AES4

Horst Görtz Institut für Sicherheit in der Informationstechnik

Author: Jorg van Mullen

Last Week’s Crypto Market

Posted on by Jorg van Mullen

Last week the crypto Market continued its long-term downtrend with BTC falling to 18K and ETH Flash crashing down to 1.

2 K despite Ethereum’s transition to proof of stake.

I say despite because it was believed that the merge would bring large institutional inflows but so far not much.

This downturn in crypto prices was made worse by the more than 400 million dollars in liquidations of leveraged Traders as always the Silver Lining is that this should make prices a little less volatile in the short term but it looks like ETH could still be in a bit of trouble.

That’s because Ethereum miners who were put out of business by the merge are still holding more than 300 million dollars worth of ETH which they will presumably sell at some point.

Note that Ethereum miners only sold around 20 million dollars of ETH leading up to the merge.

There are likely many Ethereum validators who are looking to sell some of their steak teeth luckily it’s going to be at least another 6 to 12 months before unstaking is possible and we may not see much selling on that front.

In the meantime there will be no shortage of macro factors that could take the crypto markets lower.

The elephant in the room is the Federal Reserve’s interest rate increases and many of you will know that the FED raise interest rates by another 75 basis points last week.

What many of you may not know however is that lots of other central banks raised interest rates last week too including the bank of England.

The resulting tightening of financial conditions around the world is now leading to fears of a global recession and this really seems to be the top of the iceberg.

There is one macro factor and one crypto specific factor that could do serious damage to the crypto Market as soon as this week.

These are Russia’s escalation of the Ukraine conflict and a potential Crackdown on crypto projects by the SEC.

Telegram bots as crypto tools

Posted on by Jorg van Mullen

The cryptocurrency market is always changing.

It’s a struggle to keep up with the trends when every week or day brings new information and fresh analysis.

In actuality, achieving it right the first time is nearly impossible, but you may boost your chances of success by using the suitable crypto tools.

That’s why, today, I’m going to discuss some of the greatest crypto tools I’ve encountered and how to employ them to their full potential.

The great crypto tool to add to your belt is a couple of Telegram bots specifically the Ether Drops bot and the Token Unlocks bot the Ether Drops bot makes it possible to receive a Telegram message about changes to specific crypto prices when a specific coin token or NFT is sent, when there’s a change in a coin or token’s liquidity whenever a coin or token is being swapped on a Dex and even lets you track specific wallets.

The Ether Drops bot has been around since 2018 and it supports popular EVM chains such as Ethereum, Polygon, Phantom, Arbitram, Avalanche and BSC.

I suspect that the Ether Drops bot will add additional EVM chains as time goes on.

What’s amazing is that the Ether Drops bot has a free version and though there’s a limit to how many items you can track and how many messages you can receive.

For most of you the free version should be more than enough and if it’s not then the annual subscription options are very affordable.

The only downside to Ether Drops Bot is that it can take some time to set up due to all the options it offers.

Luckily Ether Drops published a detailed tutorial on Medium.

It should go without saying that having the ability to closely track whatever coin token wallet or trade you want is very valuable and there’s no limit to what you could do with Ether Drops bot.

I personally use it to keep track of the largest holders of my favorite coins and tokens the whales, if you will this relates to the token unlock spot which lets you see when coins and tokens allocated to investors like early investors and the team are about to vest aka unlock.

This is important because a large unlock almost always results in a lot of cell pressure for that coin or token as insiders sell at a huge profit.

Whereas the Ether Drop bot can take some time to set up, the token unlock spot shouldn’t take more than two seconds to get, sorted that’s because there’s only two options: “unlock info” which lets you see all the coins and tokens the bot supports and “alert” which lets you set alerts for said coins and tokens.

If you’re not a fan of Telegram you can stick to using the Token Unlocks website which also gives more information about tokenomics including the total supply, the circulating supply, what percentage of the total supply is still waiting to be unlocked and when clicking on a coin or token provides even more detailed information about tokenomics, including the initial distribution of the coin or token, the vesting schedule and how much cell pressure the next unlock is going to create for the coin or token based on its current value.

