The uncertainty of the investment
Today we are going to talk about the aspects behind investments and their psychology.
We are facing the uncertainty about investing in the financial world.
The human being is in the perennial search for security thanks to a natural genetic repulse to risk to make us survive.
Risk aversion in an environment where we can be killed by beasts or adverse climatic conditions is what allowed us to survive thousands of years ago.
Many people have an innate adversion to losses.
Try to think of losing 20 euros. In this case the pain will be greater than the pleasure of having earned the same 20 euros.
This means that these people are totally opposed to certain practices that allow them to increase their portfolio .
In fact, to have an interesting economic return you have to take risks, since risk is the fuel of the potential profit.
It is also true that some zero-risk investments still exist such as bank accounts but which yield practically are below zero.
And these are not at zero risk since there is the risk of bank failure.
Therefore, it is necessary to manage the investment risk.
In the financial world, risk means exposure to the possible loss of money, or the possibility that your investments will drop in value compared to the purchase cost.
The amount of risk we are willing to expose ourselves depends on various factors like volatility.
Volatility indicates an indecision on the price on the part of sellers and buyers, certainly equates to a greater risk that can be justified by the greater possible gain.
Precisely to maximize our earnings and to analyze the risk to which we are exposed, an analysis of possible events that could affect our investments must be made, a sort of exercise to manage some risks to which we may be exposed.
Among the risks that we can easily recognize are:
a rise or fall in interest rates by the central bank, affecting corporate loans;
a credit risk, with debtors unable to pay their obligations;
a sudden inflationary push in a specific country or worldwide;
A possible country risk, as happened with Greece or Argentina;
These last two risks can be placed in a large group that we can call
market risk or systematic risk.
This is a type of risk that can affect all companies operating in a specific country or market.
We are talking about a recession, which destroys all the spending power of the population or an environmental problem that jeopardizes a specific industry, such as a disease that attacks plants destroying them all over the world.
Going more into the details of a specific market we can then talk about the specific risk of a company, like Enron in the United States.
This type of risk refers to a specific company in a national or international market and can be caused by huge scandals, or by the appearance of new international competitors on the internal market or by a new legislative change that worsens our market situation.
Remember that every investment is under this kind of risk and that systematic risk is difficult to predict in the future while specific risk can be eliminated through diversification.
But then there are assets that are not subject to risk, those safe havens where everyone can take refuge.
Yes, they exist and generally the greatest exponent is gold.
However, it should be remembered that gold also has price fluctuations and that in the event of a crisis it could have a certain decline. But here we need to understand how much the drop is, for example if gold falls by 10% in a market that dives into minus 60 or 70% ...
Let's move on to another point of view, moving from investment to investor.
The psychology and preparation of those who put money into any investments are much more important than people think. It is necessary to understand the different risk tolerance of the different people who approach the market.
This tolerance is mainly given by two factors which are the predisposition to risk influenced by one's personality and personal financial culture, to which must be added the ability to manage emotions and the fear of losing one's money.
Managing anxiety and maintaining clarity to better manage the situation are two very important characteristics.
Think what could happen if we panicked at every slightest downtrend or wanted to take home every little profit.
Other factors that can make this situation worse, is your relative financial situation and in which time frame you are investing for your life. Maybe that descent won't change your life, but if you've used all your money on a single asset, it starts to be different.
Financial availability and your working salary are two factors that can make you feel better, combined with a long-term vision.
If we think of a personal safety net like a bank account with a good amount of money and a job with a good salary, a loss of 20% is something that we can expect. A short-term view means that risks and loss tolerance are approached differently.
The risks are generally in a short period of time, and the markets generally recover from the crisis by making new highs in a period of time that is not so long.
One last note aside, the age of the investor is also important. An elderly person is unlikely to get involved with particularly dangerous assets.
Do not focus only on volatility risk, but on real risks, on those things that are too good to be true and try to always have a long-term view.
Risk is necessary, it can be controlled but it cannot be avoided.
Learn more about safety here.
How to choose an Exchange - Rookies
Today we see how to choose an exchange for buying and selling our cryptocurrencies.
