Mad Hedge Bitcoin Letter
July 26, 2022
Fiat Lux
Featured Trade:
(THE ART OF BITCOIN MINING)
(BTC), (ASIC), (GPU)
What Is Bitcoin Mining?
Bitcoin mining is the way in which new coins are added to the existing supply of the cryptocurrency known as Bitcoin (BTC).
These transactions are confirmed by the network and represent a critical component of the maintenance and development of the blockchain ledger.
Cryptocurrency mining is attractive to many investors interested in cryptocurrency and the most profitable are able to do it on a large scale incorporating an industrial mindset.
Granted, the units of economics of crypto mining have suffered in the short term because of spiraling energy costs.
But Crypto always ebbs and flows from crypto winters to crypto summers.
How Do I Mine Bitcoin?
Mining Bitcoin is not for the faint of heart.
Your computer must solve complicated math problems that verify transactions in the currency.
When a bitcoin is successfully mined — the miner receives a bitcoin.
One can use a normal computer that has a CPU, motherboard, RAM, and storage to mine bitcoin.
The only difference and the most important requirement here is the graphics processing unit (GPU) or the video card.
A high-performance GPU is a must if a person wants to mine Bitcoin.
Bitcoin mining is done using hardware called ASICs that is short for Application-Specific Integrated Circuits.
Another obligatory requirement is electricity for mining machines.
The largest bitcoin miners are usually found in countries with low-cost electricity.
Miners need robust infrastructure to mine mainly energy and equipment.
How do I do it at home?
A company called Compass Mining is betting that individuals will want to partake in bitcoin mining.
There’s a lucrative payout — if you’re lucky enough to mine a coin.
But the hassle of operating a mining rig can certainly cut into profits.
Compass’ new retail program will allow the purchase of a single application-specific integrated circuit (ASIC) mining rig that they can set up at home.
Mining corporations usually buy in bulk — this finally gives the little guy a chance.
Brands include top-of-the-line ASICs WhatsMiner series from MicroBT and the Antminer series from Bitmain, offering 78 to 95 Tera hashes per second and ranging in price from $8,100 to $10,400.
Profitability calculators can help you estimate your potential ROI.
Rigs are noisy and hot so it’s not for everyone.
Potential miners really need to do their due diligence if they want that sort of environment in their house.
About the size of a desktop computer tower, they can emit between 50 and 75 decibels of noise, which is roughly the same level as a vacuum cleaner or a hairdryer.
Just like the work-from-home paradigm was borne out of the pandemic, many who want to mine bitcoin, wish to do it from the confines of their couch and man cave.
The demand for mining hosting sites in North America has been outstripping supply. Encouraging bitcoin enthusiasts to set up their own operations at home is one way to relieve the pressure on existing hosting infrastructures.
China has shown us their cards by initiating a blanket ban on cryptocurrencies opening up opportunities for alternative miners.
The crackdown nearly halved the mining difficulty for the entire Bitcoin network. Miners outside China have been able to mine more bitcoin given the record low mining difficulty, raking in high revenue.
Corporate self-mining companies, such as Marathon and Riot, as well as third-party hosting sites, are facing a shortage in infrastructure to support more mining operations.
Once crypto comes back, we will all laugh at how 2022 was an aberration for the crypto world.
“Bitcoin is the beginning of something great: a currency without a government, something necessary and imperative.” — Said Author Nassim Nicholas Taleb
Mad Hedge Bitcoin Letter
July 21, 2022
Fiat Lux
Featured Trade:
(HOW TO SET UP A CRYPTO TRADING ACCOUNT)
(BTC), (COIN)
I get many inquiries asking me how to set up an account to buy Bitcoin (BTC) and so it’s gotten to the point where I will walk new readers through the process of setting up a cryptocurrency account at Coinbase (COIN).
The signup process is actually highly straightforward and only takes minutes.
Why sign up for Coinbase?
This is an exchange that is highly popular and already has a large customer base.
Investors who can’t stomach the higher risk of exposing capital to an unregulated exchange should just dabble in bitcoin-connected ETFs which is completely reasonable.
Due to a spate of recent crypto exchange bankruptcies, some might be hesitant to get their capital tied up in bankruptcy hearings, but it’s my job to let readers know this option is out there.
COIN is still a major part of the crypto infrastructure.
Readers just only invest as much as they are willing to lose in crypto due to its higher than median volatility and underperformance the past 10 months.
Let’s get this party started.
1)
As many might assume, one must open their browser and head to www.coinbase.com to kick off the process. Once there — you’ll be greeted by an interface where the right choice is to click “sign up” in the upper right corner.
