The good Bitcoiner’s Top Ten Holy Rules
Tags: Bitcoiner, Bitcoin, Rules, Xbt, Btc

In this lean period, with the price chart too faraway from the historical highs achieved in December, the crypto-trader is suffering afterthoughts, haunted by doubts, by the wife who is increasingly pounding with the chant of hindsight: “Why didn’t you sell when you were in time?”

Friends taunt, media is treating Bitcoin as a collective hallucination, a passing chimera, or even worse, they don’t talk about it at all.

According to Pippo, the bartender, and Pluto, the hairdresser, it was all “more talk than walk”, a ponzi scheme doomed to fail. The hipster friend says us out loud: “the greater fool theory!”. As he is so cool and an excited trend follower, is updated to the latest tech fashion and punctually doesn’t understand nothing, so he tells you that “Bitcoin no, but the Blockchain instead … that yes!.

His source is still Pluto, the hairdresser.

Dribbling the hipster friend and move on, but your Kraken and GDAX balance has actually more than halved compared to December. And Blockfolio? Better not opening at all anymore. At the first awakening in the morning, sweaty hands struggle to hold back the phone, which slips from the trembling grip: Bitcoin Ticker Widget App is there looking at you, with an evil grin, ready to make you deny any past luxurious desire. Lamborghini’s dream fades, the opened long tremble with fear when they touch the rainbow-colored trendlines that you drew with all your great pride with the paint app, on a screenshot captured by Bitfinex, with all new Kandisky technical skills of an amateur trading.

So, in short, it seems like that everything went south.

But no! The True Bitcoiner doesn’t care, he doesn’t give a damn of all this, because he knows the 10 Holy Rules of the Holy Blog.

If you follow the Ten Rules, it doesn’t matter how many blows of the stick you have taken and how painful you are at the moment, you still have the ultimate weapon, like Goku during the Genki Dama.

So listen, remember and spread the word!

RULE NUMBER 1

Look at the price chart. But look at it very well.

The first rule is very basic, it doesn’t require any economic, technical or sociological analysis. Just give a quick look at some screenshots.

November 2010

I’m still feeling bad for those poor people who bought during November 2010 peak. Shortly after, from $0.40 Bitcoin price has collapsed to $0.20, losing 50% of its value! Practically they are ruined, poor boys.

June 2011

But it’s nothing compared to those who bought it on June 2011!!! From $30 it is passed to $5! A collapse of 85%. Then it fell inexorably until arrive to $2 on November of the same year. Think about the despair that those wretches still face, it would be necessary to organize a commemorative collection for families.

August 2012

What if some of them tried to hold on despite adversity? What fools, despite having waited a year, in August 2012 had not recovered even half of what was lost … and they also took another 40% fall from $13.5 to $8! Really hopeless.

Not to mention April 2013, with another collapse of 70%. For those who bought at the peak of $230 must have done very badly, but really bad, when they found their bitcoins, which were worth less than $70 shortly after.

December 2013

The agony is really infinite! At the end of 2013, some idiot started to buy Bitcoin over $1000! Who can be this fool who spends such a figure for a digital fluff? The following decline was more than obvious, during 2014 and 2015, when the price returned slowly and inexorably under $300.

Then, from January 2015 to January 2017, the recovery was amazing and Bitcoin was back over $1,000. Will it have been some trader gone crazy only?

Everybody shouts at the bubble and they were talking about the imminent collapse … in fact, at the beginning of January there it was a 35% dump. But it was only the run-up to an even more incredible ascent throughout 2017

After a climb of 1600%, on December 2017 there it was an important retracement with a collapse of 70%. The previous growth was so high that today, those who invested before November 2017 are still profitable, if not in huge profits, despite the heavy December dump.

Who did invest on the December peak instead? They are in a terrible loss! What do those “poor boys” have to do: put their hands in their hair, have to tear their clothes and sell everything?

If you find yourself in that situation, investors and crypto last-minute traders, think about those “poor wretches” who invested on November 2010 by paying a bitcoin as much as $0.40. If those guys didn’t get discouraged or panicked and kept their beliefs, for every dollar invested in those times, they are now worth $20,000 in their wallet.