If you scroll down you can even see how much of that coin or token is waiting to vest to specific entities be it early investors the team or the foundation that legally owns the project.

This can help you get a better sense of how much cell pressure could occur when the next unlock comes around.

If you are a fan of Telegram, I strongly suggest using the bots to set alerts for these unlocks.

Weekly overview of the markets from AES4

Posted on by Jorg van Mullen

For those who don’t know most stable coins are backed by US government debt and this means they’re the perfect way for the US government to subsidize its spending some would say it’s the only way given that historical bulk buyers of US treasuries like China aren’t too keen on buying these days.

The European Central Bank or ECB is acutely aware of the threat that the adoption of US dollar stable coins poses to the euro especially as the Euro continues to collapse in value against the dollar.

Besides the economic issues that the Eurozone is facing as a result of sky-high energy costs another driver of the Euro’s depreciation has been The ECB’s Lax monetary policy which saw interest rates drop to zero and then go negative during the European debt crisis in the early 2010s.

Not surprisingly dropping interest rates to zero caused the cost of housing in Europe to go off the charts as informed investors took on massive amounts of debt to invest in real estate.

Institutions also took on record levels of Leverage to grow and speculate including many European Banks.

The ECB’s recent decision to raise interest rates by a whopping 75 basis points could therefore spell Doom for all the over-leveraged entities in Europe.

The same way the FED’s massive rate hikes will spell Doom for over leveraged entities in the United States except worse.

The catch is that it takes time for the monetary policy of central banks to be felt in the real economy, the rule of thumb is that it takes about a year for interest rates to squeeze individuals and institutions and the only reason the markets crash right away is because investors are pricing the future.

The thing is that Europe the United States and most of the rest of the world are already on the brink of a recession if not in one already.

Raising interest rates into a recession is basically guaranteed to do even more economic damage the full effects of which will not be felt until later next year at the earliest.

What this means is that we’re likely to see something much more serious than another Garden variety recession and some economists believe it could be just as bad if not worse than the Great Depression that happened over 100 years ago.

The Silver Lining is that this period of economic pain should only affect the stock market and crypto market for the next two years or so which is coincidentally consistent with the length of previous crypto bear markets interesting given that crypto has become heavily correlated with stocks.

If you’re wondering why central banks are raising interest rates so aggressively the answer is of course inflation caused by Rising energy costs around the world especially in Europe where Russia just confirmed that it will be keeping the Nordstream pipeline shut until sanctions are lifted.

To clarify there is still some gas making its way into Europe from Russia through other pipelines and it appears that Europe continues to purchase Russian oil and was purchasing Russian coal until just a couple of weeks ago.

What this means is that Putin could still bring more pain to Europe as winter approaches and the recently passed proposal by G7 countries to put a cap on Russian oil come December seems to have guaranteed that Russia will pull the plug on other resources Europe requires for energy.

What’s especially concerning is that the US treasury Department warned that the United States will sanction any individual institution or nation-state that makes quote significant purchases of oil above the price cap imposed on Russian oil.

These activities are only increasing the likelihood that countries will opt to break away from the Western World Order and Ally themselves with Russia, China, India and others in the east.

This will further complicate Supply chains creating a level of inflation.

That’s likely to persist even after the energy crisis has ceased and at this rate.

It looks like the energy crisis is going to get much much worse before it gets better.

The effects this will have on crypto are straightforward.

It’s going to be really really bad because central banks will continue to raise interest rates to crush demand to the point that it comes in line with the limited supply of energy to paraphrase FED chairman Jerome Powell.

The wild card in this equation is that sanctioned countries could start adopting cryptocurrency to continue their International operations – something that the Iranian government had earlier announced.

It would start doing this month although this means that crypto is likely to come under even more scrutiny.

It will simultaneously prove that crypto can be used on an international scale.

This could set the stage for adoption by other countries facing similar economic pressures.

