“Be fearful when others are greedy and greedy when others are fearful.” – Said American Investor Warren Buffett
Mad Hedge Bitcoin Letter
October 14, 2021
Fiat Lux
Featured Trade:
(THE GUIDE TO PUBLIC AND PRIVATE KEYS)
(BTC)
Cryptography transcends use cases from intelligence agencies — military writing — decoding confidential text messages.
Public and private keys are an important part of Bitcoin (BTC) and other cryptocurrencies.
They allow you to send and receive cryptocurrency without requiring a third party to verify the transactions.
The basic concept behind the two-key system is the following:
- the public key allows you to receive transactions, while the private key is necessary to send transactions.
- Using two different keys (a public and a private key) is called asymmetric cryptography.
What Is a Public Key?
A public key allows you to receive cryptocurrency transactions.
It’s a cryptographic code that’s connected to a private key.
While anyone can send transactions to the public key, one needs the private key to “unlock” it and prove ownership of the cryptocurrency received in the transaction.
Therefore, freely sharing a public key is without risk.
While anyone can send the public key safely, someone would need the private key to unlock and access these sent funds.
What Is a Private Key?
A private key offers the ability to prove ownership or spend the funds associated with a public address. A private key is unique and can take many forms:
- 256 character long binary code
- 64-digit hexadecimal code
- QR code
- Mnemonic phrase
What Does It Mean to “Digitally Sign” a Transaction?
For a transaction on the blockchain to be complete, it needs to be signed. The steps for someone to send a transaction are:
- A transaction is encrypted using a public key. The transaction can only be decrypted by the corresponding private key.
- The transaction is signed using the private key confirming the transaction hasn’t been modified.
- The digital signature is generated through combining the private key with the data being sent in the transaction.
- Lastly, the transaction is verified as authentic using the accompanying public key.
Digitally signing a transaction means to prove the owner of the sent funds. Nodes check and authenticate transactions automatically. Any unauthenticated transactions get rejected by the network.
Where Are My “Private Keys?”
Private keys are in a cryptocurrency wallet, which is usually on a smartphone, desktop software or a specialized hardware device.
Private keys are not on the cryptocurrency blockchain network.
If crypto assets are held on an exchange, then the exchange is the custodian of these private keys.
How public and private keys work together is essential to understanding how cryptocurrency transacts.
Buying crypto is effectively owning a private key that proves ownership of that cryptocurrency.
Since the record is stored on the blockchain, anyone can verify the individual as the owner with a specific public key.
Just remember that deferring to a crypto exchange to hold a private key means a crypt holder trusts them with the security of protecting their crypto assets.
There is always the choice of taking custody of one’s own crypto in a hot or cold wallet.
Depending on the degree of comfort, philosophy, risk-tolerance, and amount, readers can make that decision for themselves.
Private keys are something that should never be shared.
And if one eschews their own private wallet for a custodial solution like an exchange, seek out a time-honored, trusted, dealing in large volume, and highly functional exchange instead of a marginal, half-baked exchange.
“If you like gold, there are many reasons you should like bitcoin.” — Said Founder of Gemini Cryptocurrency Exchange Cameron Winklesvoss
Mad Hedge Bitcoin Letter
October 12, 2021
Fiat Lux
Featured Trade:
(ON THE WAY TO HIGHER BITCOIN PRICES)
(BTC), (SEC), (CME)
The CEO of JP Morgan Jamie Dimon is being a bit disingenuous by saying that Bitcoin is “worthless.”
He continued to say, “I don’t want to be a spokesperson — I don’t care. It makes no difference to me. Our clients are adults. They disagree. That’s what makes markets. So, if they want to have access to buy yourself bitcoin, we can’t custody it, but we can give them legitimate, as clean as possible, access.”
Dimon strikes me as a very “in the box” type of guy and I understand this mentality makes it hard for his brain to fathom a digital currency run by software that is running simultaneously outside the U.S. financial system.
Yeh — it’s a lot to process Jamie — I get it…the uncertainty and the uncertainty of maybe JP Morgan being adversely affected by this keeps him up at night.
I mean what does Dimon have to gain from this when he has made his career off the backs of American taxpayers paying and depositing into the U.S. financial system propped up by the precipitously devalued U.S. dollar which crypto was borne out of?
Dimon’s risk-reward ratio of getting into crypto ecosystem is mind-numbingly poor at this point, better for him to take the Charlie Munger approach and claim crypto as “snake oil” from his golden perch.
Better for him to retire out to his Colonial Revival mansion in the Hampton’s and sip on mimosas at Sunday brunch.
Dimon also said that bitcoin has “no intrinsic value.”
And although he thinks bitcoin will be around long term, “I’ve always believed it’ll be made illegal someplace, like China made it illegal, so I think it’s a little bit of fool’s gold.
China has also made Amazon and Google de facto illegal by effectively banning them from Mainland Chinese internet, so are we going by Chinese law now?
He says there is no intrinsic value but look at stable coins which are a type of cryptocurrency that offer yields on holding the coin which is highly profitable.
Stable coins are doing WHAT BANKS SHOULD BE DOING.
This whole crypto thing is obviously a little over Dimon’s head which is ok.
And increased regulation will and should happen — it’s in the works and it just doesn’t happen in 6 hours — and yes, it certainly will mean higher Bitcoin prices because of a lower systemic risk after effect.
Federal Reserve Chairman Jerome Powell clarified at the end of September that he has no intention to ban bitcoin in the U.S.
If people want crypto to become more of a mainstream asset, then clearly, regulation is a necessary first step.