Briefly, if you are at a loss, imagine that you have put your funds in state bonds, or postal savings bonds: it is difficult to think of leaving them in a few months and expecting a great profit. Be patient. Nowadays, seeing bitcoin price is coming down to close to $5,000 wouldn’t particularly surprise. But between seasonal ups and downs, the long-term trend is, and remains, since almost 10 years, an exponential growth.

Just to let you have a representation, I designed Bitcoin price projection on the chart. For the future it will follow an exponential curve, assuming an average daily growth rate of 0.3%.

An average +0.3% in the next two years is not too much at all. This is the average daily price growth of Bitcoin over the years:

2010: +0.82% 2011: +0.76% 2012: +0.26% 2013: +1.11% 2014: -0.25% 2015: +0.09% 2016: +0.22% 2017: +0.71%

Now you will wonder if it is right to authenticate the charts and base your investments on these hypotheses. History repeats itself, but history also teaches us that NOT everything is repeated. Some things end, forever. It isn’t enough having a look to a chronology and thinking that it will go on, like this, forever. So here comes the rule number 2.

RULE NUMBER 2

Take a rational approach, trying to understand the reason for the collapse and why the price will continue to rise.

A big crash can scare, but the True Bitcoiner must try to understand it without having panic. Previously I gave a long series of historical dumps. We are missing a discussion of the most recent dump started in December 2017, which we integrate here.

There is no doubt that the primary cause was the previous crazy growth. It seems that suddenly, in late 2017, mass media around the globe has noticed the Bitcoin existence. Particularly an advertisement out of the ordinary pushed a multitude of naive last-minute patrons to throw themselves headlong without having any knowledge of the crypto world, but above all, without trusting the asset they were investing in. Those same speculators who pushed up the Bitcoin price from $8k to $19k, between November and December, and then at the first sign of fear, they were immediately selling it. The main problem is that: precisely they were only “speculators”, without the slightest technical notion, without compass or ideals.

This may explain the “panic sell”, but not the reason that triggered it. On the one hand, the spark could be done from a pure technical analysis. This kind of financial analysis, while lacking in economic reasoning, can be self-predictive due to psychological mechanics: every trader foresees that when the chart rears, especially in such a vertical way, sooner or later it will have to retrace. However, between December and February there were also numerous events whose economic consequences:

1- First, debit cards blocked: WaveCrest was a supplier of Xapo cards, Coinsbank and many other Bitcoin debit cards. When Visa interrupted business with WaveCrest, many bitcoiners, which were used to live with only bitcoins (being able to spend them in almost any POS/ATM in the world) suddenly, they were without one of the main disinvestment way. Make a bank transfer of a large amounts in euros or dollars may mean paying a “capital gain”, while spending the bitcoins directly in the shop no. Hence without having this convenient way out “to spend”, people felt themselves discouraged to invest again. In addition, this stop to use cards has reduced market cap on every exchanges.

2- A negative media announcements, with fake news and fake theories about plots and strong powers that have never been proven. An example above all, the Tether and Bitfinex issue.

3- The blocked exchanges, closed or in maintenance: companies like Kraken, Bitfinex, The Rock Trading or Binance could no longer manage the new influx of users, for many reasons: the hardware capacity of the servers, the support request numbers, especially from new users who know few things about the system, as well as the need to transmit for each new user a multitude of legal paperwork, such as the Know Your Customer and Anti Money Laundering practices required by the public administration.

4- The Japanese trustee who is handling the huge bankruptcy of MTGox since 2014 has finally completed all the practices and started to liquidate the MTGox properties left to repay the creditors. The problem is that we are talking about $400 million, sold between December 2017 and March 2018 (36 thousand bitcoins and many in bitcoins cash). Today the trustee manages another 160 thousand bitcoins that were in the MTGox hands. A very high amount, if we think that it is roughly equal to the Bitfinex cold wallet reserve, the current largest exchange in the world. Those coins sale can greatly affect the market.

5- Last point, but first for importance: in December the commissions to be paid to the miners to carry out transactions on blockchain, due to the stoppage of the bitcoin network again due to the new users wave, took off. This made Bitcoin practically useless as a payment tool.