2)
A screen box pops up requiring personal information which is basically a full name, email address, password, and state. I am also assuming the user is from the United States. After clicking the agreement that the user is 18 years or older and consenting to the user agreement, click “Create account.”
3)
Technically, an account has now been created and a screen pops up offering $5 of Bitcoin if one verifies a photo ID which is completely optional. The screen let me know that it was a “limited time offer” so this offer might be gone when others sign up or it might still be there. Either way, click “Continue.”
4)
After the creation of the account, the next step is to click the verification link in the email that was provided. Simply go into the email inbox given, open the email, and click “Verify your email address.”
5)
The next step is to provide a phone number for a two-step verification. This added level of security, makes it so it’s difficult to use your account without your phone number. Select the country, enter the phone number, then click “Send code.”
6)
Enter correct authentication code sent to the phone number provided then click “Submit.”
7)
Select citizenship of the account holder then click “Submit.”
8)
Verify identity by filling in personal information including full name, date of birth, street address, city, last 4 digits of social security’s number, and zip code. Then answer a few more questions about what you will use Coinbase for, source of funds, and employment status then you’re good to go.
9)
The last step of verifying your info are two questions asking the user “How much do you expect to trade per year?” and “What industry do you work in?”
After you answer these two, then click “Submit.”
10)
That was the last of the personal questions and after clicking submit, the new user is directed to the trading interface showing a portfolio balance of $0.00. The next step is to click “Add payment method” in order to divert some fiat currency into the Coinbase account.
11)
There are different options available, and I personally chose “Bank Account” for its ease of use and free fees.
12)
A box pops up asking me to agree to the Plaid End User Privacy Policy. This is software that links Coinbase to your bank account.
For anyone who doesn’t want that linked, I would advise using one of the other three options.
Click “Continue” to proceed.
13)
Select your bank — provide your bank information.
14)
Bank Account is now linked — immediately buy any cryptocurrency available on Coinbase. Pat yourself on the back for a job well done!
Mad Hedge Bitcoin Letter
July 19, 2022
Fiat Lux
Featured Trade:
(HOW TO PLAY CRYPTO USING AN ETF)
Don’t get me wrong — I understand the precarious nature of Bitcoin today and we could be set for a bear market rally for an asset class that has been much maligned.
Cryptocurrencies have a reputation for being difficult to understand, so don’t be embarrassed if you’re befuddled — I felt the same way the first day I tried to understand this stuff.
The Harris Poll earlier this year found that 61% of people who had heard of cryptocurrencies still had little or no understanding of how they work.
How Do I Buy Bitcoin?
Conventional wisdom has it that the most likely route is a Bitcoin online exchange.
Create an account — enter a payment method.
Reputable exchanges will require information such as bank account details or a debit or credit card.
Then proof of identity is required such as a driver’s license, ID or passport.
After verification, purchase Bitcoin by transferring it to a personal hot wallet and buy and sell the asset!
Remember that these accounts coming directly from bitcoin brokers aren’t insured and aren’t secure.
Therefore, a better way to mitigate risk is by going through a Bitcoin ETF on the U.S. public markets with an official broker registered with the Security and Exchange Commission (SEC).
Not only do public stocks provide additional security as a bitcoin trading vehicle, but ETFs are an aggregation of crypto asset tracking data points reducing the volatility even more.
Unregulated crypto exchanges come with a higher understanding of operational and systemic risk and not everyone wants to venture into the arid Wild West without a horse or water.
If you trade with an official brokerage registered with the SEC, you are covered by Federal Deposit and Insurance Corporation (FDIC) insurance for up to $250,000 per account holder in a financial institution.
If there are joint owners, then the account is insured for up to $500,000 ($250,000 for each owner).
The FDIC is a U.S. government agency so, in effect, these accounts are federally insured.
There is also another layer to this — you are covered by Securities Investor Protection Corporation (SIPC).
SIPC is a U.S. government creation but not an agency of the U.S. and insures all brokerage accounts up to $500,000, but only up to $250,000 for cash in such accounts that are intended to be used for securities transactions.
Cash in brokerage accounts only for the purpose of earning interest is not protected. While SIPC has been established by Congress, it is funded by all of its member brokers/dealers.
In many cases, SIPC protects against unauthorized trading or theft in the account.
My favorite crypto ETF is Amplify Transformational Data Sharing ETF (BLOK) which has morphed into one of the best crypto ETFs on the market since its inception.
BLOK is an actively managed ETF that seeks to provide total return by investing at least 80% of its net assets in equity securities of companies actively involved in the development and utilization of blockchain technologies.
BLOK’s biggest two positions are Bitcoin proxy MicroStrategy (MSTR) and a Canadian crypto mining company called Hut 8 Mining Corp (HUT).
