Your Guide To Bitcoin ETFs, Halving, Mining & More | $BTC Trade Idea

The Origin Of Bitcoin

Bitcoin was invented in 2008 by Satoshi Nakamoto, a pseudonymous individual or group. It was introduced in a white paper titled: "Bitcoin: A Peer-to-Peer Electronic Cash System", motivated by the desire for a decentralized, secure, and anonymous digital currency. In 2009 Bitcoin launched with the first mined block, dubbed "the genesis block".

The Enigma Of Satoshi Nakamoto

Satoshi Nakamoto, the pseudonym behind the Bitcoin white paper and initial code, remains a shrouded figure. Individuals like Nick Szabo, Craig Wright, and Dorian Nakamoto have been proposed as potential identities, but none have been definitively proven. The mystery adds to the mystique of Bitcoin and the allure of a decentralized system.

The Bitcoin White Paper "Bitcoin: A Peer-to-Peer Electronic Cash System."

In 2008 Satoshi Nakamoto published the Bitcoin white paper. It was met with curiosity and skepticism from the general public and financial institutions. The white paper proposed a new way to send and receive money using digital payments directly between individuals, without banks or intermediaries. It introduced Bitcoin, a digital currency controlled by no one, limited in supply, and secured by a network of computers. Here are some notable quotes from the Bitcoin white paper:

• "We have proposed a system for electronic transactions without relying on trust." This opening line summarizes the core vision of Bitcoin, a digital currency that functions without the need for a central authority or trusted third party.
• "The root of the trust problem is not technology, but people." This quote dives deeper into the reasoning behind Bitcoin's design. It highlights the inherent limitations of trust-based systems and emphasizes the idea of using technology to create a system that is inherently secure and reliable, regardless of individual actors.
• "If enough people run nodes, Bitcoin's financial system will be much faster than the world's current system of international money transfers." This quote showcases the potential for Bitcoin to revolutionize the way we transfer money globally. It envisions a future where instant and low-cost transactions are achievable through a decentralized network.

The 2008 financial crisis exposed inefficiencies and injustices in centralized banking, prompting Nakamoto's search for a better alternative. Bitcoin aims to remove control from government and financial institutions, empowering individuals with greater ownership and control over their own money.

The Story Of The Genesis Block

Mined on January 3rd, 2009, the genesis block contains the text "The Times 03 Jan 2009 Chancellor on brink of second bailout for banks," linking Bitcoin's birth to the 2008 financial crisis and its perceived need for a new, independent monetary system. This block marks the start of the blockchain and remains embedded forever in its foundation.

While the identity of the person who mined the genesis block remains unknown, it's believed to be Satoshi Nakamoto, the pseudonymous creator of Bitcoin. The reward for mining the genesis block, 50 Bitcoins, was sent to an address controlled by Satoshi Nakamoto. While it's technically possible someone else mined the block and sent the reward to Satoshi later, this scenario seems less likely. No other individual or group has credibly claimed responsibility for mining the genesis block. While some theories speculate about Satoshi's true identity, none directly challenge his association with the genesis block.

How Bitcoin Works

Bitcoin is built on a decentralized ledger called a blockchain. Transactions are recorded in blocks, chained together using cryptography. This is secured by proof-of-work mining, where computers solve complex puzzles to add blocks. The blockchain uses pseudonymous addresses, not tied to real identities.