Today, in relation to all these points above, there is good news: new debit cards are emerging (for example mona.co), the exchanges have reopened with more staff and better performing platforms than before, MTGox has raised enough funds from sales to repay all creditors. And as far as fake news is concerned, there is a positive side: they have made all those speculators flee.

The only truly structural problem among those listed is the last point: blockchain technology is not scalable at will. However, there is some excellent news about this. First of all, SegWit is 35% adoption and growing, while all the major exchanges have started batching, greatly reducing the blockchain load. Some wallets such as Electrum have also updated the software for a more efficient fee calculation. Today, the commissions have been broken down and transferring Bitcoin is no longer prohibitive. Probably the fees will see a growth when there are new peaks of use, but the real news is that this year the first Lightning Network applications arrive in the mainnet: the definitive technological solution to the scalability of the blockchain is becoming a reality. LN allows instant payments and low commissions regardless of how many people use the Bitcoin network, a real revolution, perhaps the most important since 2009 to date.

In short, the hangover of December 2017 has passed, we have cleaned the blood with a good dose of bitter herbs, we have given a strong pruning, planting the foundation for a healthier growth. This market depression period is also the most interesting for the most technical and expert, given the Lightning Network’s revolutionary innovations. There is great excitement and we will see great things in the coming years!

But regardless of the contingent news at a specific moment in history, the real question is: why, in general, the price of Bitcoin should rise? A first answer is that the amount of Bitcoin is limited, so the more people want it, the more the price goes up. However, it is not an exhaustive answer. We must explain why people should want Bitcoin and what is the practical utility of owning it and using it. In short, what do you actually need? And here we come to the rule number 3.

RULE NUMBER 3

Ask yourself what exactly is Bitcoin for you and don’t buy Bitcoin until you are able to give an answer.

Over the past 100 years, the dollar has lost about 97% of its purchasing power. Fate similar or even worse was the Italian Lira, German Mark, in general any currency issued by States or supra-national organizations. The reason is simple: they are inflationary coins, whose emission involves a redistribution of wealth. This redistribution is nothing more than a patrimonial tax that we pay for every euro or dollar we own and which passes from the hands of those who produce and work, to those who parasitize. The “parasites” are in general the biggest “debtors” in the economy, ie Banks, National States and those economic subjects subsidized by them. This redistribution not only affects the citizen on an individual level, distorts economic dynamics, creating the so-called “economic cycles” and decreases the productive efficiency, the quality of exchanges and, in general, wealth at a social level.

The chart shows the increase of the money supply in the euro area (M3 is the broadest monetary aggregate, which includes bonds and short-term government bonds). In ten years the amount of “money” in circulation has increased by over a third. Obviously, we haven’t seen magically increase on our bank accounts by a third, but this money has been placed in the economy, passing from the hands of some individuals in particular, to be employed with a specific purpose. If you want to understand more, look at the linked video.

Today we can protect ourselves from inflation by converting our euros into physical gold. But it doesn’t work well as a medium of exchange, precisely because it is “physical”, heavy, expensive to carry, unsuitable for making payments especially for small amounts. It is not easy to make it cash, because not everyone wants it, so its purchasing power varies depending on how good you are at dealing and on which market you sell it. Would you be willing to receive your salary tomorrow in physical gold?

Bitcoin is deflating with mathematical precision, so even better than gold, of which it is unknown how many deposits could be discovered in the future. Above all, unlike gold, it is also a good exchange instrument, because like euro or dollar doesn’t have a physical dimension and therefore the circulation quantity is a digital “accounting” question, the transfer of which is carried out with a simple “click”. Unlike euro or dollar, there are no barriers, customs or intermediaries: it’s the only way you can move values ​​of any amount anywhere in the world without having to give an account to anyone. You don’t even need internet, you can perform transactions via satellite or text message, but even written on paper, as long as they reach a miner. Wherever you are, no tyrant, revenue agency, totalitarian regime, or democratic majorities of statists or socialists will be able to stop you from using Bitcoin.

The True Bitcoiner knows what Bitcoin is for. Unfortunately, too few still fully grasp the “raison d’être”.

RULE NUMBER 4

If you don’t believe in the mission, forget about it, we don’t want you.