I have already shot out a MicroStrategy trade alert to new readers and am incredibly bullish on the company.
However, this ETF encompasses more than MSTR offering broader exposure to firms related to Bitcoin, crypto miners, and software companies that are heavily into crypto.
Hut 8 engages in industrial-scale bitcoin mining operations. It also owns and operates 38 BlockBoxes in Drumheller, Alberta, and 56 BlockBoxes in Medicine Hat, Alberta.
BlockBoxes are one of the most powerful and cost-effective bitcoin mining units available on the market.
BLOK doesn’t track bitcoin 1:1, but it does mimic the price action relatively closely albeit with less extreme swings.
Controlling excess volatility is something you should be happy about.
BLOK also has an expense ratio of 0.71% which isn’t too expensive for those who want to buy and hold the ETF and not trade the derivative.
Buying BLOK is most likely the best way to ensure safe trading under the framework of the SEC, but I understand others have a higher risk profile which is also welcome.
To understand more about the ETF BLOK, click here.
(https://amplifyetfs.com/blok.html)
Although crypto has entered a crypto winter of sorts, it should be worth a trade from low levels. At least BLOK guarantees that you will be liquidated from your position and not frozen like some of these unregulated crypto exchanges.
“Bitcoin will do to banks what email did to the postal industry.” - Said Swedish information technology entrepreneur and founder of the Swedish Pirate Party Rick Falkvinge
Mad Hedge Bitcoin Letter
July 14, 2022
Fiat Lux
Featured Trade:
(BITCOIN OR ETHEREUM)
(BTC), (ETH)
In the crypto community, investors fiercely defend why Bitcoin (BTC) will be more valuable than Ethereum (ETH) or vice versa in the future.
It was only just last year, we were presented with a situation where both were going up, and primarily because of the law of numbers, the growth rates for ETH were higher because the coin was priced in the low thousands.
When the pronounced equity selloff started to really accelerate at the beginning of this year, it offered a snapshot into which currency is best suited to endure heavy systemic stress.
The winner, and not even close I might add, was and still is Bitcoin.
Saying Ethereum has been having a hard time is an understatement, it has sunk from a peak of $4,800 to $1,000 today.
In relative terms, BTC has outperformed ETH by around 40% during this equity turmoil showing itself as still the best in show and the only reasonable crypto to invest in.
I am on record for saying ETH would be higher than BTC in the future earlier last year because of the accelerated growth input of the asset in a growth industry.
That all changed once the dynamics reversed and tailwinds became headwinds, and now, we are really witnessing ETH’s true colors.
It simply isn’t as good as BTC period.
I have heard of some pundits pushing back the timeline of when ETH will surpass BTC to 2030.
I would respond by saying what is that based on?
Hope?
I do believe the upcoming system shift to proof-of-stake (PoS) will take absolutely no part in ETH usurping the crypto throne ten years from now.
Investors don’t care if the coin is produced using hydrocarbon energy or windmills.
It’s not really a big deal to them.
I would probably say it will never happen, pointing out that BTC is digital gold while ETH is the second iteration of the internet.
I have seen nothing that suggests that ETH's software or code is so much superior to that of BTC so much so that we are about to experience a revolutionary shift.
It’s not that at all.
To say that “there’s plenty of room for both” is also something I don’t agree with because I believe this is a winner take all type of proposition which is an inherent dynamic embedded in technology.
There are over 20,000 crypto coins and most of them are scams.
Even if ETH reduces hydrocarbon energy and increases its security, that doesn’t mean that BTC will have less security advances relative to ETH over time.
Even more ironic is the PoS switch means that the system will need to run a validator as the backbone of the network.
The validator is expected to maintain sufficient hardware and connectivity to participate in block validation and proposal.
In return, the validator is paid in ETH (their staked balance increases).
Validators miss out on ether rewards if they fail to participate when called upon, and their existing stake can be destroyed if they behave dishonestly.
Once activated, validators receive new blocks from peers on the Ethereum network.
No offense, this sounds like a centralized version of ETH and not a decentralized coin.
Proof-of-work is when any random guy can hook up to a power grid and produce a BTC which he can take proceeds from. He has no control over the system and nobody knows who he is.
The validators being held by a code of conduct and penalized or rewarded by that is absolutely what I consider centralization.
Ultimately, I don’t believe ETH has any special advantage over BTC and the PoS switch is a lot of marketing chutzpah.
The fact is that BTC has outperformed ETH when the equity sushi hit the fan and honestly, who cares about PoS.
Investors care about preserving the value of their portfolios.
If a choice between one, invest in BTC and avoid ETH.