First of all we must understand at what point of our path we are, this guide wants to be a sort of how to for complete newbies.
There are some basic things to know and consider before choosing your trusted exchange.
Let's start with the idea that all large exchanges tend to be more or less equivalent in the service you will use at the beginning, but moving forward you will obviously also notice substantial differences.
One of the first differences that we can check is the trading location of the exchange and consequently which customers the exchange accepts, based on their country of origin or residence.
For example, US clients are not always accepted on some Asian exchanges.
Another difference lies in the methods of payment of crypto or, to better define it, in the method of entry into this world.
In fact, not all exchanges accept fiat money deposits.
Many exchanges only accept stable coins and not all of them. In this case you would find yourself with some euros on your hands without knowing how to get them to your exchange and you would have to find an alternative method, such as switching from another exchange that accepts fiat money.
Then the usage fees must be considered.
We've already talked about what fees are, and how they can destroy your profitability.
The more expensive an exchange is, the harder it will be to make sure your trading is positive.
The KYC or customer verification system is another thing to consider.
There are exchanges that do not allow you to operate without your documents while others give you an operating or withdrawal limit.
And then lastly, the number and which coins are listed on the exchange.
Choosing an exchange with a limited number of coin is not a long-term choice, unless you are a specialist of those specific coins.
Instead, an exchange with a good number of coins, to which more are added, will allow you to increase your future earnings.
Learn more about safety here.
How to buy a cryptocurrency - Rookies Step
Today we are going to see how to buy a cryptocurrency in 3 simple steps.
phase 1 - Research:
Before doing anything you have to find out what you want to buy.
Which seems trivial, but it's not so easy to find because the crypto market offers a disproportionate number of coins.
First of all we need to understand if we want to buy a coins with a glorious past or a coins that have just come out on the market.
We need to make this research, which can also be based on suggestions given by the media or friends.
Be careful in this case not to be fooled by possible scams.
Analyze the situation of the coin on a graphical level and everything that revolves around it.
phase 2 - SAFETY
Once you have chosen the coin you want to buy, the first thing to do is find a secure wallet and create it.
Learn more about safety here.
step 3 - buy the coin
Open the exchange and press the BUY button.
Now some recommendations
Always do extensive research on the coin you are analyzing and if someone has suggested it to you, try to understand if it is a disinterested suggestion or not.
Obviously NEVER follow the hype.
The hype invariably leads to entering at inflated prices and then losing a lot of money. Enjoy the hype by standing at the window.
Remember that wallets are programs to hold your coins so pay attention to the different types of wallets and different types of addresses.
If you get the wrong address you have lost your coins.
Bitcoin halving in May 2020
The bitcoin halving is an event that occurs every about 4 years and halves the remuneration of closing a block of the Bitcoin blockchain. It is one of the main features of bitcoin monetary management.
In order to better understand what we are talking about, however, we must review 3 fundamental points which are:
Bitcoin blockchain
Mining
And the total supply of money
Talking about the BlockChain, it is a live record of all bitcoin transactions. The blocks are made up of the transactions within them, and the blocks are linked together in an indissoluble way.
The block is created when a defined number of transactions are made and the block can contain a maximum number of that transactions. Reaching this number, the block is closed and added to the block previously mined and linked to it.
When a Bitcoin transaction occurs, the data is communicated to the network of computers that validate the transaction, add the transaction to the bitcoin ledger and transfer the ledger change to all computers on the network. Since there is a maximum of data that can be saved in a block, a block is closed approximately every 10 minutes
Mining is how transactions are verified within the coin network. The verification and creation of the blocks is created by the miners. Each group of transactions has a cryptographic hash of the previously published block and this connects all to the previously created blocks creating the blockchain. To accept a new block on the network, miners are required to follow a proof of work system that involves the creation of a new cryptographic hash to add to the new block. To be added to the register requires the creation of a new single hash which will go through a validation process and then will be passed to the next block and so on. To create a new hash, miners compete with each other using the computing power of their computers to be the first to have the 64 digit hexadecimal number or hash that is at the same target difficulty level as the network.