• Decentralized ledger: A record of transactions that is not controlled by any single entity, unlike traditional bank databases.
• Blockchain: A specific type of decentralized ledger where data is grouped into blocks, chained together chronologically, and secured by cryptography. Imagine it as a digital book of transactions, open to anyone to view and verify.
• Blocks: Groups of transactions bundled together with additional information like timestamp, previous block hash, and miner's reward. Think of them as pages in the digital book.
• Timestamp: Imagine a block as a page in a ledger, and the timestamp as the date and time that page was written. It captures the precise moment the block was added to the chain, establishing chronological order and preventing the manipulation of transaction order. Each block's timestamp serves as a vital piece of evidence for the chronological history of the entire blockchain.
• Previous Block Hash: Think of a hash as a unique fingerprint created by a complex mathematical function applied to the block's data. It serves as a secure link between blocks, building a chain of trust. When a new block is created, it not only contains its own hash but also includes the hash of the previous block. This creates a chain where tampering with any block would be easily detectable, as it would invalidate the hash of all subsequent blocks. This ingenious mechanism ensures the immutability of the blockchain, meaning once data is recorded, it can't be altered or deleted without affecting the entire chain.
• Miner's Reward: Mining involves using computational power to solve complex puzzles and validate new blocks. As a reward for this effort, miners receive a certain amount of bitcoin upon successfully adding a block to the chain. This reward incentivizes miners to maintain the network and secure the blockchain. Over time, the reward amount decreases, creating a programmed scarcity of bitcoin and contributing to its value.
• Transaction recording: Transactions are digitally signed and verified by the network before being added to a block. Once a block is filled, it's closed and linked to the previous block using a unique identifier called a "hash."
• Chaining blocks: Each new block contains the hash of the previous block, creating a chain that cannot be tampered with. If someone tries to alter a block, the hash mismatch becomes obvious, invalidating the entire chain.
• Cryptography: A diverse set of techniques used to secure information and ensure its authenticity and privacy. It acts like a complex lock and key system for the digital world.
• Cryptographic hash function: One-way mathematical function that turns any data (e.g., a transaction) into a unique alphanumeric string (e.g., the block hash). It's impossible to reverse engineer the original data from the hash.
• Digital signatures: A mathematical code used to verify the authenticity of a transaction. Only the owner of the private key can create the signature, and anyone can verify it with the corresponding public key.
• Pseudonymous Addresses: With Bitcoin you have a public address, which is an identifier used to receive bitcoins. It acts like your bank account number, but it's not directly linked to your identity. It comes with a private key, which is a secret code used to spend bitcoins from a public address. Think of it like your bank account password.
• Double-spending problem: Solved by the blockchain structure. Once a transaction is recorded, it can't be spent again because all nodes in the network have a copy of the ledger.

Bitcoin Mining

Bitcoin mining is the heart of the network, powering it with security and distributing new bitcoins into circulation. Let's break down the process:

Solving The Puzzle

Miners use specialized computers to solve complex mathematical problems. These problems involve cryptographic algorithms specifically designed to be difficult and computationally expensive. Miners use specialized hardware, like ASICs (Application-Specific Integrated Circuits), to hash data related to the next block, aiming to generate a specific hash that meets the required difficulty.

Think of the ASICs as super-powered calculators designed for one task: Bitcoin mining. They outperform regular computers, giving them a significant edge in the mining race. The hashing algorithm used in Bitcoin mining is called SHA-256. Miners gather the data for the next block, including pending transactions, a timestamp, and the previous block's hash. They feed this data into the SHA-256 algorithm, which produces a unique 64-character string of letters and numbers called a hash. Miners repeat this hashing process millions of times per second, with small variations in the input data (called a "nonce"), hoping to create a hash that meets the current difficulty target.

The Bitcoin network sets a target for how difficult a hash must be to be considered valid. This target is adjusted regularly to ensure a steady block creation rate. The miner who first generates a hash that is less than or equal to the difficulty target wins the right to create the next block and receives the reward. While ASICs increase the odds of finding a valid hash, there's still an element of chance involved. It's a continuous race among miners, with luck and computational power deciding the winner. Once a miner finds a valid hash, they broadcast it to the network for verification. If verified, other miners accept the hash, and the winner creates the new block, adding it to the blockchain.

Building A Block

The winning miner assembles a new block, including verified transactions, a timestamp, the previous block's hash, and their own hash. It's like completing a puzzle piece that fits perfectly into the blockchain sequence. Once the block is validated by the network, it's added to the chain, becoming a permanent record of the included transactions.

