Understanding Bitcoin Halving: A Definitive Guide

Understanding Bitcoin Halving: A Definitive Guide

Introduction

In the world of cryptocurrencies, Bitcoin has emerged as the undisputed leader. Its decentralized nature, limited supply, and global acceptance have cemented its position as the digital gold. A crucial event that takes place in the Bitcoin network every four years is known as "Bitcoin Halving." In this article, we will delve into what Bitcoin halving is, why it occurs, and its impact on the cryptocurrency ecosystem.

What is Bitcoin Halving?

Bitcoin halving, also referred to as "halvening," is a pre-programmed event that occurs approximately every 210,000 blocks, or roughly every four years. It is an integral part of Bitcoin's protocol, designed to control its inflation and regulate the issuance of new coins into circulation.

During a Bitcoin halving event, the block reward for miners is reduced by 50%. In the early days, when Bitcoin was launched in 2009, miners received a reward of 50 BTC for every successfully mined block. After the first halving in 2012, the reward was reduced to 25 BTC, and after the second halving in 2016, it was further reduced to 12.5 BTC. This process continues until all 21 million Bitcoins are mined, making it a deflationary digital asset.

The Purpose of Bitcoin Halving

The main purpose of Bitcoin halving is to create scarcity and mimic the properties of precious metals like gold. By halving the block rewards at regular intervals, the rate of new Bitcoin creation slows down, leading to a predictable and controlled issuance. This is in stark contrast to fiat currencies, where central banks have the authority to print new money at their discretion, often leading to inflation.

The limited supply and predictable issuance of new Bitcoins through halving events have contributed to the asset's perception as a store of value and a hedge against inflationary pressures.

Halving and Scarcity

The scarcity aspect of Bitcoin is fundamental to its value proposition. As the halving events occur and block rewards decrease, the rate at which new Bitcoins enter circulation decreases. This creates an environment where demand can potentially outstrip supply, driving the price higher due to the scarcity factor. Historically, Bitcoin's price has seen significant increases in the wake of halving events, although past performance is not indicative of future results.

Halving and Mining

Bitcoin mining is the process by which new Bitcoins are created and transactions are verified and added to the blockchain. Miners use powerful computers to solve complex mathematical puzzles, and when a block is successfully mined, they are rewarded with newly minted Bitcoins and transaction fees.

With the reduction in block rewards during halving events, miners receive half the number of new Bitcoins for each block they mine. This can have significant implications for mining profitability, especially for miners who rely heavily on block rewards to cover their operational costs. As a result, miners need to become more efficient and competitive, leading to an overall improvement in the mining infrastructure.

Halving and Price Impact

The anticipation and aftermath of a Bitcoin halving event often trigger price volatility. As the date of the halving approaches, there is typically heightened speculation and increased media coverage. This can lead to an influx of new investors and traders looking to capitalize on potential price movements.

After the halving occurs, the reduced rate of new Bitcoin issuance can create a supply shortage, which, combined with sustained or increased demand, may drive the price higher. However, it's essential to note that the market's response to halving events can be influenced by a wide range of factors, including macroeconomic trends, regulatory developments, and technological advancements.

Conclusion

Bitcoin halving is a critical and recurring event that plays a vital role in maintaining the integrity and value proposition of the world's first cryptocurrency. By enforcing a controlled supply and creating scarcity, halving events have a profound impact on Bitcoin's price and its role as a store of value.

As the crypto ecosystem continues to evolve, understanding the dynamics of Bitcoin halving will remain crucial for investors, traders, and enthusiasts alike. By grasping the underlying principles of halving, one can gain valuable insights into the long-term potential and growth prospects of Bitcoin as a digital asset and a revolutionary form of money.

 Learn more about crypto through this: A cryptocurrency video course for beginners

 

Truths you need to know about money

 

·         The biggest financial institutions in the world are set up to make a profit for themselves, not their clients.

·         Some people are willing to give up things that are far more valuable to get it: their health, their time, their self–worth, their family, their love, and in some cases, even their integrity.

