Understanding Crypto Part 2


#1

Understanding Crypto: Part 2.
PART 1 Found HERE: Understanding Crypto Part 1
PART 3 Found HERE: Understanding Crypto Part 3
PART 4 Found HERE: Understanding Crypto Part 4

Satoshi’s & How they Effect Price.

Before getting into the nitty gritty on Satoshi’s lets cover the Basics.
A Satoshi is the smallest unit of a Bitcoin. One Bitcoin can be split/broken up into 100 Million little Pieces and each of those pieces is called a Satoshi (or “Sat” for short.)
Just like in £1 or $1 we can divide that 100x into 100 Pennies, Bitcoin can be divided 100,000,000x into 100,000,000sats. This is because Bitcoin has 8 Decimal Places as opposed to our more Conventional money System (Or ETN System) only having 2.

Literally every Exchange you are likely to Find, operate their order books based on Satoshi Values when you are looking to buy/sell/trade. This will always be true when you are using Bitcoin to Buy ETN Unless you are exchanging a different Coin in Exchange for ETN (Base Pair’s) <— More on this another Day.

When/If you look at your Portfolio Value in a Crypto App, or look at the Dollar value on a website such as Coinmarketcap you will usually be confronted with it’s Cash/FIAT Value. This is not a good Indicator to look at to see how well your ETN is performing! If you look at the Cash Value and it is UP or DOWN 10% on the Day, this does NOT mean that everyone is BUYING or SELLING ETN.

The Price of Bitcoin will always dictate the Price of every other Crypto, when it goes down, everything else follows, likewise if it goes up everything else follows. There is a few reasons for this.

1)This is caused by the fact that Exchanges all use BTC as the Default Base Pair for everything.
2)Exchanges all use Satoshis on their Sales Boards for people/bots to place buy/sell orders.
3)Each single Satoshi’s Cash Value changes dynamically with the price of 1 whole Bitcoin.

Dealing with point 1 … Bitcoin is the base pair for literally everything on every exchange, even though many Coins including ETN have other Base Pairs such as Etherium, Litecoin, QASH etc. Remember that these other Base Pairs are still paired to Bitcoin on the Exchanges and are still bought and sold with their own satoshi value to BTC pairing on their own. So when Bitcoin moves, these other Base Pairs move in tandem. This is why the other main Base Pairs such as Etherium drop in price in line with Bitcoin, and every othe Coin will follow suit.
Point 2 I don’t think this requires any farther Explanation.
Point 3… As the Cash/FIAT Price of Bitcoin Changes the Value of each Satoshi will change with it. An Example could be: If you buy 1 BTC and todays Value is £20,000 then each Satoshi is worth £0.0002. (20,000 divided by 100,000,000) Current Price divided by the amount os Sats in a BTC - (100m) = current value of each Satoshi. Example 2: Next Year Bitcoins value nose dives down to £3000. Now your Satoshi Value is 0.00003. (3000 divided by 100,000,000) Current price divided by amount of Sats in a BTC - (100m) = Current Value of each Satoshi.
Now hopefully you can see why Bitcoin drags everything with it, UP or DOWN! So never hate Bitcoin, there is a very good reason why it is referred to as the “Big Daddy” of Crypto.

I don’t think this is a bad thing because Bitcoin has done pretty well so far in it’s 10 Year History, and i Personally think it will Continue to do so in the Future, so i for one am happy to be Dragged about by him. <----- Personal Opinion

If you use BTC to buy ETN on an Exchange, you should notice that the Current Price is marked by how much Satoshis it is worth (Currently 202sats ATM) The Satoshi Value is The single most Accurate way of Determining the Supply Vs Demand (or current level of interest) of Cryptos. If people buy more Coins than is Currently Available at the current price point, it will push the Sats Higher. If People are Dumping more Coins on the Exchange than there are Buyers to absorb the dump, the Price in Satoshi’s will go Down!
To be clear, when you look at the Cash Value of ETN or any CC, it is calculated on one thing… The current Price of Bitcoin, Divided by 100,000,000, multiplied by how many Satoshis it is currently worth on the Exchange. This will give you the Cash Value
So since Bitcoin’s current Value determines the Cash Price of ETN, try not just look at Cash Value of it. Look at the Satoshi Value AND the Cash Value. If ETN dropped 10% Overnight and the Satoshi Value stayed at 200sats the entire time, then check Bitcoin’s price and im sure you will find it has Dropped 10%. Unfortunately in this case we have to blame Bitcoin. If Good news comes out regarding ETN, and people flock to the Exchanges and buy more, you will find the Satoshi Value Increase accordingly and this will push ETN’s price higher regardless if Bitcoins price has stayed still. However if our Sats go up 10% and Bitcoin falls 10% then you should find our cash Value has stayed much the same. So… I guess the point i am making and hope you take away from this is that there is 2 factors at work when determining ETN’s Current Price. These are simply Satoshi Value (determined by people buying/selling ETN on Exchanges) and Bitcoin’s Current Price, which we can’t do anything about.

The Below is Purely Hypothetical! Certainly not Financial Advice and meant for Educational Insight ONLY!!!

