The Miner Cycle

Miners have a serious impact on the price of bitcoin and other cryptocurrencies. These people are experienced in the game, they have been in it for a long time and therefore now have a lot of capitol behind them. understanding the psychology of mining bitcoin and getting ahead is a key to understanding the price waves that we experience.

Miners are acutely aware of the dynamics of profitability between mining and holding bitcoin. they have experienced times when buying and holding bitcoin would have been more profitable than mining, they have also experienced times when mining has been the easiest and most effective way to get bitcoin quickly and at below-market rates. Mining has an advantage of collecting somewhat anonymous funds and so the balance here is dependent on legislation and regulation by the banking system. Buying and holding bitcoin is most scary and often costly when the price is volatile. This lead to a cycle where mining operations are commonly started during times of volatility, after a peak. Buying and holding by smart money happen most in low volatility. Miners, when they have spare bitcoin, which they often do, in times of low volatility, with increasing "mining difficulty" levels are increasingly tempted to hold there bitcoin rather than sell and buy more miners.
Buying both miners and bitcoin require free funds, with mining requiring more time to maintain. Due to legislation and buyers privacy fears, it is easy to sell bitcoin for paper cash and more difficult to sell for wired money. It is nearly impossible to buy miners with paper cash because they are manufactured internationally. It is also not possible to pay power bills with paper cash and difficult to pay with bitcoin. This leads to a tendency for some miners to accumulate paper cash.

If miners are strict they will avoid paper cash but then they will either accumulate bitcoin or wired digital funds from sales on exchanges. Wired funds they will definitely have to pay tax on in that financial year. So the cycle of financial years tax filings in high mining countries has an impact.

When volatility is high there will be a further tendency to want to leave the funds on the exchanges because of withdrawal costs and because of lost opportunity costs, if they choose to also trade there bitcoin. The strategy would simply be mean reversion, which will make good money in high volatility but over time will reduce the volatility through its own practice.

Through these processes, you can see that there is a lot of logic to the patterns of the bitcoin charts in the past, in particular, the last two booms. Whether this cycle continues to be a strong force is not as clear.

10k Close But No More Tulip Talk

Not long ago no coiners would harp on about Bitcoin being like the famous tulip bulbs bubbles of the Netherlands. Now after having been much higher media no longer bring it up, though the price is still very high as compared with previous years. The plant itself isn't actually that bad of a metaphor. The phonomenon is not the same but right now the bulbs might be getting ready to flower. Spring is coming.

Why Bitcoin Holders Can't Wisely Sell Their Bitcoins

If you have been interested in bitcoin for the last few years, there is no doubt that you have made a lot of money. You have been a good hodler, but maybe you want to buy something, a house, a car, some dinner or a holiday.  So you go to sell, but as a thinking person, you find yourself bogged down.

To start there is forking. You don't want to just through money away so you want to cash in on your bitcoin cash and your bitcoin gold before you sell your good old traditional bitcon. That takes time and can be a logistical nightmare. On top of that, there are the other endless forks that are worth a little now, like bitcoin diamond, bitcoin silver, bitcoinx, bitcoin cash plus and super bitcoin that may one day be worth a lot. In a way, bitcoin is becoming an interest-earning asset and it compounds. Forks are even starting on top of forks.

Whether you need to pay taxes or not is a difficult question to answer and increaingly puts a damper on selling. Taxes across the world are confusing, is it a currency, is it an asset, do you pay capital gains or not. In NZ it is supposed to be an asset. if bitcoiners are to be required to pay capital gains when they sell then they will be tempted not to, if they are to pay on gains or interest yearly, then they must either find a way to sell or just try to keep their stash secret or in another jurisdiction.

Anonymity is also at risk when you sell your bitcoins. especially if you have been holding them for a long time it is likely that at least the person who you sell them to will be able to trace those bitcoins back to figure out how many others you likely have and where you or someone close to you has been spending them.

Banks continue to make it hard to sell because they can sometimes not be receptive to large deposits from bitcoin sales, or large cash deposits. When selling bitcoin you often have to do it on an overseas exchange, this leads to a slow four day "swift" (the name sounds so ironic lately) transfer and probably an inquisitory phone call from the banks call centre. If you sell for cash you have a security risk, someone could rob you, and then you can't deposit it without questions, it's also difficult to spend cash on large items. In many cases, cash is treated worse than cryptos. Sellers could be running back to bitcoin so they can buy things on cheapair, overstock and open bazaar.

So when faced with all this.With FOMO from forks and fear of taxes, publicity, banks and cash, in addition to FOMO of the regular 100% gains, I can see why many just decide to crack a homebrew and HODL Lets review some beers. 

Mark Says No to a Billion Dollars

Lightning Apps on Main Net

With new apps coming out and proving themselves lightning is making Visa level transaction volumes real for bitcoin. They are fighting back, but talking about bubbles seems very last month. The big question is will this, combined with other developments like rootstock (rsk), mimblewimble and schnor signatures combine to put pressure on competing cryto currencies?

The Circular Bitcoin Economy

The bitcoin economy is becoming more circular. I would argue that it is sustainable and eco. With super cheap transaction cost all it takes is more users to escape. Check out this town in Italy, Rovereto.

Anti-Lambo

 

You escaped wage slavery, told your friends about your plan, they laughed at you and were too scared. Now you buy a lambo. Why? You want to rub your riches in their face and prove that they should listen to you.

Come on we know it's tempting (I wanted one since I was a kid), but don't be a jerk. This is the peoples movement and the lambo that you crash might just put you right back into the rat race, and your friends will hate you for it.