The thing to understand is that the miners are remunerated at the closing of each new block with new bitcoins created by the system and by the transaction fees, which are already circulating btc. The rewards are created to incentivize miners to participate in the bitcoin blockchain.
Learn more about Mining here..
The amount of money.
Bitcoin was created as digital gold. Satoshi deliberately created bitcoin with characteristics similar to the physical gold. The principle of mining bitcoin is similar to gold mining, which is long and difficult. Another feature is the maximum amount of bitcoins that can be created which has been programmed to be 21 million. This number was created to copy the inflationary stability of gold. In this case, the term inflation is used for the growth of the amount of money that is not covered by gold in a gold standard.
In the modern way of understanding the term inflation, bitcoin is deflationary because his purchasing power grows over time. Compare it to the gold extraction profile where in the future the cost of extraction will be increasingly higher and more difficult and therefore the previous quantity of gold extracted will increase in value because no more can be produced at low prices.
In the old concept of inflation, bitcoin is inflationary because, not being covered by gold, the quantity of bitcoin grows as the creation of blocks by miners increases. There are now 18 million in circulation. At the current rate, the last bitcoin will be created in 2140
Let's go into the halving detail
The halving referred to the bitcoin blockchain is the reduction of the closing reward of a block for miners to half the previous number. The current reward is 6.25 bitcoins per block.
The halving takes place every 210,000 closed blocks and therefore more or less every 4 years since a block is closed every 10 minutes. Initially, the block reward was 50 bitcoins, which dropped to 25 in 2012 and then 12.5 in 2016
But why does halving happen? Satoshi planned halving to lower bitcoin monetary inflation. In addition, the technological advancement factor of mining machines is also considered and for this there is an increase in the difficulty of creating new blocks to lower the validation speed.
With 12.5 bitcoins per block and 10 minutes of build per block, around 1,800 bitcoins are created daily. After May 2020 these dropped to 900 bitcoins per day.
Now returning to the previous parallel with gold.
It is considered one of the best stores of value due to the fixed presence and its scarcity which is imposed by nature.
The bitcoin algorithm is created to make it scarce. So as the demand for bitcoin grows, the value will grow. There have been major rises in btc prices months after each halving, but this is a trading strategy that you may or may not consider.
Bitcoin as it is created in its algorithm, is made to be scarce and therefore grow in value as long as people like you and me believe in its intrinsic philosophy.
Monero
Today we are explore a crypto coin that works really good on privacy.
Let's talk about Monero.
Monero is considered a Private decentralized crypto currency, a decentralized coin that bases its story on privacy and not on anonymity.
It is necessary to define these two different concepts.
The concept of Privacy in cryptocurrencies is based on the fact that you as a user do not want other subjects to know what you are doing. The action you do must be unknown, but the identity of the person who performs it is public.
In the other side, anonymity means that it doesn't matter if other users know what we're doing, but these users don't know who is doing these actions. In this case we have Public Actions and Unknown Identities.
If we take for example the most famous cryptocurrency in the world, namely Bitcoin, we would discover that it is not private. The actions made by users are Totally visible on the blockchain but the identities are anonymous. In reality partially anonymous, or rather pseudonym.
Monero, on the other hand, is a private crypto that does not expose who sends money, how much it sends and to whom.
The transactions are traceable and the subjects who benefit from them cannot be indicated. It is not possible to understand who the transaction started from or connect them with others.
The first thought of all very often is that with such coins, only Criminals can benefit from it. But that's absolutely not true.
Monero was created for those who want to maintain their personal privacy and security, for those who do not want to be tracked by the big data of the big companies of the internet age in their routine behaviors.
Monero is also a great way to Cover the presence of a large personal btc build-up that could be attacked.
Monero has a possible use also for market predictions.
If we knew the addresses of the exchanges, we could monitor the quantities of coins entering and leaving these addresses, using this information to create long or short strategies based on our analysis.
Monero then solves the question of the fungibility of a traceable currency.