·         Getting rich isn’t being the chess piece in the money game, but becoming the chess player in the game of money.

·         If you want to make real money you should come out of the matrix first.

·          Proper asset allocation divides your assets into buckets that are secure and give you peace of mind.

·         It’s time for you to decide to become an investor, not just a consumer. To become rich you have to get money from others’ pockets.

·         The real truth of mutual funds is this if someone comes to you with an investment opportunity you have to put 100% of your capital and take 100% of the risk, and if it makes money, he wants 60% or more of the upside to come to him in fees. And by the way, if it loses money, you lose, and still, he gets paid! 90% of American investors, invested in a typical mutual fund,  and believe it or not these are the terms to which you’ve already agreed.

·        96% of all actively managed mutual funds fail to beat the market over any sustained period.

·         In the financial market,  people tend to buy high and sell low. They do this based on their emotions (or based on the broker’s recommendations).  But when the market falls, when we can’t take the emotional pain any longer, we sell. And when the market goes up, retail investors buy more. It’s simply bull market is like sex. It feels best just before it ends.

·         If you pack 1000 gorillas into a gymnasium, and teach them each how to flip a coin, one of them flip heads ten times in a row. Most would call that luck. But when that happens in the fund business we call him a genius!

 

Trading Secrets & Background

Risk Management

 Cut your losses and let your winners run. Even if your win rate is 40% while trading, I believe you still can make a profit. How do you do that? If you go with the trend (Following trend) according to the above example while doing 10 trades, you will get 6 losses but still, you will make 10x the capital invested. (Imagine you enter a trade at a coin at 10 cents. If it goes to .80 cents, if you cut the losses and let the winning trades run, you can make an overall profit). In trading, the more successful person is not the one who analyzes properly, but the one who manages the risk properly. In another example, imagine your win rate is 99%. In 99 cases, if you bought a coin for $100 and sold it at $101, you made a profit, but if you make a bad trade, you lose the $100 invested in one single trade. Because of that managing risk is very important.

Trading is combined game of probability & statistics

The coin toss experiment is also like a trade. The reason is that when tossing a coin, the probability of heads falling is 50%. As shown in the chart below, the first time (at the initial stage) the chart varies greatly in the first 25 cases. (more ups & down) but going up to repetition 400,500,800 it goes like a line. After understanding this you can identify losses as a percentage, and how much you profit as a percentage in the market. One does understand this will not allocate 100% of his capital to trade once. He divides his available capital into small slices and distributes his trades according to his win rate by doing more trades. ( if you have 10,000$ trading capital you can allocate 1000$ × 10 or 500$ x 20). This is emotionally challenging work. But what we do here is to smooth the expected return. Many people lose money no matter how well they analyze and trade because of this reason. It is here that by making more trades in accordance with a certain strategy, you can achieve meaningful results.

Can the future be predicted from past data?

What we do when trading is to gather some information from the past and determine the price of crypto in the future.  Otherwise, it is predicted that the price will move in this way.

But my answer is somewhat different.  In the cases of predicting the future only by doing chart analysis, it is likely to be wrong.

To avoid it, we have to carefully find out whether the background data supports changing the relevant direction or moving in the same direction.  Example - Recently, after bitcoin crashed to the 30,000$ level, many people said that this is a strong support level, so it is going to take an uptrend again.  After bitcoin crashed 25,000$ and after 20,000$, various people expressed their opinions on social media/news that there will be a big reversal (BTC to 100,000$).

But today BTC is at 15,000$ level. No matter what support levels the chart comes to if the market is to go up, if new money is to come into the market, it should be seen whether the necessary background is formed.  Such a background has not been formed.  So how can there be an uptrend when there is no such background?  Before technical analysis, that is the point to consider first.  Before when the uptrend started, were there any problems like this in the world, Was there inflation, was there war, was there any economic crisis, was there any recession, there was nothing.  It was very positive.  The market analysts have said the market bounced from the 200-day moving average three times before, and it will happen again this time, but it doesn’t.