We don’t want the “panic sell” of new entrants. More linear growth and lower volatility is good for everyone. If you cannot understand point 3, don’t invest. If you think that the state should have greater control of the economy, don’t invest. Bitcoin and Blockchain have a political-economic rather than a technological significance. In Bitcoin, technical innovation is not the end, it is merely a required necessary means of finding a solution to a political instance. If you are not aligned in terms of ideals, stay away from bitcoins. If you don’t understand anything and for some reason you go through the head of buying, study first political economy and then, finance or information technology.

Someone invests anyway, either by fashion or by speculation, perhaps because he thinks that for some abstract reason blockchain technology is revolutionary, so it’s worth while throwing money into it. It is clear to them that the blockchain meaning is exclusively its cryptocurrency, without which, however, blockchain cannot work, since the value of the coin is the engine that allows the blockchain to remain intact.

Someone believes in cryptocurrencies and their “salvific” mission, but doesn’t believe in Bitcoin, because it is now “old, outdated” stuff. So to change the world it’s not necessary Bitcoin, but maybe Ethereum, Bitconnect, Eiaculatio-coin? Well, for them there is the rule number 5.

RULE NUMBER 5

Bitcoin is not “out of fashion”. Technologically, there is not any better cryptocurrency. Don’t believe to these stupid things.

Among the beneficial consequences of this market depression, there is also the death of hundreds of altcoins in the cryptocurrency today system. Along with the ICOs that for 99% are useless scams. These coins do nothing more than divert attention and energy from the target and confuse investors about the real capabilities of a blockchain technology. Fortunately, some exchanges have started to de-list numerous cryptos, which will go into oblivion. Among these, there are several Bitcoin forks that are not even mined anymore. On 30 March 2018, Bittrex removed 84 altcoins, of which 28 had even blockchains or non-functioning wallets, so it was impossible to carry out even one transfer.

But there are still fans of this or that cryptocurrency that sponsor new technological improvements: higher speed, lower costs, less energy consumption, Proof-of-Stake, Sharding, Graphene, Tangle etc. Often we must be careful not to be fooled: if today a cryptocurrency has got faster and cheaper transactions than Bitcoin is not because it has overcome a technical hurdle, implementing a better technology.

The reasons may be only three:

1) has less bitcoin transactions (which applies to all cryptocurrencies except Ethereum);

2) has increased the block (like Bitcoin Cash);

3) has reduced the average time difference between the creation of one block and the next (like Ethereum or Litecoin).

The first reason of course doesn’t qualify a cryptocoin as better than Bitcoin, because with the adoption would also lose speed and economy, while the other two reasons do not derive from technological innovations: overnight, even Bitcoin can increase the onchain capacity by modifying size or average time difference between blocks. If it has not already been done, it is only because the majority of nodes (miners and important economic nodes, which have a “political” power over the protocol development decisions) decided that this is not the right way to climb. The so-called increase in block size allows to overcome some limits, but only in a linear way and at certain costs, while an exponential increase in capacity is needed to really climb to levels that allow mass adoption.

Lightning Network, the protocol built on Bitcoin, is the only solution to the truly innovative scalability existing today. Although actually it can only be used by very technical users and under certain conditions, soon more user-friendly applications will be developed and a new service ecosystem will exploit it properly.

The Bitcoin current technological primacy doesn’t mean that there are no interesting proposals among the alternative cryptocoins. For example, the studies on Sharding carried out on Ethereum may lead over the years to the development of an excellent solution to scalability. Or, an Emergency Difficulty Adjustment like the one already used in Bitcoin Cash could be useful to Bitcoin, as well as many other characteristics of alternative currencies. But, can these implementations somehow subtract the primacy to Bitcoin? After all, these developments are nothing more than code, and it is open source code. If there is something really good, Bitcoin to improve can trivially make a copy-paste. The competitive advantage of a cryptocurrecy on another is not so much due to which first implements an improvement, rather it is the community behind it. It is the network effect which is important: the number of companies, services, users who use that network represent the value carried on that blockchain.