Once you get your Head around all of the above you will probably realize that a good way of looking at things price wise is, if we are worth 202 Satoshis just now… How much more/less demand do you see coming from People wanting to buy into ETN or existing people wanting to buy more ETN? Will the supply of Coins for sale on the Exchanges be no match for how many are being bought in the Future? Come up with your own answer. (More on this in Part 3)

Then where do you see Bitcoin going in 5 Years? if it is $4000 now, and you guess it will be worth $400k that would be a 100x Increase. And remember we get Dragged with it! in this Scenario 100x. Plus you then have to guess where our Satoshis will be in 5 Years and multiply that into the 100x Factor for Bitcoin’s movement. If you think ETN will be worth 20,000 Satoshis then that is a 99x Increase. So your Beloved ETN has went up 99x also and if the above were to ever be true then your way of Calculating your Increase would be a simple 100 multiplied by 99, and this is how many times the Current Value of your Portfolio of ETN investment has multiplied.
In the above Example notice how i made both BTC and ETN go UP on BTC Value as well as ETN’s Sats Value, In the Real world of course this may not happen, they work independently on their own sliding scales and when one goes up the other may go down.

Satoshi Value and Bitcoin Values work Independently from one another. How much Satoshi’s each Electroneum are worth is determined by how much people are buying Versus how many are being sold. Bitcoins price is determined by people buying and selling it Versus how many Bitcoin are being sold on the Exchanges.

It is Common Knowledge that every Day less and less Electroneum are emitted via Block Rewards to the miners, and as such it is fair to assume that this Mechanic means less and less ETN are sent to the Exchanges for sale Daily. Likewise Bitcoin goes through a “halving” every Couple of Years meaning less and less Bitcoin are sent to the Exchanges, again it is a fair assumption that this leaves less supply being sold and causes a natural increase in it’s worth. Time is on our side, over time… there is less Available Coins, and I will let you draw your own Conclusions as to what can happen under those Circumstances. <— Personal Opinion
But talking about Blockchain Reward Reductions for Miners is a Completely Different subject for another Day. This will be Covered in PART 3: Blockchain Rewards & Mining (Reward Reduction + effect it naturally causes)

If any of this does NOT Make sense then please feel free to request me to go into more Detail because i believe this to be the most miss-understood thing in the whole Cryptospace, yet I deem it to be the most Important.


Understanding Crypto Part 3
Understanding Crypto Part 1
#2

Another concise easy to read post. Loved it @ColinSTE keep them coming, and thanks.


#3

Please professor,
Can you tell me where I can get an autographed copy of your “leatherbound” edition?

Thanks @Colin STE,
A huge effort on another great read!
:chipmunk::chipmunk::chipmunk::chipmunk::chipmunk::chipmunk::chipmunk::chipmunk::chipmunk::chipmunk:


#4

Knowing the Information is Well Received makes it worthy of the time spent!

I will keep them Coming over the Festive Period. Beats the hell out of Refreshing Coinmarketcap 100x a Day hehe :smiley:


#5

I dont have to refresh.
I use coincodex.com
You have many talking about this.
Its an extremely well recieved and easily understood series of informative posts.
I do like the fact that its not Only based on Electroneum.
Especially the Bitcoin relevance is very important for people to understand.
Youre building much confidence in the investor.
A very good thing indeed.
:heart::heart:


#6

I thoroughly enjoy reading these @ColinSTE very informative I hope people take the time to read this as there is a lot of good info in there :+1: Thank you for taking the time to put this together you’re very professional :+1::zap: you are a true professor teaching your knowledge :+1:


#7

Thankyou I learned a lot from this…

:grin:


#8

A great explanation for me with limited knowledge of crypto currency, thanks :pray:


#9

You are very Welcome Scotty. Look out for Part 3, you may find it even more useful.


#10

Good news keeps on coming , your two posts , then Richards Email, 2019 is going to be amazing I feel . Cheers :beers:


#11

PART 3 Understanding Crypto Part 3


#12

Another excellent post @ColinSTE and many thanks for this.
However there is something I can’t understand and need help with.
Kucoin for example .when I look at the order books I see very large amounts of ETN coins.
100,000-500,000 for example in both red and green.
When I look at the trade history it’s nearly always very small amounts of ETN on display ranging from as little as 1-10,000 ETN.
why do I not see the large 300,000 coins in the trade history as I do in the order books?
I’m quite new to all this and im looking to learn everything about how exchanges work so any help would be much appreciated.


#13

The Order books are for people to set a sale price for their Coins. Likewise the Buy orders are People who have set a price point that wish to buy Coins at. A simpler way to get your head around it is to think of the SELL board as a Shop Shelve. What is on the Shelve has price tags on them. If there is 500,000 ETN for sale at 195 sats that doesnt mean that someone has to buy the whole ampunt of 500k at one time. Somebody mivht buy 20,000 of them and this will show as a 20k Green trade on the Trade History Board. And there will now only be 480,000 coins left for sale at 195sats.
The reality is that the amount of Coins for sale on the boards changes/flickers Constantly with bots adjusting their orders otherwise you would have been able to spot this fairly obviously.

But Thank You for raising a really Good Question! I will add this to the Original Post later.


#14

Ahhh now I get the concept and today I learn something new :+1:
Many thanks for these 3 great articles you have posted here on the forum.
It’s really appreciated and great to have people like you here on the forum.
Keep up the fantastic work :+1: