Cyrtocurrency and Bitcoin - The Hidden Dangers.

Okay, time for the real messy stuff - Bitcoin. While most of you could have heard of Bitcoin, and some could even went into trading online using Bitcoins, there are still many who does not know what Bitcoin is and for them, I am writing this post on my blog for it. There maybe a second post after this, if there is enough contents, not sure yet. For this post, I believe it is best if I used a common source (likely a Youtube clip from various sources) to emphasis on the point where you can listen to the facts there as well.

Let's get down with the basic introduction of what bitcoin is.

Source : https://youtu.be/41JCpzvnn_0

Topic : What is Bitcoin?

Youtube video from 99Bitcoins channel. All rights on that clip belongs to them.

According to this website on what is a Bitcoin, this website describe it as one of the "medium of exchange" which people are using currently to based their wealth value. In the past, people had difference "objects" as medium, such as gold, silver, gems and other valuable stuff which can have their own value (this is important to know for later purpose) in exchange for another value of equal level. 

The point to take from this website is : Money = Value = Trust.

Which means your money equals to the value of a medium (like gold, silver, gems etc) which people will trust will remain in such value for long time in the future. However, there is one thing I disagree with what he said. He "claims" that paper money are created because people accepted it as medium of exchange. This is incorrect.

Coins came first because it was minted in gold and silver (metal). The value of the coins were on the metal which was used in the mint process to create the coin, which is why there was different value for gold, silver and copper coins in the past. Interestingly to know is that paper money was NOT an European invention but a Chinese invention. Coin Minting and the use of Paper Currency system could be found being used in China as far as 770 BC.

The modern bank notes emerged with attempts to establish a government-backed banking system and these banks were pushing for the people to accept paper notes as a form of IOUs (I owe you) which were commonly used by Europeans governments in maintaining trade with their colonies. Some of the early attempt to establish bank notes was by Stockholms Banco (in 1661), a predecessor of Sweden's Central bank. 

The war between France and England, had pushed the creation of bank notes as a form of IOUs ever since. Bank of England (established in 1694) issued IOUs in 1695 and by 1745, standard printed notes ranging from 20 pounds to 1,000 pounds were printed. Scottish economist, John Law helped to established banknotes as formal currency in France. By 1862, the United States of America government had started to print banknotes as well. 

So what we can say from here is that bank notes were not established as a trusted medium by the people to manage their wealth but as a tool of necessity by the government to fund their military campaign and better dealings with their loans and debts. 

Source : https://youtu.be/c7VH96My_3I

Topic : Bitcoin Trading for Beginners.

The important aspect which this Youtube video states includes :

1). No one can really predict what will happen to the price of Bitcoin (4:00).

Basically, your profit is determined by how good your trader is at spotting when it is the best time to buy and to sell. If he makes mistakes, it will be your money that burns. Very similar to gambling and how a bookie could function. Please think about that for a moment.

The presenter can claim that people who trade (but here I'm not sure whether he means the person who is putting the money in or the person who doing the trading for others. Some in rare cases could be both) can do fundamental analyse of the situation on when and where they should buy and sell. 

2). Type of Orders (of trading). 

Market Order (fullfills the bitcoin trade at any price) Which means you can put an order out to buy a certain amount and the market will deliver. 

Limit Order (Price is guaranteed but there could be a waiting period until the order is reached). You basically set a ceiling price on how much you willing to trade.

Stop-Loss Order (Preset price on selling Bitcoin as to minimize possible lost of money if the price dropped).

These concepts are based on stock-market trading concepts. I know because throughout late 1990s (1997 onward) to 2010, I was actively investing and playing around with stock-market while working at a local college (I was in mid-20s at that time and I did make good money. Probably over 50,000 Ringgit Malaysia (RM) my guess). The trading stopped when companies stopped issuing public stocks via newspapers and did it through banking system (which I was not familiar with at the time). 

3). Maker and Taker fees.

Maker = creates order that aren't instantly fulfilled.

Taker = Creates order that are instantly fulfilled. They have higher fees since they fulfill the orders. 

Resistance and Support level technically related to what we already learned in the above based on the type of orders. The type of orders for a bitcoin (by placing ceiling price and asking price) will likely to create a resistance and support structure for Bitcoin trading. 

4). Common mistakes people makes in Bitcoin trading :

i). Risk more than you can afford to lose.

ii). No clear action plans. When to start and stop trading.

iii). Leaving money on the exchange. The exchange can get hacked, goes offline or goes out of business, you can end up losing money.

iv). Giving into greed or fear.

v). Not learning lessons from your trades.

Source : https://www.bankrate.com/investing/stock-market-financial-security-march-2021/

Topic : More than half of the investors thinks the stock market is rigged against individuals.