Dimon, if like he says — “regulators are going to regulate the hell out of it.” — regulators are doing this because they want to elevate it to a mainstream asset where banks like JP Morgan can charge customers an arm and a leg for custody and levy other fees.
And yes, too much regulation could stifle crypto innovation in the U.S. and push business overseas, this is also certainly another risk.
Ironically enough, the positive shift in sentiment toward Bitcoin can be attributed to recent statements from the United States Securities and Exchange Commission Chairman Gary Gensler suggesting the long-awaited approval of the first Bitcoin exchange-traded fund (ETF) in the U.S. may be just around the corner.
Institutional investors are continuing to pile into Bitcoin as we speak despite prices pushing up to a five-month high.
According to the latest data, more than $226 million in capital flowed to institutional Bitcoin products this past week.
Bitcoin products dominated inflows for the third consecutive week, posting a week-over-week increase of 227%.
Crypto investment products have now posted inflows for eight weeks in a row.
While the SEC has previously shot down every application it has received for physically backed Bitcoin ETFs, the SEC is currently deliberating four applications for exchange-traded funds based on the Chicago Mercantile Exchange’s (CME) regulated futures contracts.
With CME’s futures markets offering a product that is already insured and overseen by U.S. regulators, experts believe that Bitcoin futures ETFs are “likely on schedule” to receive a regulatory green light this month.
This is all highly bullish for Bitcoin and other cryptocurrencies.
““DeFi boom is a very near equivalent of an apocalyptic event for the traditional financial institutions.” — Said Indian Author Mohith Agadi
Mad Hedge Bitcoin Letter
October 7, 2021
Fiat Lux
Featured Trade:
(HOW TO SET UP A CRYPTO TRADING ACCOUNT)
(BTC), (COIN)
Mad Hedge Bitcoin Letter
October 5, 2021
Fiat Lux
Featured Trade:
(ARE ALTCOINS RELEVANT?)
(BTC), (ETH)
As some of you may have figured out — there are other cryptocurrencies out there besides Bitcoin (BTC).
In fact, there are thousands of different cryptocurrencies out there.
Generated, in part, by the transformational narrative of BTC, many have tried to replicate the success of Bitcoin in terms of percentage gain of the underlying asset.
These other peer-to-peer digital currencies have emerged over the last couple of years and are all chasing BTC.
First, let me get it out of the way by saying that BTC has extraordinarily benefited from its first-mover advantage and the subsequent snowballing network effect.
Altcoins, not even one, have experienced these super boosters.
These digital currencies, better known as altcoins (alternative coins), are mainly designed to overcome the structural and technical limitations of BTC while supporting a diverse set of real-world use cases.
Why should investors keep tabs on altcoins?
Per the date of this writing, BTC has a market cap of around a trillion dollars, and altcoins also represent another trillion.
Commanding half of the market cap in cryptocurrencies is enough to warrant attention.
Since altcoins are such a big part of the market, every crypto investor should understand how they work.
In fact, the way you might profit off of crypto is not in BTC itself, but the diverse set of other assets in the space.
It’s true many missed the BTC boat — make sure you don’t miss the next boat.
Owing to the growth of the decentralized finance (DeFi) ecosystem, the increased use of smart contracts, and the introduction of environmentally-friendly consensus mechanisms, altcoins have expanded their market capitalization manifold, especially between 2020 and 2021.
Altcoin’s popularity signals the growing breadth of high quality crypto assets invading the industry.
Many blockchain companies and projects issue their own cryptocurrency tokens, making them the primary utility token for users to interact with their network.
Since there are hundreds of projects and DeFi opportunities available, such as staking and yield farming, together with an open market to choose from, it can be a bit challenging to determine the most promising projects.
One major variable that must be baked into the pie is that altcoins tend to offer a higher risk and higher reward as a cryptocurrency investment.
Although Bitcoin is volatile, it's the market leader and has already gained substantial value and name recognition — so investors looking for extra juice will gravitate to lower-priced, nascent coins with more upside.
Altcoins have more room to grow, but they also represent higher systemic risk therefore I can’t advise readers to pour their entire net worth into altcoins just yet.
A wonky altcoin could literally go poof in one second and there’s no way to get your fiat back with it.
Readers looking for altcoin success should only allocate a small portion of their portfolio into this space, and I would recommend a trusted broker like Robinhood or Coinbase as reputable crypto brokerages.
Altcoins are more advanced. Since they came out after Bitcoin, they've improved on its technology. In terms of transaction speeds and costs, many altcoins are far superior technically to Bitcoin.
Should you consider investing in altcoins?
The proverbial low-hanging fruit has been harvested in BTC.
Another serious challenge of altcoins is how to pick the right one in a crowded setup which is where we come in.
We will be navigating through altcoins and giving readers the best chance to succeed.
Like real estate, many of these altcoins are getting priced to the relative price proposition it holds when compared to a $50,000 BTC, which is essentially seen as the best house in the best neighborhood thus priced the highest.
The altcoin that will perform best in the short run will be the worst house in the best neighborhood and the most potential for returns will come from the best house in a rapidly gentrifying neighborhood.
Altcoins and their underlying prices are behaving in a similar fashion to real estate prices, which is why Ethereum and some others are looking super cheap and primed to gain on BTC.
In short, the “rising tide lifting all boats” truly applies to the digital gold as well, and I am supremely confident that BTC will hold this $40,000 support level through the end of 2021 giving the existence of crypto a massive victory to us crypto junkies.
