The ultimate lesson in crypto trading
As someone who’s written about blockchain for years now, the book “21 Lessons: What I’ve Learned from Falling Down the Bitcoin Rabbit Hole,” by Gigi, is a must-read for anyone interested in cryptocurrency.
When I was working as a fintech reporter in Baltimore, this quickly became my Bitcoin Bible; even replacing the sacred “Bitcoin Standard.” And it’s the reason I changed my strategy and started investing in Bitcoin instead of stocks, gold, and the entirety of the altcoin market.
I’m not one for long introductions so let’s jump into the most important lessons from the book.
One of the most important things to know about Bitcoin is that it is censorship-resistant money. This means that no government or financial institution can block you from sending or receiving Bitcoin.
This is an incredibly powerful concept because it gives individuals complete control over their money. For example, if your bank account gets frozen, you can still send and receive Bitcoin.
Bitcoin isn’t completely immune to censorship; in fact, Vitalik Buterin, one of the most prominent crypto personalities and founder of Ethereum, said that the government could severely marginalize BTC with a concerted effort.
However, as long as there’s free speech somewhere in the world, cryptocurrency’s future is certain.
“Every aspect of Bitcoin is text…. The ledger is text. Transactions are text. Public and private keys are text. Every aspect of Bitcoin is text, and thus equivalent to speech.” — Gigi
Financial literacy = Wealth
When I attended college I noticed that the concept of “White privilege” was much less about race, and more about financial IQ.
My family never taught me about money and I noticed that applied to my other Black friends as well. Financial literacy is a cheat code in life — and many minorities don’t have access to it.
This is all to say learning about Bitcoin is a lesson in cryptography, philosophy, economics, history, tech, and personal finance, among others, as the author Gigi explains (and I can attest to). The price of financial education will always be more valuable than any cryptocurrency, even Bitcoin.
When Satoshi Nakamoto created Bitcoin he inadvertently bolstered the financial literacy of a new population of investors: Internet nerds. Suddenly the guy who watched Star Trek could have a conversation with a guy working on Wall St.
It’s only now that the wider knowledge of Bitcoin is beginning to get more mainstream. And when it comes to obtaining financial IQ in crypto, there are many avenues to explore:
- Every crypto exchange (i.e. Coinbase, Gemini, Crypto.com) has their own educational section
- Crypto has its own set of functions, separate from traditional finance. So when you buy your first Bitcoin you will be exposed to new concepts like decentralized applications (dApps), smart contracts, and initial coin offerings (ICOs).
- There’s also a plethora of crypto YouTubers, bloggers, and publications on the web!
This is why “the rabbit hole” aptly describes Bitcoin. Understanding its basic concepts is relatively easy, but the opportunity to learn more is always there.
“My dear, here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.”
The Queen of Hearts told that to Alice, in Alice in Wonderland. She’s right.
Staying ahead of the inflationary curve is like sprinting on a treadmill to grab a delicious cupcake with sprinkles. The cupcake is always just out of reach. There is no winning in this game.
Inflation is a hidden tax that robs you of your purchasing power due to money printing from the Federal Reserve. Over time, the US dollar has lost more than 95% of its value. This means that a dollar 100 years ago is only worth $0.05 today.
The dollar will eventually go to zero. That isn’t a crazy conspiracy, it’s happening right now like a slow-motion car crash.
“I do not think it is an exaggeration to say history is largely a history of inflation, and usually of inflation engineered by governments for the gain of governments.”
— Freidrich Hayek, Good Money
When I worked as a fintech writer in Baltimore my editorial team wrote about inflation almost every other day. Bitcoin has a future because of US monetary inflation. It gives individuals a way to opt-out of the fiat money system and store their wealth in a currency that cannot be devalued.
With Bitcoin, you don’t have to worry about inflation because the supply is capped at 21 million BTC. You can simply think of Bitcoin as the best savings account ever created. This also means that your Bitcoin will always maintain its purchasing power, regardless of how much money is printed by the government.
The best part? If you’re reading this, it’s still early to invest.