Each coin or cash note, in the real world, is the same as the other and must not be of interest to you where it comes from. We know from many newspaper articles that some of the bills we handle to buy bread may contain traces of drugs or have been used to buy other illegal materials.
However, in the bitcoin blockchain you can trace the path of each coin since its creation, so it could happen that some government agency knocks on your door in case of some investigation. All this is pure abstraction but who knows, in theory it can happen and that is why virgin bitcoins exist
A completely private coin like Monero has a complete fungibility like the 50 euro just out of the ATM and does not have this problem.
The difference between other private coins such as Zcash and Dash is that these offer the option of private transactions while Monero only offers private transactions.
The monero protocol works by obfuscating the three parts of the transaction. So Who sends, who receives and the total amount of the transaction
The system is created to obscure those who send money via a system called ring signatures. whoever makes a transaction has their signature mixed with signatures of previous transactions, creating confusion and the inability to trace the starting address of the transaction.
The amount sent is obfuscated through the Ring C T or Ring Confidential Transaction, where the sender sends only a small piece of information and this is enough to verify that the amount is legitimate. I will not go into the technical details as they are very complicated, but you can find everything on the official website of monero.
The recipient of the transaction is protected by the so-called Stealth Adress, in fact when it is sent to a public address, in reality I am sending to another address of unique use that is derived from my public address.
This creates a separation between addresses and only my private key will be able to use the funds sent to my address
Monero is a Proof of work blockchain and CryptoNight is its algorithm
Monero can still be mined not only from very powerful PCs but from PCs of normal use and there is no limit to the creation of coins.
Learn more about Mining here.
Trading: the mistakes you will make. For Sure.
Trading is not a simple and straightforward activity. It is a long journey, made up of study, sweat, monetary blood spent every time a mistake is made. It is a solitary journey that not only involves our bank account, but also our most hidden inner part, awakening fears and invalidating our psyche. Every mistake you make is a source of pain but no one becomes a capable trader without going through this path.
Today we are going to see some of the mistakes you will surely make as a newbie trader.
The first mistake you may run into involves doing too much or too little paper trading. Here we need to understand how you are made at the level of psyche. Paper trading is a training system for traders that consists of creating sales and purchases on paper, without real money, to train and understand how it works. However, paper trading lacks a fundamental component which is anxiety about the use of real money. On a paper trading account we can also have 100 thousand or more euros invested, but not being real money, your behavior will be easily swashbuckling and arrogant. zeroing the trading account will not be a problem.
Zeroing the account doing paper trading is not actually a real problem, but if you analyze what and why it happened. The best thing to do would be to switch as soon as possible to trading with real money, with small amounts, to begin to get used to managing the tension of maintaining the position on the market and managing the emotional waves of seeing the value of the asset purchased increase or decrease. . More paper trading could serve those who are braver and more gamblers, while a more timid and calm person could leave earlier given his less aggressive disposition.
Another mistake that arises from the first is to use a too big size of the market position. Because there will be a time when we will be so confident in ourselves and our analysis, that we will put half of our portfolio on that stock that we are sure will go up.
And then after a short time to see it collapse sending us into total panic. At which we will have to decide whether to face the pain of losing money and defeating our beliefs or to hold the position ignoring what would be right to do, transforming a short-term trade into a long-term investment, without having any idea when it will be changing trend.
This error also brings with it the anxiety of having a lot of our money invested in a single position, anxiety that will be present even if our position is positive. In fact, anxiety will most likely get us out of the position much sooner than we should, making us bring home a meager income.
The second mistake is related to the third mistake, which is not having a trading plan. Having a trading plan means having an idea of what our goals are for earning and safeguarding the portfolio. It seems obvious but it is not, and above all having a plan helps us to discipline ourselves on the markets.
In fact, planning protects us from another mistake, which is over trading or exaggerating by taking positions. In fact, it can happen that after a series of particularly good and profitable trades our ego pushes us to risk more and more, in the belief that we are very good and we cannot make mistakes. If all the trades have been positive before, these will certainly be positive too, bringing us one step closer to wealth and happiness. On the contrary, in fact our ego is one of the biggest enemies we have, as it deflects our vision and perception of the market by endangering our account.
