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Crypto Fundamentals You Need to know


So, you’ve heard about Bitcoin and Etherium, and you’re are hyped! — Great!

Let us try to establish the fundamentals before we are adding crypto to our precious wallets. After all, you are just about to become important part of the future economy!

To start with, let us define what money is:

Commodity accepted by general consent as a medium of economic exchange. Money is anything that people are willing to use for purpose of exchanging goods and services.

Money has a long history. From Barter to Banknotes but no matter what time in history, money has been exposed to corruption and human manipulation often leading to inflation.

Bitcoin brings a revolution ?

A new fella came along called Bitcoin (BTC) in 2008 . A peer-to-peer version of electronic cash which would allow online payments to be sent directly from one party to another without going through a financial institution. In simple explanation, a bank-free internet money without any central authority governing it. This new fella has started a crypto revolution .

“The rot problem with conventional currency is all the trust that’s required to make it work. What is needed is an electronic payment system based on cryptographic proof instead of trust. Bitcoin White Paper (2008) by Satoshi Nakamoto

What the hell is crypto?

Cryptocurrency AKA Crypto is a digital currency built on peer-to-peer network (no middleman), which transactions are secured with cryptography, than logged & recorded in a blockchain. For those who do not know , the blockchain is a publicly recorded ledger of transactions available to everybody. This allows verifying, processing and tracking payments as well as preventing counterfeiting without middle man and centralised authority. Something that was never possible before.

Why do Bitcoin has value?

Bitcoin, US Dollars and Gold all have value because other people believe that they do. They have no objective value and are all social constructs. Bitcoin can be used as a medium of exchange and a store of value. Bitcoin serves a purpose as a store of value just like gold. The advantage compared to gold is that it can be used as both a store of value and as a medium of exchange (international, fast, anonymous money transfers). BTC is a new 21st century gold , limited to a quantity of 21 million with value proposition coming from scarcity.

Although it once sold for under $150 per coin, as of October 26, 2021, one Bitcoin now sells for more than $62,000. Because its supply is limited to 21 million coins, many expect its price to only keep rising as time goes on, especially as more large, institutional investors begin treating it as a sort of digital gold to hedge against market volatility and inflation – 2021.

How many cryptocurrencies are there ?

There is over 12 000 cryptocurrencies circulating in the world at the point of writing (2022 February). It is important to understand that different cryptocurrencies deliver different value propositions. These cryptocurrencies can be broken down into 4 main sections.

· Bitcoin (BTC)

· Altcoins (ETH; SOL ; DOT; LINK; USDT and many others)

Cryptocurrency adoption rate

Crypto adoption is so exponential, that it is expected to be a 1 Billion users by 2025. Yes, that is right 1 Billion. As we get increasingly connected, the technology adoption S curve gets steeper and steeper, and people embrace new technology faster and easier. With crypto users growing at around 80% a year, this makes it the fastest rate of technological adoption in human history. Crypto adoption rate is so fast that it supersedes previous computer, internet and mobile phone adoption.

What does adoption rate mean for BTC?

Bitcoin, is considered still early in its adoption curve, likely somewhere in the early adopter phase. If adoption rate is growing for the asset with limited supply & we take into consideration Supply and Demand fundamental economics. The value of Bitcoin will keep rising and it’s nowhere near now when adoption of Bitcoin will go mainstream. With current growth rate by the start of the next decade, the cryptocurrency and its network should already be in the next phase of their adoption reaching mainstream adoption.

As of 2021, we estimated global crypto ownership rates at an average of 3.9%, with over 300 million crypto users worldwide. And over 18,000 businesses are already accepting cryptocurrency payments. –

Inflation, one of the other reasons BTC could be a good choice ?

Current Fiat currency, which for example is you Euro, GBP , USD etc. is subject to a country’s political notions or a central bank’s monetary policy. To simplify, Fiat is created and regulated by a governmental body. All of that Fiat represent debt. This Global debt (fiat money) is fast approaching a record $300 trillion at the time of writing. The catch is that if printed Fiat money (which represents debt) is not backed by growing GDP, then it is loosing purchasing power. The more something is the less value it has. Suddenly your £10 000 in savings can buy much less shares in Apple, Google, Real Estate.

Worldwide currency – your 3rd good reason for BTC ?

For example, if you are in the United Kingdom but you want to sell your Phone on a website to someone in Japan, you can’t simply sell it directly to Japanese customer in GBP currency. Japanese customers use their own currency – Japanese yen. But If someone in the Japan buys something from United Kingdom and pays with Bitcoin there is no conversion rate, no bank delay, and no bank fee .

Why does crypto fluctuate so much ?

Cryptocurrency does not stand for debt. It strictly represents itself, and its value is determined by what someone is willing to trade for it.

It is not subject to a country’s political notions or a central bank’s monetary policy, but determined by the users itself. We could say value of cryptocurrency is backed by investor’s confidence that the project solves a certain problem. Users and investors however are highly influenced by supply & demand factor, government policies, usability and media , making this asset class extremely volatile.

It’s also a very small market compared to others assets. A small market cap means there’s more chance that highs and lows will be way more high or low simply because large buy or sell orders represent a larger percentage of the market. For example stock market is worth around 100 trillion, Gold around 11 trillion but total crypto market is only 1.3 trillion now (February 2022)

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