Bitcoin is protected by the SHA-256 hash function. Sha-256 might sound small, but in actuality, it equates to —
115 quattuorvigintillion 792 trevigintillion 89 duovigintillion 237 unvigintillion 316 vigintillion 195 novemdecillion 423 octodecillion 570 septendecillion 985 sexdecillion 8 quindecillion 687 quattuordecillion 907 tredecillion 853 duodecillion 269 undecillion 984 decillion 665 nonillion 640 octillion 564 septillion 39 sextillion 457 quintillion 584 quadrillion 7 trillion 913 billion 129 million 639 thousand 936.
I didn’t even know most of these numbers existed.
Renowned security technologist and author Bruce Schneier extrapolates that even if we built an optimal computer that uses a Dyson sphere — a hypothetical megastructure built around the sun for energy — and let it run for 100 billion billion years, we’d only have a 25% chance to crack a 256-bit code. Damn.
When my dad helped me open up my first bank account as I entered middle school he didn’t explain to me the concept of “fractional reserve banking.”
I can’t blame him. Few Americans know how the banks are screwing them.
Under the fractional reserve system, banks are only required to hold a small fraction of the deposits in their accounts. By law, they’re only required to hold 10% of your money — so if you deposit $1,000 only $100 of it is actually there.
This means that if everyone tries to withdraw their money at the same time, the bank will not have enough cash to cover all the withdrawals.
If you ever wondered how the 2008 housing crash happened, this is why.
Fractional reserve banking should be called counterfeiting money. That’s what banks do so that they can make more from your deposits. The fact that they do this and still pay you less than 1% in interest is absolutely ridiculous.
This is why Bitcoin is so important. It gives individuals a way to opt-out of the corrupt fractional reserve Ponzi scheme.
When you hold Bitcoin, you are your own bank. You can rest assured knowing that your Bitcoin is safe and sound no matter what happens to the banks (i.e. another 2008 crash or recession).
“…you do not really understand the concept of banking. All the banks are broke. Bank Santander, Deutsche Bank, Royal Bank of Scotland — they’re all broke! And why are they broke? It isn’t an act of God. It isn’t some sort of tsunami. They’re broke because we have a system called ‘fractional reserve banking’ which means that banks can lend money they don’t actually have! It’s a criminal scandal and it’s been going on for too long.”
— Godfrey Bloom
History teaches us that two things happen to countries that allow the money printer to go wild: 1) Hyperinflation 2) A new currency usurps it (e.g. Bitcoin or the upcoming digital dollar).
Relying on the U.S. dollar implies you trust that the Federal Reserve and central banks will not devalue your currency. Clearly, as seen with fractional reserve banking and the 2008 housing crisis, the central banks don’t care about you.
So what about the Fed? Well, in response to COVID-19 the Fed instituted a policy of unlimited quantitative easing, in effect injecting trillions of dollars into the economy. They used every tactic to inflate the monetary supply, in effect taxing you and creating the economic shitstorm that we’re dealing with today.
In his book Gigi points out this about Bitcoin, “Satoshi showed us something novel: no matter how hard you dig for this digital gold, at a certain point you won’t be able to get more Bitcoin out of it. For the first time in history we have a monetary good which, no matter how hard you try, you won’t be able to produce more of.”
Technology is exponential.
This means that it grows at a faster rate than you can imagine.
For example, the first car was invented in 1885. It took until 1915 for there to be one million cars on the road and then it took 15 years for there to be 100 million cars.
And it only took 40 years for there to be one billion cars. The number of cars on the road has been doubling every 15 years.
The same is true for other technologies like the internet, personal computers, and mobile phones. It’s also why in the Bitcoin community there is the saying, “Gradually, then immediately” meaning nothing seems to happen for a while — like how things feel now — and then everything happens at once (i.e. El Salvador adopting the currency, new updates, or exponential price action)
I learned this lesson painfully when investing during the COVID-19 pandemic. I ignored Bitcoin and didn’t accumulate much before it bounced back even stronger than before!
Millionaires are made in recessions. Don’t forget that.
I learn something new each time I pick up “Falling Down the BTC Rabbithole”
It even turned what I thought of a blockchain on its head, with him correctly stating that a blockchain isn’t so much about data storage as it is for telling time.
Let this article serve as a reminder that Bitcoin is all fundamentals.
If Bitcoin doesn’t work out, then nothing in crypto will.
And at this point betting against the core tenants of cryptocurrency is like betting against the Wright brothers.