Being emotional is a mistake that we will always pay dearly for. Being cold and focused means seeing things as they are and not as we would like them to be. Emotion is the enemy of victory especially when it leads to greed. There are situations in which being satisfied is the right choice, in fact the emotionality will mean that we will still be inside the trade that we will have to sell, losing all the profits and going at a loss.
The emotionality leads to what is called FOMO, fear of missing an opportunity. We think it is an unmissable opportunity and we throw ourselves headlong without thinking about it and without analyzing, only to end up making a mistake that cost us part if not all of the trading account. The FOMO is that illogical and illusory push that deceives us and leads us into deception. Think about when prices are high and people who know nothing about it enter the market, buying pushed by the mass media. Think about when your hairdresser tells you to absolutely buy that specific action and that he was good at just taking it. Nothing against hairdressers, some know even more than me, but if your hairdresser knows nothing and tells you so, this is a great example of FOMO.
When you are filled with emotion, you don't have to sell or buy. You have to study, update, train but not trade. Emotions equate to losses.
You have to follow your take profit and stop loss. If you have put them on and you are not totally stupid there will be a reason, and if you have put them without a sense you are perhaps a beginner and it can even be there. Know them and not follow them, this is being stupid.
And being stupid is always waste of money and a loss of money is pain.
Cloud Mining
Let's go into the details of Cloud Mining. Btw you can learn more about Mining here.
Cloud mining is a service that allows you to mine bitcoins without having the necessary hardware but renting it through contracts with different companies around the world.
Bitcoin mining as we know is demanding and expensive, consumes energy and is sometimes even unprofitable.
In addition, profitable mining today after the last halving of May 2020 is even more difficult as the reward for closing a block begins to be scarce, and it will get worse and worse given how bitcoin is structured.
Without a low-cost power source to lower operating costs, mining farms are often a loss.However, cloud mining comes to the aid of farms that by selling their own mining contracts are able to recover funds for their survival.
For many people just entering the cryptocurrency world and wanting to diversify their investments, cloud mining contracts can be a possible way to go.
Simply investing your capital, sometimes without even setting up the machines yourself, is a strategy to be considered risky.
In fact, it must be assumed that for the user who has just entered the crypto world, lacking the appropriate equipment, the necessary skills, and low-cost electricity, cloud mining contracts are also a risk of being scammed.
These contracts de facto discharge part of the farm investment risk on the users who sign them, in exchange for a part of any profits.
These contracts are actually simple rental contracts for equipment and management to mine coins.
The owner and manager of the farm collects the fixed monthly or annual fee of the contracts sold and not through the creation of cryptocurrencies.
There is no need to mine bitcoins in reality, the farm could in cases of scam, not even exist with the manager who cashes the contracts without delivering bitcoins to customers because the farm fails to mine due to the difficulty of mining.
Serious cloud mining companies exist, you just have to commit to finding them, however, being aware of the risks of the investment. You must always stay away from those who promise you easy, fast and abundant earnings by paying very little.
If you really want to invest in cloud mining, privilege the study of coins and how to set up the machines.
Look for contracts where you set the usage parameters of the rented computers. If you have been good, you will have to celebrate.
Why do altcoins exist?
Why altcoins exist? and what are they for?
Alt coin is the abbreviation for Alternative Coin, or coins alternatives to Bitcoin.
Bitcoin as we know was the first truly successful cryptocurrency, which show the way for all those who followed it.
But Bitcoin is not perfect and altcoins are used to create a hypothetical better version of bitcoin or a coin that has different purposes and functions from those of Bitcoin, in fact some of them are faster than bitcoin, others focus on anonymity, others do different things like ethereum and others.
Altcoins can then be mined in a different way, for example bitcoin has an algorithm called SHA 256, an altcoin like Litecoin, which derives from Bitcoin, has a different algorithm called Scrypt.
There are now thousands of altcoins on the market, but only a very few have achieved a decent fan base. We must in fact divide the coins that have a utility, the coins that are based on projects that do not really have to do with the blockchain and coins that are exclusively scams or useful for the Pump and dump.