The Reward

The winning miner receives a block reward in newly minted bitcoins. This incentivizes participation and secures the network by rewarding computational power dedicated to solving puzzles. The Bitcoin reward is halved every 210,000 blocks (roughly every 4 years), creating a predictable and limited supply of bitcoins. The mining difficulty automatically adjusts based on the network's computational power. When more miners join, the puzzles become harder to solve, ensuring a steady block creation rate. This self-regulating mechanism guarantees a constant flow of new bitcoins without flooding the market.

Cost Of Mining

Specialized mining equipment like ASICs is expensive and consumes significant electricity. The cost of ASICs for Bitcoin mining varies significantly depending on several factors, but generally starts in the hundreds and can go up to thousands of dollars. While the initial cost of the ASIC is important, remember that mining is energy-intensive. You need to factor in the ongoing cost of electricity to run the machine, which can vary greatly depending on your location and energy rates. Also ASICs require proper cooling and ventilation to prevent overheating and damage. Maintenance costs can add up over time.

For ASICs expect to pay anywhere from $300 to $5K+. you'll likely need cooling equipment, additional power supplies, and possibly a specialized mining rig to properly house and operate your ASIC. Add another $100-$500 for such equipment. Maintenance can add another $50-$100 per year, with mining software adding another $50-$100 to the initial investment. Electricity can be one of the biggest variable influencing profitability for miners. For example, if your ASIC consumes 2,000 watts (2 kW) and your electricity rate is $0.10 per kWh, running it for 24 hours would cost $4.80. Multiply that by 30 days, and you're looking at around $144 just for electricity per month.

Based on these factors, the overall cost of mining Bitcoin can fall within a broad range of $1,000 to $10,000 or even more. This includes the initial hardware cost, estimated electricity expenditure for a few months, and other ancillary expenses. It's important to keep in mind that as more miners join the network, difficulty increases, making it harder to mine and earn rewards. If Bitcoin's price drops, your potential earnings decrease as well. We will discuss the Bitcoin halving's effect on mining as well later on in this article.

Problems Bitcoin Solves

• Double Spending: Traditional digital currencies face the double-spending problem, where the same unit can be spent twice. Bitcoin eliminates this through its blockchain technology. Every transaction is recorded publicly and chronologically, making it impossible to spend the same bitcoin twice (no overdrawn bank accounts).
• Centralization: In traditional financial systems, central banks and governments control currencies and influence monetary policy. Bitcoin offers an alternative. It's decentralized, meaning no single entity controls the network or the issuance of new bitcoins. This empowers individuals with greater control over their finances and reduces reliance on centralized institutions.
• Censorship: Governments or institutions can sometimes censor or restrict financial transactions. Bitcoin potentially helps bypass such limitations. It operates on a peer-to-peer network, eliminating the need for intermediaries who could censor transactions. Governments have limited control over the Bitcoin network, potentially offering greater financial freedom and access.
• Fraud: Traditional systems can be vulnerable to fraud, such as counterfeiting or unauthorized transactions. Bitcoin's features mitigate these risks. The transparent and public blockchain allows everyone to verify the legitimacy of transactions, deterring fraudsters. Strong cryptography secures transactions, making them tamper-proof and irreversible.
• Faster and cheaper international transactions: By bypassing traditional banking systems, Bitcoin can offer faster and cheaper cross-border payments.
• Financial inclusion: Individuals in countries with limited access to traditional financial services might benefit from Bitcoin's accessibility and ease of use.
• Increased transparency and accountability: The public nature of the blockchain can promote transparency and accountability in financial transactions.

Bitcoin Challenges And Concerns

• Volatility: Bitcoin's price can fluctuate significantly, making it a risky investment.
• Environmental impact: Bitcoin mining consumes significant energy, raising concerns about its environmental footprint.
• Security vulnerabilities: While generally secure, the Bitcoin network is not immune to hacking or other security breaches.
• Limited adoption: Although growing, Bitcoin is still not widely accepted as a mainstream currency, limiting its practical use.