A Crypto Primer: Currencies, Commodities, and Tokens

Posted on by Jorg van Mullen

Cryptocurrency lingo is full of technical jargon. As a result, many terms are frequently confused with one another without much consideration as to their significance. This might be time-consuming for investors looking to grasp and enter the crypto market.

The three words: cryptocurrencies, crypto tokens, and crypto commodities are often confused for one another in interviews and other discussions. However, they all hold unique meanings that become important to understand when determining a valuation framework for investment opportunities. For example, the value of a cryptocurrency is derived from how well the coin adheres to characteristics of money. In contrast, the value of a crypto token largely depends on factors such as protocol adoption or robustness.

A brief overview of the differences between cryptocurrencies, crypto tokens, and crypto commodities is provided below.

Cryptocurrencies are one of the most fascinating investment possibilities on the market today. Cryptocurrencies, often referred to as digital money, are a subset of electronic coins that meet the standards set out by traditional paper money. The following are some of its features: a store of value, unit of account, and fungibility (or the ability to be utilized regardless of its history of transactions).

Bitcoin, Ethereum, and Litecoin are some examples of cryptocurrencies. Cryptocurrency valuing frameworks tend to consider things like traction for the said currency as well as its supply schedules. The terms “altcoin” and “coin” are synonymous with regard to cryptocurrency.

In broad terms, a crypto commodity is an tradable or fungible asset that may be used to represent a commodity, utility, or contract in the real or virtual world through unique tokens on a blockchain network. Some people consider blockchains creating tokens as crypto commodities. CPU power and other computer system features are said to define crypto commodities in one case, while in the other case they are defined as components of cryptocurrencies.

With the help of an illustration, it may be easier to see how tangible coins are linked to their virtual counterparts.

In the physical world, oil is a commodity. It has an associated cost in extracting it from the ground and is used to power global commerce. In crypto commodities, things work similarly. There’s a price tag on their creation and they’re utilized to run the cryptocurrency economy.

Cryptocurrency has no inherent value. It is a market-based commodity that depends on the quantity and speed of processing power, as well as storage capacity, available to the system. Because it’s used as a foundation block to create smart contract tokens, Ethereum’s blockchain is another example. The Ethereum Enterprise Alliance (EEA), made up of several large organizations, has come together to establish a framework and common technology for creating apps on its blockchain.

Cryptocurrencies, like crypto tokens, are built on blockchains. The most prevalent sort of tokens is cryptocurrencies. However, crypto tokens are more comprehensive representations of blockchain value. Value is represented in a variety of ways, including as cryptocurrencies and loyalty points and assets developed on the blockchain.

Ethereum provides the blockchain platform for tokens that are used to develop services and products. For example, Tronix (TRX) is a token for the entertainment industry while EOS is a infrastructure token powering decentralized applications. You can find a full list of Ethereum tokens here.

Even though they are often used synonymously in media, cryptocurrencies, crypto commodities, and crypto tokens are three distinct entities. These differences become especially important when talking about possible regulation and valuation changes down the line.

Will Cardano’s hark fork called Vassal take a place in the same with Ethereum’s one?

Posted on by Jorg van Mullen

Now another thing that has crypto holders concerned is the risk of on-chain censorship after Ethereum transitions from proof-of-work to proof-of-stake.

This is because Ethereum’s largest validators are regulated entities which could potentially be coerced by regulators to enforce rules at the protocol level. While this risk appears to be extremely low it’s large enough that large crypto mining company ant pool recently announced it will be pulling its clients funds from Ethereum post merch citing on chain censorship fears. Note that this could have something to do with antpool being a Chinese company.

Now as some of you will know one of the ways I’ve personally been hedging myself against something going wrong with Ethereum’s merge is to hold competing smart contract cryptocurrencies as part of my portfolio and this includes Cardano’s ADA.

As many of you will also know Cardano is overdue for a hard fork called Vasil which was initially supposed to happen in June but was delayed by a month after minor bugs were discovered and then indefinitely delayed again in July to ensure quote a smooth process.