Before making such decisions we have to consider whether the necessary background has been created.  It is difficult to tell the long-term from past data.  Therefore, you can save a lot of money by avoiding making decisions based only on technical.

 

How to identify the market bottom fundamentally?

In determining the market bottom, from technical analysis, it is very easy to look at the support levels and use Fibonacci to reach some decisions.  But this is done by fundamentals when the market participants get tired of the market, when they get to the point where even asking about the market becomes a headache, the bad news keeps coming and there is no end, the bottom starts.  That is where the bottom is made.  This is when smart money enters the market.  It is from this time they collect to the long term.

 

 

Trading Philosophy and Top Trading Strategies

 

Ø  Trading Philosophy

 

This is an extremely important section and lays the foundation needed to be a successful trader. There is no set legal framework for this and the more important thing is the set of beliefs and principles followed by the trader. This consists of several areas such as risk management, trading strategies, trading expectation, risk tolerance, and individual capital status. Trading decision-making is a combination of all these. It is best to study these topics further and prepare a theory that suits your needs. The following are the top trading strategies and by combining these with other technical analyses and putting them in the decision-making process, more successful results can be achieved.

 

Ø  Trend following strategy

The trend-following strategy is to buy when the price of an asset is in an upward trend and short when the price of an asset is in a downward trend. In trading, a trend is when the price moves in a specific direction. In this strategy, traders enter a long position when the price goes up and enter a short selling position when it goes down. This trading strategy is widely used in all markets such as forex, crypto, and stocks.

  

Ø  Day trading strategy

 

The day trading strategy involves buying and selling financial instruments to close the position at the end of the day to profit from small fluctuations in price. Day traders focus on factors like liquidity, volumes, and volatility before opening a position. Day traders base their decision-making on tools like candle stick chart patterns, trend lines, and volume bars. To be successful in day trading, a special thing they must have is to control their emotions and carry out the trading process.

 

Ø  Scalping trading strategy

 

Scalping is a trading strategy that focuses on profiting from small price changes and making quick profits by reselling. During scalping, stocks with high volume are selected by tracers. The most important thing is that in scalping you must have a correct exit strategy. The reason is that you can lose the value of all the small profits you have made with one loss. A scalping trader makes hundreds of trades per day, and you can succeed in scalping by making the percentage of profit higher than the percentage of loss.

Ø  Swing trading strategy

 

This means that trades are made for both movements in any financial market. They buy when the market is going to go up and short when it is going to go down. They study technical analysis and do trading in over-bought and oversold situations. When there is a strong trend, swing traders work to enter the direction of trade by retracement swings. Especially since they do both long & short, they can get more trading opportunities.

 

Ø  Position trading strategy

 

Position trading is a popular trading strategy where a trader holds a position for an extended period, usually months or years, ignoring small price fluctuations in favor of profiting from long-term trends. Position traders tend to use fundamental analysis to evaluate possible price trends in the market, but other factors such as market trends and historical patterns are also taken into account through technical analysis.

Ø  Over-bought and over-sold strategy

 

Often used in forex and the stock market, it identifies overbought & oversold situations at support and resistance levels through RSI (relative strength index). This belongs to a family of trading tools known as oscillators - so-called because they oscillate when the market moves. When the RSI value is above 70%, the market is considered overbought. This means that traders are speculating that the market may return to a downtrend. Also, when the RSI reaches a level below 30, it is speculated that the market may enter an up movement again.

Ø  End-of-day trading strategy

 

This is where trades are entered at the time the market is scheduled to close. Here, this trades division refers to trading with the understanding that the price will settle at the end of the day. An important thing that happens here is that more attention is paid to the closing price and the price movement of the previous day. They can speculate on the price. Also, they can get more benefits by placing stop loss and taking profit opportunities following a proper risk management and entering trades.

 

Exposed Audit Process of Company

What is auditing? 