Bitcoin Timeline

Early Days (2008-2010):

• 2008: Satoshi Nakamoto publishes the Bitcoin white paper, laying out the vision for a decentralized digital currency.
• 2009: The genesis block is mined, marking the official launch of Bitcoin. Initially, only a small group of cypherpunks and tech enthusiasts take notice.
• 2010: The first commercial transaction occurs: Laszlo Hanyecz buys two pizzas for 10,000 bitcoins, now worth over $300 million! This event becomes a legend in the Bitcoin community.

Gradual Adoption and Early Hype (2011-2013):

• 2011: Bitcoin's price starts to gain traction, reaching $1 by February and $11 by June. Early media coverage sparks public interest.
• 2012: The first Bitcoin exchange, Mt. Gox, opens, facilitating larger-scale trading.
• 2013: Bitcoin's price skyrockets from $13 to $260 in just two months, fueled by speculation and media hype. However, a crash follows, raising concerns about volatility.

Maturation and Mainstream Recognition (2014-present):

• 2014-2016: Bitcoin's price fluctuates significantly, but the technology matures and the ecosystem expands with new businesses and services.
• 2017: Another massive price surge brings Bitcoin to nearly $20,000, drawing mainstream attention and attracting both investors and skeptics.
• 2018-2020: A bear market sees the price drop drastically, prompting debates about Bitcoin's future.
• 2021 and beyond: Renewed interest and institutional investment push Bitcoin's price to record highs above $68,000. Today, Bitcoin is recognized as a major asset class and continues to evolve. Just this week Bitcoin Spot ETFs were approved for trading on major exchanges.

Initially, Bitcoin was met with curiosity and skepticism from the public and financial institutions. Many questioned its technical viability and real-world use cases. The 2013 price boom brought widespread media attention and attracted more interest, but also concerns about volatility and potential for illegal activity. Today, Bitcoin's perception is complex and diverse. Many see it as a revolutionary technology and alternative investment, praising its decentralization, limited supply, and potential for financial inclusion. Others remain skeptical, worrying about volatility, environmental impact, and potential for criminal activity. Governments and regulatory bodies are still grappling with how to approach Bitcoin, with varying degrees of acceptance and regulation. The story of Bitcoin and its public reception is far from over. As the technology evolves and its influence grows, the debate over its future is sure to continue.

Bitcoin ETFs

In October 2021 the first ever Bitcoin futures ETFs were approved in the US, marking a milestone for Bitcoin's journey towards mainstream adoption. These ETFs track the price of Bitcoin futures contracts, not directly holding Bitcoins themselves. Bitcoin Futures contracts are agreements to buy or sell Bitcoin at a set price on a future date. They allow investors to speculate on Bitcoin's price without actually holding any Bitcoins.

Spot Bitcoin ETFs, approved this week, directly hold Bitcoins, aiming to track the actual spot price of Bitcoin traded on cryptocurrency exchanges. Compared to Bitcoin Futures ETFs, spot Bitcoin ETFs have a closer correlation with Bitcoin's price, potentially higher liquidity, and increased institutional investment. The hope is this will attract a wider range of investors, including those hesitant about futures contracts or lacking access to cryptocurrency exchanges. Increased institutional investment could bring more stability to Bitcoin's price, but also introduce new risks and potential manipulation.

See why we are watching Hashdex $DEFI Bitcoin ETF

Bitcoin Halving 2024

Imagine a scenario where miners earn 50 newly minted bitcoins for each block they create on the blockchain. Now, picture this happening for every block indefinitely. The increasing supply of bitcoins could potentially lead to inflation, causing their value to decrease over time. This is where the halving comes in. Every 210,000 blocks (roughly every four years), the reward for mining a block gets cut in half. So, in our example, after the first halving, miners would only receive 25 bitcoins per block, and then 12.5 after the second, and so on. This progressively slows down the rate at which new bitcoins enter circulation.