More recently a Cardano developer claimed in a Twitter thread that Cardano’s Vassal testnet was quote “catastrophically broken due to a series of bugs” and cautioned that the Vassal hard fork should not be rushed. In an AMA shortly afterwards Cardano founder Charles Hoskinson came out to call the quote unfair narrative about Cardano’s test net quote incredibly corrosive and damaging adding that the issue the Cardano developer identified was addressed in the latest release of the Cardano test net.

Charles also stated that the Vessel hard fork will likely take place quote “sometime in September” and that a concrete date will be set the moment the five largest cryptocurrency exchanges are prepared for the upcoming upgrade.

For those unfamiliar the Vassal hard fork is expected to drastically improve Cardano’s scalability ie speed. Not surprisingly the soft September schedule for the Vassal hard fork has led to speculation that Cardano is planning on the hard fork occurring around the time of Ethereum’s merge with crypto media outlet decrypt noting that this is quote perhaps not coincidental.

Indeed it would be an admittedly strategic move if Cardano improved its scalability around the time Ethereum transitions to proof of stake.

This is because it would put Cardano in a perfect position to acquire users and investors if the merge fails or simply fails to meet the expectations of ETH holders.

Ethereum merge

Posted on by Jorg van Mullen

The important development that’s expected to occur in mid-September is of course Ethereum’s transition from proof-of-work to proof-of-stake also known as the merge.

In case you missed the memo Ethereum’s final merge test net took place last week and it was a massive success so much so that Ethereum developers have bumped up the date for the main net merge.

The Ethereum merge is now expected to occur on the 15th of September and I should note that this is a soft date meaning the merge could occur the day before or the day after.

When you combine this bullish news with what will hopefully be another lower CPI print on the 13th of September you have a recipe for rocket fuel which will take ETH and most other altcoins to the moon. Even though ETH is still more than 50 down from its all-time high in dollar terms it has been gaining against BTC for almost two years and appears to have officially broken out on the weekly chart.

If my measurements are correct ETH could hit 0,1 BTC or more in the coming weeks.

Logically this means that ETH’s price in fiat terms will depend on BTC’s price in fiat terms at that time. Now this is anyone’s guess but previous crypto market cycles suggest we could rally back up to the next zone of price resistance which is anywhere between 30 and 36 k and possibly as high as 38k.

With each ether being worth around 0,1 BTC at that time this translates to an ETH price of 3 to 3,8 k and I reckon additional speculation and hype could possibly push its price into the 4k range which would give ETH a double top for this crypto market cycle just like BTC. Now there are a few things to remember however.

First and foremost this all assumes that the two important inflation prints that occur between now and then come in lower than previous prints which is by no means guaranteed.

Never mind all the other black swans that seem to be swimming around the markets lately. Secondly it sounds like Ethereum’s final hard fork prior to the merge will take place on the 6th of September.

It’s possible that Ethereum developers could discover a bug at this stage which would cause the merge to be delayed. Now this is unlikely but again a possibility and must therefore be accounted for.

Finally the merge is arguably one of the most important events in cryptocurrency.

Expectations are thus extremely high and if these expectations are not met for whatever reason ETH could crash very quickly. There’s also the non-zero possibility of a serious problem showing up during the merge so take nothing for granted.

Is it taxable to move crypto between wallets?

Posted on by Jorg van Mullen

Is it taxable to move crypto between wallets?

Do you have a question about whether or not your wallet-to-wallet transfers need to be taxed?

Many crypto investors have moved their coins to various wallets and exchanges. In certain cases, these sorts of transfers may create tax reporting difficulties.

In this article, we’ll break down everything you need to know about the tax consequences of wallet-to-wallet transfers (as well as a simple approach to avoid future tax difficulties).

What are the tax implications of cryptocurrency?

Cryptocurrency is taxed similarly to other assets, with the exception of capital gains.

Is it subject to tax when I move cryptocurrency from one wallet to another?

It is not taxable to move cryptocurrency between wallets that you own.

The cost basis and holding period of your assets do not alter when you perform a wallet-to-wallet transaction. Your original investment cost will be used as your cost basis. The time you first acquired your coins will be recorded as your holding period.

