it will be more difficult to solve the mathmatical tasks/problems and be rewarded. This is also known as halving. Now you might think that this isn’t as bad, because you don’t have to do the work, but your computer. Well, the computer uses a huge amount of computing power (not from the CPU, but rather your graphic card’s CPU known as GPU) and this means your electricity bill will go thru the roof. According to Bezinga, the costs to mine a single Bitcoin are somewhere around $4161. And now comes the worst part: Also with mining BTC, we have powerful mining farms that hold a high concentration of mining power, making it impossible for individuals to mine Bitcoin. Maybe these were the reasons, why Satoshi had decided to leave the project in 2010.
So now you might have received a different perspective about the “movement”. But is there more?
Unfortunately, yes. You will find more dirt or truth by reading “The Bit Short” by Crypto Anonymous. A great article about how a fraudulent company iFinex/BitFinex uses their unbacked stablecoin USDT (Tether) to propel the price of BTC — and a heads up: The New York State Attorney General has settled with the company for $18.5M and shut down their operations in New York. The settling number is really peanuts compared to the huge amount of USDT created out of thin air, which have been used to drive up Bitcoins price, just to realize profits and cover a huge loss of $850M. Also, it does not mean that Tether is now carefree — it’s only a matter of time, until the U. S. Securities and Exchange Commission (SEC) will knock on their door.
So maybe now you are wondering what I am trying to sell you
For only 9,99$ a month,… Just kidding.
All I want you to do is learn to be more critical, because I don’t want you to lose money and of course I don’t want you to miss out on an opportunity, but it depends on you to manage risks and evaluate what is a real opportunity.
I won’t tell you where to invest, but I want to make you aware that when people tell you “with this you will become rich” or “be part of the revolution” there is always a hidden agenda.
Always ask yourself: “Would I tell people, who I don’t know, about a gold mine,that I have discovered?” Maybe after I had taken all the gold.