Bitcoin's creator, Satoshi Nakamoto, believed in a controlled and predictable supply of the cryptocurrency to ensure its long-term value. By limiting the new supply, the halving helps prevent hyperinflation and protects the value of existing bitcoins. While the reward decreases, the value of each bitcoin potentially increases over time, making mining still profitable and maintaining network security. As the total supply of bitcoins approaches its pre-determined limit of 21 million, their perceived value may rise due to increased demand and limited availability.

The next Bitcoin halving is expected to occur sometime in April 2024. It will mark the sixth halving since Bitcoin's inception, reducing the block reward from 6.25 bitcoins to 3.125 bitcoins. Historically, Bitcoin's price has risen significantly after each halving due to increased demand and limited supply. The anticipated price movement could lead to periods of high volatility in the Bitcoin market, creating both opportunities and risks for investors.  With reduced rewards, less efficient mining operations might struggle to remain profitable, potentially shifting the power balance within the mining pool landscape.

Pre-Halving: The reward per block mined was 50 BTC
1st Halving: November 28, 2012 at 210,000 blocks the reward was cut to 25 BTC.
2nd Halving: July 09, 2016 at 420,000 blocks the reward was cut in half from 25 BTC to 12.5 BTC.
3rd Halving: May 11, 2020 at 630,000 blocks the reward was cut in half from 12.5 BTC to 6.25 BTC.
4th Halving: Estimated to be around April 22, 2024 at 840,000 blocks. The reward will be cut in half to 3.125 BTC.

Check out our blog post last week that breaks down the Bitcoin halving in detail, and talks about 3 Alt-Coins we are watching for the Bitcoin 2024 halving!

The SEC & Governments' Stance On Crypto

The SEC considers bitcoin a commodity, not a security. Even after passing the Bitcoin spot ETFs, they have expressed concerns about market manipulation, fraud, and investor protection. Regulatory frameworks are still evolving, with potential for stricter regulations. Governments worldwide have varying stances, from supportive to restrictive.

Bitcoin As A Commodity

• SEC's Stance: The US Securities and Exchange Commission (SEC) has generally classified Bitcoin as a commodity, similar to gold or oil, based on its lack of centralized issuer or reliance on third-party efforts for value. This means Bitcoin trading falls under the Commodity Futures Trading Commission (CFTC) jurisdiction.
• Pros: This classification potentially offers greater flexibility for market participation and innovation, encouraging the development of Bitcoin derivatives and investment vehicles.
• Cons: Concerns remain about potential market manipulation and lack of robust investor protection compared to securities regulations.

Concerns About Market Manipulation And Fraud

• Market Manipulation: Bitcoin's relatively unregulated market is susceptible to manipulation via tactics like wash trading, pump-and-dump schemes, and large market orders influencing price movements.
• Fraud: Crypto scams, hacks, and rug pulls targeting inexperienced investors pose significant risks, highlighting the need for stronger consumer protection measures.
• Investor Protection: Lack of clarity on regulatory frameworks makes it challenging for investors to navigate risks and ensure investment decisions are informed.

Evolving Regulatory Framework

• Global Coordination: Different countries are taking diverse approaches to Bitcoin regulation, ranging from supportive frameworks in Singapore to restrictive bans in China.
• US Landscape: While the SEC considers Bitcoin a commodity, it has asserted regulatory authority over certain crypto assets deemed securities based on the "Howey Test," emphasizing the need for investor protection.
• Future Uncertainty: The regulatory landscape around Bitcoin is constantly evolving, making it difficult to predict future regulations and their impact on the market.