The only news that Bitcoin can not “integrate” (or at least, not without huge developments and with shocking impacts) is the Tangle technology (used for example by Iota), since it is not a blockchain, but a completely alternative structure. To date, however, the Tangle doesn’t work, because it cannot get rid of the need for a central coordinator. If you overcome this huge rock, it could be promising and competitive. At a certain point, however, the ecosystem and the services that have developed on a network are so many and important that the network will not be abandoned even if there are technologically better alternatives. Today we could replace the Internet Protocol IPv4 and IPv6 with something better and completely different, but we should also convince the rest of the world to use this new fantastic network instead of “the Internet”. So Google, Facebook, NASA and any company or person in the world should start using the new protocol. When it comes to epochal innovations such as railroad tracks, bolts (with standard nut and screw sizes), container, internet, or Bitcoin, the market naturally converges towards a single standard and once the standard is adopted in a diffused manner change is enormous. It is a question of economic incentives and disincentives.

RULE NUMBER 6

Bitcoin is a pyramid scheme. Make sure you find yourself at the top.

When we’re talking about a pyramidal structure in a generic sense, we aren’t necessarily referring to Ponzi schemes, or other illegal practices. The value distribution among those who own bitcoins, until the adoption and the price which continue to rise, is pyramid-like: those who entered first are in earnings, when they spend, thanks to the influx of money entered into the system by those who he is buying after him. The wealth of those who are at the top of the pyramid is given by the fact that the base is expanding more and more, as adoption grows, new people enter inside the system with new capital. This structure is also the Bitcoin great strength: each “member” has an incentive to bring new people into the network and to make Bitcoin known to the rest of the world.

But the last buyer who finds himself at the base of the pyramid, it will be cheated? No, if bitcoin will continue to be successful. In fact, even if everyone, all over the world, owned bitcoins, the bitcoin maximum amount in circulation would not change, leaving an offer unchanged. On the contrary, the goods produced in the economy and the world population continue to grow, thus increasing the demand for a means of exchange to trade these goods, or a reserve of value to delay the purchase over time. As a consequence, the demanded quantity of money (bitcoin) will be constantly greater than the quantity offered. For the law of supply and demand, the price, even if much slower than today, will continue to grow.

In 2018 almost any worker in Italy can afford to buy 0.1 Bitcoins, even if not all at once. Bitcoins are 21 million, among those lost or destroyed there are many less. If there are, we hypothesize, 16 million Bitcoins in circulation and 7 billion people on earth, and Bitcoin becomes the main world currency, who owns at least 0.1 Bitcoin makes mathematically part of the 2% of the world’s richest population. Who owns 1 whole bitcoin will be among the super-rich 16 million of the planet.

Entering into the market only when all the media and any newscast talks about the new historical highs of Bitcoin may not to be the most brilliant idea. The market is pure anarchy and the last-hour speculators are often fools. But on the other hand, opening the next collapse to enter could be the biggest mistake in life. There are those who sold for $1,000 and are still waiting for them to come back to that amount. You may find yourself waiting, waiting, while Bitcoin continues to grow and never return to the figure you thought you were buying. So don’t worry too much about the moment and buy; doing it in 2018 still qualifies you as an early adopter. So once you have purchased you are inside the system, you can consider yourself at the top of the pyramid that will be created in the coming years. So spread the word, make communities, share this article, create a larger base than you can.

RULE NUMBER 7

Buy and spend Bitcoin, create volumes, use Bitcoin services and make communities.

We hear about what a good bitcoiner has to do: “hold”. It means to keep Bitcoins purchased safe and never move them. It is not really like that. The good bitcoiner constantly moves the money. Take an example of Laszlo. He bought two pizzas paying 10,000 bitcoins. If we look at the current value, those pizzas have cost just a few million euros. But if there had never been any pioneer who bought real goods by selling their own bitcoins, the price and adoption would never have come to where we see them today. Recently Laszlo has done the same type of purchase, but paying through Lightning Network. Pioneer for the second time.

It is fundamental to create a base for users which daily exchanges Bitcoin (even if not on blockchain, or maybe better if it is not on blockchain) and that it is not for just speculative trading movements. A simple holder generally buys bitcoins only once, someone once in some months, but the most assiduous put aside something every month and then their economic activity as bitcoiner ends there. Instead, everyone should commit to making actions daily by using bitcoins.