This process involves examining a company's accounting records.  But this does not check every bookkeeping of the company, but it checks the sheets among the according records which are fundamental for keeping the accounts.  The main purpose of this is to check whether the accounting reports reveal a true and fair view of the business.  The responsibility of the auditor of the company is to determine impartially whether these have been disclosed under the prescribed accounting standards and laws.

 

 Who are auditors and who appointed them?

The shareholders who own the business appoint a board of directors to run the business.

To achieve the long-term vision of the business, these directors make decisions, and to audit whether they run the business transparently, the shareholders appoint an auditing firm (charted accountant) once a year by voting at the annual general meeting.  The expectation is that a third party will make an accurate assessment of whether the shareholders' money is properly kept in the business and whether it is invested in the right way.  As mentioned above, the responsibilities of the auditors are to check whether the financial statement published by the business is under the proper accounting practices and legal requirements.  In particular, the thing you should remember is that auditors are reporting to shareholders, and not to directors.

 

What is an audit report?

It is a formal document that is issued after auditing whether a business has done business transactions and issued properly created financial statements by a given period of time. And it expresses the auditor's opinion on the financial statement of the entity and shows the true and fair view of its position at a given date.

 

Why all businesses should audit their financials?

What you need to know is that not all fathers are required to audit their accounts. But the business can do so. According to the companies act, it is not necessary for small businesses and dormant businesses that have not been traded in the stock exchange within a year (businesses that have not been traded to be reported within that time frame) to audit their reports. But the thing to keep in mind here is to consider the laws of the country where you are doing business and investigate this further. 1. Sole Proprietary 2. Partnership 3. Non-Profit Organizations If they audit their reports, they are called "non-statutory audits".

 

Who are external auditors and internal auditors?

According to the Companies Act, limited companies need to appoint an independent auditor to monitor their transactions. (This does not apply to dormant companies) In the annual general meeting of public limited companies, the shareholders choose an audit firm and they conduct business audits. They are called external auditors. The primary purpose of these auditors is to re-examine the accounting reports issued by the business and give their conclusions. Then the shareholders can reach a correct conclusion about the truth and the real nature of the business. Internal auditors - In addition to external auditors, the directors can appoint an internal auditor to check the internal transactions of the business. They are employees employed within the business and their role is to conduct an internal audit of whether the business is conducting its transactions properly. When they see any deficiencies in the day-to-day transactions of the business, they advise the employees of the business on how to correct them. They provide information about the internal affairs of the business directly to the board of directors. Appointment of internal auditors is not essential but it plays an important role in the smooth running of business transactions.

 

Analyze Balance Sheet through Laser Eye- Part 02

Part 02

 

The Property/ Plant/ Equipment – This Section shows the investment in long-term assets made by the business. This includes the property needed to run the business and the land used to establish the factories and yards of the business. One of the secrets of highly successful businesses is that they don't always invest in property plant and equipment. Therefore, the money earned from their profits remains in the business itself. ( money do not outflow from business) Another characteristic of many businesses is that they are less likely to have competitors. This is because a new business spends a lot of money on PPE and that business is reluctant to enter the industry.

 

Goodwill - We can identify it as the business reputation. As the business grows in popularity over the years, and when they acquire other businesses their reputation goes up. If the business reputation on the balance sheet does not change, you can determine that they have not acquired new businesses for over the years.

 

Intangible assets – Intangible assets include assets that cannot be touched by hand. These include copyright, patent, trademarks, franchises, and brand names. For example, the Coca-Cola company brand name is more than 100Bn $. It is because they have spread their brand and become popular all over the world. We can see the same thing applies to apple, tesla, Bank of America, Wal-Mart, McDonald's, and Samsung.

 

Long-term assets - This section includes investments made by the business for more than one year. That is the investments they have made in subsidiaries etc. Looking at these long-term investments, we can understand the vision of the board of directors of the business. You can see if the other businesses they have invested in have a durable competitive advantage, and if the businesses they have invested in for the long term are in the same business field they are currently engaged in.