Varying Government Stance

• Supportive Governments: Singapore and El Salvador have adopted Bitcoin as legal tender, demonstrating an endorsement of the technology and its potential economic benefits.
• Restrictive Governments: China has banned Bitcoin mining and trading due to concerns about financial stability and energy consumption.
• Cautious Approaches: The US and EU are cautiously exploring regulatory frameworks to balance innovation with investor protection and financial stability concerns.

The Story Of Ross Ulbricht

In 2011, Ross Ulbricht founded the Silk Road, an online marketplace operating on the dark web exclusively using Bitcoin as its currency. Users could anonymously buy and sell various goods, including illegal drugs. Using Bitcoin allowed the Silk Road to operate outside the traditional financial system and evade detection from authorities for several years. It provided anonymity for both buyers and sellers, making it challenging to track transactions and trace activity. While Bitcoin offered anonymity, it also left a digital trail of transactions on the blockchain. In 2013 Authorities used sophisticated data analysis techniques to track these transactions and identify Ulbricht as the operator of the Silk Road. He was convicted of several charges, including money laundering and running a criminal enterprise, and sentenced to life in prison.

Postive:

• Showcased Bitcoin's potential for decentralization, anonymity, and secure transactions.
• Accelerated mainstream adoption as it forced governments and financial institutions to acknowledge Bitcoin's existence and potential impact.
• Sparked discussions about regulatory frameworks for the cryptocurrency industry.

Negative:

• Cast a negative light on Bitcoin, associating it with crime and illegal activities.
• Increased scrutiny and potential for stricter regulations on Bitcoin and the broader crypto space.
• Raised concerns about Bitcoin's potential for money laundering and other illicit activities.

Free Ross Ulbricht NFT

The Free Ross Ulbricht NFT is a collection of digital artwork and writings created by Ross Ulbricht, with the aim of raising funds for his legal defense and potentially advocating for his release from prison.

There have been two key NFT collections associated with Ross Ulbricht's case:

Ross Ulbricht Genesis Collection:

• Launched in December 2021 on SuperRare, it featured ten artworks and writings created by Ulbricht throughout his life, from childhood to present day, along with an animation created by Levitate with Ulbricht's voiceover.
• The auction raised over $1.4 million, with proceeds going towards a donor-advised fund supporting various causes, including helping children visit incarcerated parents and efforts to free Ulbricht.

Ross Ulbricht Growth Collection:

• Launched in April 2022 at Bitcoin Miami, it included four physical framed paintings and corresponding NFTs with Bitcoin-tokenized certificates of authenticity and one Bitcoin-tokenized digital animation.
• Bidding reached almost $300,000, but the collection ultimately did not receive a final bid meeting the reserve price.

These NFT collections represent a controversial topic, with supporters viewing them as a way to support Ulbricht's legal efforts and raise awareness about his case, while critics raise concerns about glorifying his past actions and potentially profiting from a criminal act. The legality and ethical implications of using NFTs for such purposes are still debated.

How Our Exclusive In-House Analysts Are Trading Bitcoin $BTC

"$53.3K is an important high timeframe level for me. I'm looking for a squeeze above that level and then a 4H candlestick close back below to take a short position, taking profit on the way down to $32,690. Stop loss on the high that gets made above $53.3K. That's the only clear setup I see to go short from, anything else is too risky. Longing here after all this ETF volatility is also risky. Long term I am SUPER BULLISH. After the halving I wouldn't be surprised if we see a selloff first and then higher highs. The effect of news is minimal in my honest opinion, it just creates a lot of volatility, but the chart is going where it is programmed to go regardless." BTC_Jay

Check out our Discord!

Entry: Watching for price to break above $53.3K, then watching for a 4H candlestick close back below $53.3K for entry.
Target: Taking profits on the way down to $32,690
Stop Loss: Based off of personal risk:reward

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Keep in mind we are bullish on Bitcoin overall, and trade it (as well as other crypto) regularly in our Crypto Trading Discord: Titan Trading. This is just one longer term setup we have, so make sure to check out Titan Trading for trades in the meantime!

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