The IRS, however, does not consider cryptocurrency to be actual currency. This means that you may have to pay taxes on your Bitcoin gains if you sell it. But the good news is that because cryptocurrencies are a type of virtual money and don’t resemble real cash at all when they’re exchanged, they do not incur capital gains tax in the United States.

Is it possible to deduct crypto transfer costs?

In some situations, cryptocurrency costs may be subtracted from your cost basis, resulting in a lower capital gains tax liability.

If your transaction satisfies one of the following criteria, you can typically apply costs to the property’s cost basis.

It is an essential step in the buying or selling of a property.

It increases the property’s real value.

The IRS hasn’t said whether fees for wallet-to-wallet transfers fulfill these criteria. As a result, depending on your risk tolerance, you may take various approaches to record charges for wallet-to-wallet transactions.

If your wallet-to-wallet transaction gives you access to different crypto assets, the aggressive strategy is to use transfer fees to raise your cost basis.

To minimize your tax burden, many experts advise you to treat all wallet-to-wallet transfers as non-deductible since they are not directly connected to purchasing or selling cryptocurrencies.

Is it okay to exchange cryptocurrencies for other currencies in a crypto-to-crypto manner? Is currency trading between different virtual coins taxable?

Moving your cryptocurrency across wallets is not the same as performing a crypto-to-crypto trade, where one currency is given for another. Taxation on crypto-to-crypto trades is distinct from wallet-to-wallet transfers.

Because you’re selling cryptocurrency in a crypto-to-crypto trade, you’ll have a capital gain or loss if the value of your coins has increased since you acquired them.

Why wallet-to-wallet transfers can cause tax issues

While wallet-to-wallet transfers are not taxable, they may result in tax difficulties in certain situations.

Consider the following example.

David’s profit is $5,000 in this scenario. If David hasn’t maintained proper records on his cost basis, it’s probable that the whole proceeds of his sale will be considered a capital gain – in this case, $15,000.

What to Expect from NEO 3.0 and the Release of Flamingo

Posted on by Jorg van Mullen

NEO 3.0 will be the biggest upgrade to the Chinese smart contract blockchain yet. Here’s what to expect.

It all started with a simple question asked in the aes4 Telegram channel: “Anyone know when NEO 3.0 is coming out?”

To really answer that, I think it’s important for people to know just how long that question has been out there. Briefly, some backstory and history…

In a Distant Bull Market, Far, Far Away

NEO was actually created in 2014 by co-founders Da Hongfei and Eric Zhan under the name Antshares. In 2017 Antshares was rebranded to NEO and the journey began.

NEO quickly became known as the Chinese Ethereum because of its similarities with the use of smart contracts. It’s a reference the NEO team doesn’t like as they feel Ethereum is Ethereum and NEO is a step above. Regardless, people still refer to NEO as the Chinese Ethereum and the team doesn’t bother wasting time anymore trying to alter how people perceive them.

The main focus at NEO is on creating the vision of the NEO Smart Economy Ecosystem. And more importantly Next-Gen Internet. But that’s a story for another time; today we’re focused on NEO 3.0. Note that it’s 3.0, meaning there was a 2.0. NEO 2.0 is what many people in crypto currently know and will remember as a failed lacklustre blockchain that wasn’t able to achieve what its creators had in mind. There are numerous articles out there for you to peruse and learn more about that chapter, but as far as NEO are concerned, that was the past and although they acknowledge it, they prefer to look forward to 3.0. So that’s what we will do too.

A New NEO Emerges

Going back one last time to 2018, Da Hongfei and the team decided that NEO, although still making great progress, had fallen short of what they wanted the project to be. They recognised that the current blockchain would not be able to perform to the standards and ideas that lay ahead. It was then decided that NEO would develop a fresh blockchain starting with a new genesis block to create NEO 3.0.

For me personally, this announcement solidified my position in NEO. At the time, many other projects had fallen short of their promises but still tried to play things off by drawing focus to smaller victories. NEO didn’t try to blow smoke up people at all. They stated exactly what the public was saying and that is that NEO was not achieving what was being promised. So they simply decided to start over again and get it right.