 

Young growth companies generally maintain a relatively low level of debt in the early stages of the business. As a business grows, they steadily increase its investment in PPE. As a result, businesses reach a stable level of profitability after some time. That is the matured stage. Businesses then distribute most of their profits to shareholders. At that time, both the assets and liabilities of the business are high. Here, the goodwill of mature-stage businesses is very high. The reason for that is that the business has acquired a strong reputation over time by acquiring other businesses since the age of young growth. 

When you study any business, you should cross-check not only the balance sheet but also the income statement and cash flow statement. (You can see the article I wrote on how to study an income statement correctly in the blogger) In addition to the fundamental analysis, when you study a business, pay attention to its company management. In addition to these, there are many more issues, but I have mentioned only a few grants. Stay tuned to the "value stock investor & Fiverr expert" space as more important issues will be discussed in future articles

Analyze Balance Sheet through Laser Eye - Part 01

 

Analyze Balance Sheet through Laser Eye

 

 

One of the main differences between the balance sheet and other financial statements is that it is created on a specific day. Generally, a business prepares a balance sheet at the end of each quarter and the end of each year. In studying that, we should be more concerned about reading an updated balance sheet. For example, if we are studying a business in the middle of the year, instead of looking at the balance sheet of the annual report issued last year, we should read the balance sheet of the quarterly report issued in the last quarter. It is simply like a snapshot of a business.

 

It mainly consists of three parts namely assets, liabilities, and equity. Liabilities are classified as current liabilities and non-current liabilities and assets are classified as current assets and non-current assets. Current liabilities mean the debt is to be settled in less than one year. which includes accounts payable, accrued expenses, and short-term debt. Non-current liabilities include loans that have to be settled in more than one year. Amounts payable to vendors, unpaid taxes, loans from banks, loans from bond issuance, etc. are included in this section. 

 

This article will discuss the assets side of the balance sheet that held by a business in detail.

 

The characteristics of the most successful businesses in the world are that their debt is less compared to their assets.

 

Assets = Equity + Liabilities

 

Short-term assets consist of cash and cash equivalents, short-term investments, and amounts due from other debtors. This is entered in the balance sheet according to the liquidity order of the assets. That is, by determining how quickly these can be converted into cash. In the past, these short-term assets were also known as floating assets.

 

The more cash and cash equivalent in a business, the better for the business. To take a detailed look at cash and cash equivalent, you need to study the balance sheet of the last six or seven years. The reason for that is that if the cash and cash equivalent showed a higher value in the selected year, you can accurately check whether it is the money received by your business from a one-time event. (such as the sale of new shares or bonds, or the sale of an asset of an existing business).

 

Inventory, Inventory refers to the bonds that are stored in anticipation of taking the business. Since the balance sheet of a business is made for a particular day, the inventory includes the amount of inventory that was on that day. One of the disadvantages of businesses in general is that their inventory expires over time. But in the businesses doing business in the manufacturing sector, since their products do not change with time, they can achieve a competitive durable advantage in this sector. This is because this section allows you to gauge whether the business is maintaining enough inventory with demand.

 

Total receivable, Once the business goods are sold to a buyer, they can be sold on credit or cash. The business allocates some portion of the goods sold on credit as bad debt and the reason for this is that the business allocates the expectation that they will not receive a certain portion of the goods sold. It is called bad debt and it is deducted from receivables and shows in the books of the business as net receivable. 

 

Net Receivable = Receivable - Bad debt

 

Although net receivables do not express a very precise statement about the long-term existence of the business, it shows how well the businesses in the same industry are doing their day-to-day activities. One trick that businesses do here is to give their customers 90,120 days instead of 30 days to pay for the borrowed goods. This will increase the sales of the business, but then the amount of bad debt of the business may also increase relatively.

 

 

Prepaid expenses, In some cases, a business makes payments in advance for the goods or services they are due to receive. For example, the payment of insurance premiums for the next year can be mentioned.  

 

Other current assets can be identified as the last part. It includes deferred income tax recoveries.