A good way to analyze the coin we have spotted is to understand if it has a following by first checking the market cap and then the community of users who use or follow it.
The market cap is the term used to indicate market capitalization.
This is calculated by multiplying the number of coins in circulation by the price of the exchange. A high value generally indicates a certain interest from the world and therefore value within the coin.
Remember that you can invest in an altcoin both when it is already on the market and before it is issued, in what are the famous ICOs.
if you want to invest in an altcoin, in the post ICO period, in general you will have more information and less chance to buy a scam but most likely if the coin has an actual use or value, you will pay much more than the price of the ICO.
So inform yourself and study well and always beware of ponzi schemes and fraud.
Learn more about Scam here.
Trading vs Investing, with Bitcoin
In this article we talk about bitcoin trading, specifically seeing the difference between investing and trading.
First of all we need to define what bitcoin trading is.
Bitcoin trading is the exchange of fiat currency or other cryptocurrencies for bitcoin, on an exchange, with a short-term vision and then returning to fiat currency by exploiting the high volatility to gain in fiat currency.
We must understand that the difference between investing and trading refers specifically to the long or short term view. In fact, investing means buying bitcoin today and then reselling it in 3 4 or more years, regardless of its movements. Trading bitcoin, on the other hand, means taking advantage of its movements to make money.
The two views are both correct and are the result of two different points of view. Investors generally believe in the underlying technology and ideology of Bitcoin, seeing in it a possible bright future for the asset. Traders, on the other hand, may not be interested in technology but are interested in the short-term economic potential of the instrument, so ups and downs are welcome when positioning in a trend.
The two visions can be experienced simultaneously. Nobody forbids you to put some bitcoins away on a wallet for the long term and at the same time trade others for the short time.
A popular slang term in the bitcoin world is hodl, which refers to someone who has long-term invested in bitcoin. The term comes from a mistake that has become popular on the bitcoin talk forum.
At every big down fall, don't panic and hodl!
Traders not interested in bitcoin technology consider it an interesting asset for their work as the market is open 24 hours a day all year round. The volatility of the currency and its riskiness are the perfect fuel for day traders and swing traders.
One last observation. Don't turn a short-term trade into a long-term investment just because the market has gone in the opposite direction to what you thought and your loss percentage became important because you didn't use the stop loss.
Tax Havens
Today we lie down in the sun in full relaxation and talk about tax havens.
A tax haven is basically a low or no taxation country for resident businesses or individuals. They are considered refugees from states that have exaggerated taxation.
Generally the banking system allows transactions to be carried out that are covered by banking secrecy and the administrative management for the creation of companies is very quick and lean.
It must be understood that if tax havens exist, tax hells must exist somewhere.
Are tax havens legal? Yes.
Are tax havens fair? It depends on what our point of view is, which is obviously linked exclusively to companies operating in sectors that has no link to criminality.
If we look at the large sums being taken away from high-tax states, it is clear that tax havens are unfair. Countries like Panama don't have the needs and expenses of normal European countries. Companies operating in high-tax countries benefit from the state services of these countries and therefore should remunerate them.
From the other point of view, however, it is easy to understand that a country with low or no taxation gives to any company a competitive advantage given the saving of money from taxation, money that can be reused in research and development, higher salaries, bonuses and all that. which is needed for company and employees.
Another interesting point to understand is that there is now a competition between nation states in the world of globalization. There have been those who are administratively friendlier to companies, which offer greater advantages and which encourage companies to put their offices there. Places like Luxembourg, the Netherlands or Ireland have understood this dynamic and built a competitive advantage. Other countries, on the other hand, which have inefficient and expensive state welfare systems, are forced to over-tax their citizens.
In today's world, where competition is getting stronger and many barriers have been destroyed, it is easy to understand that every competitive advantage need to be used. States and governments that do not understand this are destined to lag behind on the international scene and with them their economies and the prosperity of their citizens. Being more inclined to favor companies by lowering taxes and bureaucracy, improving and decreasing the state machine, could be the ideal solution to make sure that tax havens no longer exist.