Enter the bear market crash, granting the NEO team’s undivided attention to starting over. The results are the NEO 3.0 blockchain. The amount of “offtime” work NEO has put in isn’t hard to see with a multitude of partnerships and collaborations being released, one of which being the newly formed Poly Network.

Interoperability on Steroids

In brief, Poly Network is a cross-chain interoperability protocol that supports Ethereum, NEO, Ontology, Cosmos-SDK and will eventually include the Bitcoin blockchain, allowing interoperability and atomic cross-chain transactions. This is important because it sets up the next move.

On September 23, 2020 NEO will have another key piece of the NEO economy being launched in the form of Flamingo. In a nutshell, Flamingo is NEO’s entrance into the defi realm but with a twist. Because of the newly created Poly Network already announced that allows cross-chain interactions, Flamingo will allow users to not only use NEO assets in the pools but also various Ethereum-based options among others. This opens the door for a much broader user base and brings extra exposure to what is shaping up to be a very exciting new chapter in NEO’s history books. And best of all, we haven’t even gotten to 3.0 yet.

3.0 was set to be released earlier this year originally, but they aren’t going to release anything this time until it meets the team’s rigorous standards. As a result, the release has been pushed back to Q4, 2020. It’s been hinted that the launch could even fall into Q1 2021, but at the time of writing 3.0 has been listed as 90% complete so we will see.

The important thing is that NEO are focused on being at the top. I expect there to still be issues with 3.0, because let’s face it, all of this tech is so new and cutting edge that being absolutely perfect out of the gate is rarely ever achievable. But I’m encouraged with how NEO has handled the shortfalls of 2.0 and have no doubt, should there be any major deficiencies in 3.0, they will not be accepted and a fix or even a 4.0 wouldn’t be out of the picture.

If you’re looking for a quick overview of what has been happening with NEO, head over to NEO.org and check out the August monthly update. More and more people can’t help but take note of NEO’s new surge as they are steadily making moves up the charts of CoinMarketCap and are currently sitting in 17th. Further moves upward are expected as more news is released and we inch closer to the full release of NEO 3.0.

What is Bitcoin

Posted on by Jorg van Mullen

As the resident techie for my friends and family, I’ve gotten a lot of questions over the years about Bitcoin. It’s been on the news, it’s made people rich, it’s a means of buying drugs, and hackers are out to steal it. But what is it? Do I need some? How do I get it? Who made it? To get started answering those questions, let’s lay some groundwork.

Bitcoin is a digital asset. And like any other asset, whether it be a dollar bill, a house, a rare trading card, or a family heirloom, it has value.

There are only 21 million Bitcoin that will ever exist. In fact, there are more millionaires in the world than there are Bitcoins, which means that even if you have more than a million dollars, you may never get to own a whole Bitcoin. And it’s because of its scarcity – and because of the features that make it useful, which we’ll get to in a bit – that people have invested in it. You can think of Bitcoin similar to how you think of gold. There’s only so much of it in the world, which makes it rare. And because the supply is limited, as demand goes up – more people wanting to own it – the value goes up.

But can’t we just make more Bitcoin? The US treasury just minted two trillion dollars for COVID relief! The answer is no. The limit on how many Bitcoin can ever exist is written right into the code itself. It’s like the first commandment of Bitcoin: There shall never be more than 21 million Bitcoin.

So if there are 21 million out there, how do you get some? How did anyone get any? We’ll get there, but some backstory first.

When Bitcoin was created, there was a concern: If one person or group controls how Bitcoin is transacted, or holds the passwords to everyone’s accounts, then it would never be an autonomous system. It may seem crazy, but if your bank one day decided to close its doors, you might be entitled to FDIC insurance, but that’s about it. You have no recourse. Your funds are constantly at risk because they are being held and managed by someone else. That is the risk of a centralized system. The creators of Bitcoin wanted to avoid that.

