Play Bitcoin Better Than the Crowd When You Know the Truth

Shah Gilani

There's so much written about Bitcoin, from so many angles, it's hard to know what it really is.

What is it good for? What is it worth? Where is it going?

It's obvious there are huge moneymaking opportunities in Bitcoin. The cryptocurrency's unprecedented development has already minted a few billionaires and many millionaires in its short life.

You can be sure, however, those winners didn't get to where they are without knowing Bitcoin basics.

If you want a shot at Bitcoin riches, you have to know the truth about this cryptocurrency, so you can make this moment in history a profitable one.

Here's the truth about Bitcoin and how to play it…

Everything You Didn't Know About Bitcoin Basics

For starters, Bitcoin is a cryptocurrency based on blockchain technology. Here's what that really means.

The crypto prefix in cryptocurrency comes from cryptography, the practice and study of techniques for secure communication in the presence of third parties. Blockchain is a decentralized ledger in which a continuously growing list of records (blocks) are linked, secured, and distributed across networks of computers.

Now, about that currency thing.

Currency is a system of money. Gold and silver can be used as currency. Paper and coin currencies used to be backed by gold and silver. Eventually, "fiat" currencies replaced every other kind of currency, including all asset-backed currencies. Fiat currency is money that a government declares to be "legal tender." It's acceptable as payment of debt.

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Every currency in the world is fiat currency – they're made up. The dollar, pound, franc, euro, yen, yuan – they are all currencies simply because respective governments decreed them to be.

Bitcoin is no different. It was decreed a currency by its originator, Satoshi Nakamoto, believed to be a pseudonym for Australian tech pioneer Craig Wright. It's just another made-up fiat currency.

The blockchain technology that Bitcoin is based on is an open source networked ledger used to record the creation of bitcoins and record transactions based in bitcoins. The blockchain imparts no intrinsic value on the "currency" other than maintaining those records.

Mined for the Taking

You can't create bitcoins out of thin air – at least, not exactly. They have to be mined.

Bitcoin mining is a process where computers are used to verify a block of transactions along the Bitcoin blockchain, which are then put through a process that applies a mathematical formula to them. That then turns the block into a random sequence of letters and numbers known as a "hash." The hash is stored along with the block, at the end of the blockchain, at the point in time it is authenticated.

Everyone who participates on the blockchain has access to all records of all transactions, including the most newly made. Anyone can mine blocks (by identifying them by their hash and confirming them) and earn a reward of 25 bitcoins.

Satoshi Nakamoto mined the first ever block of Bitcoin, known as a genesis block, to earn 50 bitcoins.

This raises a question. How was Nakamoto, creator of the Bitcoin blockchain, able to mine a genesis block of 50 bitcoins even though there were no Bitcoin transactions before he created the first one?

That's Bitcoin. It's "a riddle, wrapped in a mystery, inside an enigma," as Winston Churchill might say.

So is the price of Bitcoin.

Because Bitcoin has no intrinsic value, and its utility as a currency is limited to those who choose to use it and accept it, the value ascribed to it is simply what the next person buying a Bitcoin is willing to pay for it in dollars, or in euro, or yen, or another cryptocurrency like Ethereum. Just to make it more complicated, that other cryptocurrency would itself have to be valued against an established currency to determine its price in order to buy Bitcoin at whatever its price is..

This year, Bitcoin's been getting a lot of attention, mostly because its price (in U.S. dollars) has skyrocketed.

In fact, a single Bitcoin rocketed from a value of $1,000 at the beginning of the year to almost $20,000.

All that "appreciation" is drawing a lot of headlines and investor interest.

The Future of Trading Bitcoin

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Shah Gilani

About the Author

Browse Shah's articles | View Shah's research services

Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains.Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.

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