First example is the use of bitcoin debit cards. At the beginning of each month, it’s possible to use part of our own salary to buy bitcoins and to reuse them during the same month, it contributes to the increase the “floating” trade. In addition, it allows to make the price more stable, less subject to manipulation by big whales and to the volatility of the pump and dump. At the individual level, the practice is useful because there is a good chance that bitcoins will be reassessed during that month, when we are going to spend it. If not, you can wait and spend those bitcoins at another time.

Second example is about the online purchases. Instead of paying through traditional routes, you can spend bitcoins in many online ways (i.e. All4btc, alzashop, bitrefill or the merchant forest you find on coinmap.org). The advantage to spend money directly is that you don’t have to make a bank transfer from your bank account to spend bitcoins. This is therefore a more immediate method of “disinvesting”, which guarantees greater privacy and there is no risk of paying capital gains. On the net, there are also good opportunities to get big discounts, as thanks to purse.io, an intermediary that allows you to buy discounted Amazon products, obviously paying in bitcoins. The recommended discount is generally 15%, but if you can afford to wait even longer for the execution of the order, you can combine purchases even greater discounts, as in the case of the order I made in the screenshot above (19% discount).

Using bitcoin services can not only be useful for oneself, at least under certain conditions, but also means helping companies and people who believe in bitcoin and strengthen the community. It can be seen as a sort of “duty” towards the community.

RULE NUMBER 8

Create a serious wallet for yourself and mind your privacy.

This rule is practically the most important to follow. Keep a hoard safe from anyone, in a personal wallet, don’t leave too much funds at a third party or exchange. Bitcoin exchanges are no longer more reliable than traditional banks (the MTGox crack teaches us) and for the most part they are as succubus as the banks to the intrusive demands of the public administrations and their worst caprices (taxes, transaction censure, confiscations, forced withdrawals). Also take care about your privacy: let everyone know which bitcoin addresses you have and receive all your payments on the same addresses can expose you to risks, even personal security.

Today, a good wallet must have at least SegWit (and possibly compatible with bech32 addresses). Electrum is an example.

For the most passionate, who want to download the entire blockchain, there is always Bitcoin Core.

RULE NUMBER 9

Start gradually and be cautious.

At the beginning, invest little and try to understand as much as possible: how to configure the wallet, how to move coins from wallet to wallet and between wallet and an exchange. Practice setting fees to pay when using a personal wallet, possibly even trying a “Replace By Fee”. Learning to use a wallet is no more difficult than learning to use emails, where the replace by fee is the difficulty level “use of the Blind Carbon Copy (Bcc)”, which maybe you didn’t use. As you enter a little in confidence, start to try some services, spending your bitcoins. Get an account on two different exchanges at least, perhaps in different jurisdictions, to always have an alternative for both buying and selling. Then, get a debit card. Try trading too, but remember that Bitcoin is independence and freedom, before speculation. Becoming rich is only a side effect, the main goal is to change the world in a better world.

Personally, I’ve arrived to have a fortune of about 99% in cryptocoins and I keep going converting every salary, except for the part that I expect to spend in cash during the month. After blocking debit cards I started to keep more fiat money aside, for obvious necessities, but I see it as a temporary thing and I intend to try some new debit card, as I did for Coinsbank. As for the exchange, I will also look for “debit cards” to have at least two alternatives at the same time (both Mastercard and Visa). I have never disinvested to go back to the euro permanently, but I have always spent (to buy goods or services) part of the capital gains given by the revaluation of Bitcoin.

Bitcoin is still today an experiment, both from a technological and social point of view, and there is always failure possibility, a risk which we have to consider. If things go one day for the worst, I will not regret anything for two reasons: first, I have already spent a lot of capital gains obtained thanks to the revaluation of Bitcoin, also guessing the worst future situation, the net loss that I would suffer may not be very heavy. Second: I am aware that I’m fighting for something in which I firmly believe. My advice for bitcoiners friends is as follows: convert into bitcoin all or almost everything you have only if you firmly believe in the “mission” and you intend to pursue it with tenacity.

RULE NUMBER 10

Do not forget who is next to you.

Keep your Bitcoins as safe as possible, but let them be accessible to your loved ones. Do not take them to the grave unless you have expressly intended to do that.

CREDITS

This article were originally written in Italian by Alberto De Luigi for The Holy Blog and translated in English by Stefania Stimolo for NovaMining.