So Bitcoin was built differently. It was decided that Bitcoin would be completely decentralized. Instead of having a single group or bank move money, the creators of Bitcoin decided that it would put that control into the hands of every user of Bitcoin. We control who owns, who sends, and who receives Bitcoin. And for 11 years since it was turned on in 2009 by an unknown software developer(s), it has never been controlled by a single person or group.

Here’s how it works:
When Bitcoin is sent from one account (often called a wallet) to another, the sender via his computer notifies as many Bitcoin users as possible that they’re trying to send money.
The other users’ computers that are notified then continue to broadcast that message out to even more computers.
Any transactions they deem to be invalid (i.e. I tried to send $10 Billion to myself or tried to send Bitcoin that I didn’t own) are thrown out and don’t continue on to other computers.
Over time, the computers using Bitcoin have accumulated a bunch of transactions and they bundle them into what’s called a Block.
A copy of the new Block containing all the latest transactions is then broadcast to all the computers using Bitcoin to add to their list of all the Blocks that came before them.
These Blocks, in order, create a chain where each one is aware of what transactions came before it. This is where the term Blockchain comes from.

This whole process happens roughly every 10 minutes around the entire world! Now I know this can feel a bit overwhelming, but I promise we can simplify this with a real world example. Let’s imagine how rumors get spread in high school…

I tell my closest friends that Jon and Jane went on a date (Bitcoin is sent and I notify some computers using Bitcoin)
My closest friends tell their friends (They notify some other computers, trying to spread it to everyone)
If anyone that heard the rumor knows it’s not true (Jane was at work), they say so and don’t continue to spread the rumor. They tell people not to share the rumor; it’s incorrect. (Invalid transactions are thrown away)
People hear a lot of stories over a couple days about other people going on dates (Multiple transactions that are heard are accumulated in a Block)
Someone writes a Facebook post about all the crazy stuff that happened that week (The finalised Block is broadcast across the Bitcoin users’ computers)
The Facebook post, and all the rumours within, are memorialised as part of our social history and become past facts while we continue to date more people and start more rumours (The Blocks are added to the Blockchain which is a history of all transactions)

This is how Bitcoin keeps the record straight without having a single institution in the middle controlling it. Instead, that responsibility falls to us, the users. Now unlike rumours in high school, which are fickle things, there are millions of computers running these checks in tandem with one another to make sure that everything happening, all the Bitcoin being sent, is valid. But there are two more important key features that make this all so powerful:
You don’t have to be a part of checking the transactions or dedicating a computer to it to own or send Bitcoin
If you do take part in validating the Bitcoin transactions being made (also called mining), you earn Bitcoin by doing it.

Which brings us back to the earlier question: How do you get some? Well, there are two ways: You buy some from someone else, or you mine it yourself! Keep in mind though, there are millions of computers mining Bitcoin out in the world. You only earn roughly the fraction of what value you provide to the network. Right now, you’re likely to spend more on the electricity running your computer than what the Bitcoin you’d earn is worth.

There are a bunch of websites where you can buy Bitcoin and they’re out of scope for this post, but you can just look up this site’s “Exchange Review” section and choose a site that’s reputable. You can buy it with a credit card or by depositing funds from a bank account, but be aware that the movement of cryptocurrency is like any other asset: You’ll need to report on any gains to the IRS if you are American, or check your local regulations with your accountant for more information.

After all that explanation we’ve answered how Bitcoin works, and how you can buy / earn some, as well as what makes it valuable. But there’s one final question: What is a Bitcoin?

Bitcoin is simply a number and an address. Address XYZ owns this much Bitcoin. And the Blockchain is the mechanism through which we host that whole list. To show you what I mean, here’s a wallet that holds almost 80,000 Bitcoin (almost $800,000,000 on the day of writing). And here’s a wallet that’s never had any money in it. Now even though we know the balances of these wallets, we don’t know who owns them, which is why Bitcoin can be used anonymously. When you own Bitcoin, all you know is the address of the funds, and the password to that wallet. I’ll dive deeper into what makes the password and address so special and secure in an upcoming article, but by having those 2 pieces of information, you can send and receive Bitcoin.

