Bitcoin Bears Being Bullish - Issue #1

Welcome to our first weekly paid newsletter for investors. For the last few years we have been putting out a regular newsletter related to the happenings at MadCapX, the Madbyte coin and cryptocurrencies in general. Even though we created a blockchain of our own, we have always believed that Bitcoin has been the main cryptocurrency to follow.

In these newsletters we will cover investment opportunities, profile cryptocurrency coins and tokens, and investigate the assortment of platforms and tools to let you automate or dig deeper into investing. Now let’s jump into it.

The Short of It

Bitcoin in 2020 has shifted into a new gear with the likes of billionaire hedge fund manager Paul Tudor Jones saying “I like Bitcoin even more now than I did then. I think we are in the first inning of Bitcoin and it’s got a long way to go” on CNBC.

"We are going to see over the next 10 years a rebuilding of the financial infrastructure of this country," says Mike Novogratz. "It was the COVID virus that really accelerated adoption of crypto--the macro story with Bitcoin, and more maybe important story of digitalization of all cash."


Portfolio

The portfolio below will show a return on a longer hold position starting this month. We will be adding more portfolios in future newsletters.

The BTC portfolio is up 21.57% in one month.


Profiling Bitcoin

Bitcoin, the original decentralized and consensus-driven digital currency, was first proposed in a 2008 whitepaper written by Satoshi Nakamoto (a pseudonym, with the real author still being unknown).  It became reality and launched in 2009.  Bitcoins value has continually crept upward over time with a built-in coded guarantee of no more than 21 million coins ever to be minted. Being the first and original, it gained the advantage of also being the standard base currency of most cryptocurrency exchanges.  While thousands of other coins have been created afterward with improved upon backing technologies and different use cases, Bitcoin continues to dominate from a value standpoint.  Someday this may change, but for now it is definitely still the case.

So how does Bitcoin work? From an end user viewpoint, you download and install wallet software to store your coins on. Many will also just signup on cryptocurrency exchanges and store their coins online and use them for trading. Bitcoin can be obtained by trading something for it, in most cases fiat currency. Bitcoins are initially minted into the system via trading computing power (called mining). Transactions are stored on a globally shared copy of a ledger, called the blockchain.  Transaction information is added to the blockchain in blocks, with each block being added by a miner who provides the best solution to a mathematical problem (in the case of Bitcoin, finding the smallest hash value of a given block).   The solutions are not able to be pre-calculated, but rather must be brute-forced, meaning many solutions need to be tried and compared against solutions from others to see which one is the “winning” solution.  Miners with the winning solution for each concurrency block get rewarded with newly minted Bitcoins.  A new block is added to the blockchain approximately every 10 minutes (the difficulty of getting the winning mining solution varies according to how many people are mining and will always adjust to target a 10 minute span).  The number of rewarded coins per block halves approximately every 4 years, thus ensuring that over time only a maximum of approaching 21 million Bitcoins will ever get minted.

Once a transaction is stored on the blockchain, there is no changing it.  This immutability feature is one of Bitcoins greatest strengths but also can be a great weakness.  Currently, it completely falls on the owner to make sure they keep their private keys secure and away from hackers trying to steal their keys via the usual social engineering trickery.  If your keys get stolen and your Bitcoin gets moved to someone else’s wallet, there is usually nothing that can be done about it.  As private wallet addresses don’t have any way to identify who owns them, your stolen Bitcoin can still be seen on the blockchain, but it’s no longer accessible to you.  You can try to follow it’s transaction path to an exchange and try to complain to them, but without regulations there isn’t much legal recourse for you at this time.  Keeping your wallet private keys (passwords) is vital.  Also, storing Bitcoins on exchanges isn’t fool-proof either as exchanges get hacked or disappear (with their users coins) all the time.  This is especially true if you are dealing with any of the numerous smaller anonymously run exchanges.  A common catch phrase in the cryptocurrency world  is “Not your keys, not your coins”.

If you have purchased Bitcoin at anytime since its inception and have held on to it, there is over a 95% chance it has gained in value. Only if you purchased during the last huge bullrun in 2017, when Bitcoin values hit over $20,000 USD, would you be at a loss today.  Even if you are at a loss, don’t worry and keep holding.  If history is any indication, Bitcoin stands to go much higher in value than it’s highs during 2017.   There may be a ceiling of value for Bitcoin, but unless the Internet disappears or people worldwide abandon cryptocurrency, we are far from it.  Investors that hold will be the winners in this game.


Trends 

In this chart, Raoul Pal overlays the 2012 to 2017 market with what is currently happening. Since the supply schedule of bitcoin stays the same in each 4 year cycle it provides a predictable price movement when we only need to analyze the demand side.

Not since 2017 have we heard Tone Vays say “guys, I’m bullish as hell”. Though there is some resistance to look for as Bitcoin heads toward an ATH (all-time-high). Be aware of the potential resistance areas where we could see some pull backs. The video below is a 1 hour, 26 minutes long, but it is linked starting at the 1hour, 2min mark where Filbfilb starts talking about order flows and Tone gives his opinion about buying before it double tops at 14k and 20k and to look out for those pull backs and potential buying opportunities.

If you take out the COVID March dip that went below $4000, you can see how BTC has been trending upwards. BTC is currently sitting at the top of the trend line with the white dotted line being the ATH from last year creating another resistance point. There is still some momentum to continue the upward climb, but we would not be adding to our portfolio since it is topping on this trendline. We will wait until it either breaks the trendline up or else it dips for a correction that takes us back down to possibly as low as the dotted yellow line area or even further to the bottom of the trendline.

Timing the market isn’t necessarily needed if you are buying Bitcoin as part of your investment portfolio from each pay period. A Yale study suggests you should have at least 6% of your portfolio in Bitcoin. Even for the biggest naysayers of Bitcoin should be investing a minimum of 1% for diversification against inflation.

The Case for $500K Bitcoin” was published by Tyler Winklevoss late August. In the report they discuss how gold and oil have been reliable stores of value and how, for the last 75 years, the U.S. dollar has been the global reserve currency. The report outlines the case for Bitcoin as the ultimate protection against inflation as well as a case for $500k Bitcoin value.

Disclaimer: Nothing in this newsletter is intended to serve as financial advice. Therefore, do your own research and due diligence before applying any of the techniques highlighted in this post. Any risks or trades based on this newsletter are committed at your own risk.