And there you have it : Bitcoin is a system for sending and receiving value that’s controlled by no one. What started as an exploration of decentralised money that was worth less than a fraction of a cent has turned into a global phenomenon. On May 22, 2010, someone paid 10,000 Bitcoin for 2 Papa Johns pizzas. That’d be almost $100 million today. Who knows what they’ll be worth in the future.

And finally, remember : if you’re interested in owning some and just want to get started, you don’t have to buy a whole Bitcoin! Bitcoins can be bought and sold as fractions. You can still buy 1 / 100,000,000th – the unit known as Satoshi – of a Bitcoin for less than a penny today.

GLOSSARY

Bitcoin – A decentralized system that facilitates sending the digital asset, Bitcoin
A Bitcoin – A single unit of the denomination used in the Bitcoin system
A Satoshi – The smallest portion of Bitcoin one can own in a wallet (1/100,000,000 of a Bitcoin)
Wallet – A password / address associated with a balance that you can send / receive Bitcoin to and from
Block – A list of transactions that have been bundled together from a 10 minute period
Blockchain – The full history of blocks that contain all Bitcoin transactions
Mining – The process of earning Bitcoin by validating transactions

Marketsnaphot 03 October

Posted on by Jorg van Mullen

Hello everyone. This is my very first post on aes4 and I am excited to be able to share my thoughts, analysis and trading setups on this platform!

In the past, most of it would be in the form of tweetstorms, so you can get a feel for my style by going on my Twitter profile and checking older posts. However from now on, aes4 – alongside Tradingview – will be the main platform where I’ll be sharing everything from specific thoughts on current events to deep dives using technical, fundamental and quantitative methods to try to interpret the current market conditions, based on five years of trading experience. I’ll try to share my “Market Snapshots” almost daily, while deep dives will be coming out on the traditional market weekly open. Alright,enough with the intro, let’s take a look at the markets!

Things got overheated in crypto and we just got a correction. A few days ago I mentioned how ETH and BTC would probably squeeze small-mid caps, and yesterday I had mentioned that we were getting near a top based on TA and by how crazy things were getting in DeFi. So far I don’t see anything that says the bull market is over, however yes I can see BTC going to 10.5-10.8k over the next 1-2 weeks and potentially to 9.5-9.8k in case we get a strong USD bounce.

Stocks are also in a massive uptrend, but even I, a massive stock bull am starting to think that we could see a strong correction before stocks go into the final parabolic stage. That along with a USD correction could easily push BTC into the 9-10k zone. Essentially what worries me the most in terms of my bullish thesis is the DXY going above 96-97, something that could potentially do a lot of damage in crypto and most other markets. Yes I’ve been bullish everything other than the USD, but I am really not of the opinion that the USD is going to die any time soon.

For now it is clear that many alts are in correction mode and many have probably topped for quite some time. In my opinion this correction will probably last another week before the market starts going crazy again, and by that I mean the majority of coins going up and not just DeFi. Older and non ERC coins/tokens have been suffering due to the fact that so many new coins are coming on the market fresh, straight on uniswap, sucking liquidity from cexes markets. Their returns have been much smaller than DeFi and this trend could last for a lot longer.

The truth is that alts have been in a bull market against Bitcoin since September 2019, and in a really strong bull market since mid May 2020 which is quite a long time, yet the trend seems to be getting stronger, not weaker. We’ve seen lots of crazy things with tons of coins going up 5-10-20-100x or more, yet the total crypto market cap is still very low. The altcoin marketcap is still 70% below its ATH and only 15% higher from where it was in late June 2020, while the overall fundamentals and quantitative data are telling me that the market is 20x better than back then. So to me it is more of a question as to whether Bitcoin, Ethereum or other coins will have a better relative performance, and if so, what would the best entries be.

Trying to look at the bigger picture and not short term movements, as my long term thesis really hasn’t changed, I’ll give everything a week to settle. As the old adage goes: the trend is your friend until it’s not.