Table of Contents 1.0 Glossary 2.0 Bitcoin: What It is and How It Works 2.1 The Bitcoin Blockchain in 250 Words or Less 2.2 Buying Bitcoin 2.3 Inflation and Forks 3.0 Other or “Alt” Currencies or “Coins” 3.1 Ethereum 3.2 Ripple 3.3 Dash 3.4 NEO 3.5 Litecoin 3.6 Iota 3.7 Monero 3.8 NEM 4.0 Wallets 4.1 Considering the Safest Options 4.2 Bread 4.3 Mycelium 4.4 Exodus 4.5 Copay 4.6 Jaxx 4.7 Armory 4.8 Trezor 4.9 Ledger Nano S 4.10 Green Address 4.11 Blockchain.info 5.0 Exchanges 5.1 Important Initial Considerations 5.2 Shapeshift 5.3 Coinbase 5.4 Gemini 5.5 Cex.Io 5.6 Poloniex 5.7 Kraken  2    6.0 Technical Trading 6.1 Technical Trading’s Potential 6.2 How to Read a Chart: The First Teeny Baby Steps 6.3 Common Analytics 6.3.1 Simple Moving Average 6.3.2 Exponential Moving Average 6.3.3 Moving Average Convergence Divergence 6.3.4 KDJ Indicator 6.3.5 Bollinger Bands 6.3.6 Relative Strength Inex 6.3.7 Bias Ratio 6.3.8 Williams % Range 6.3.9 Fast/Slow Stochastic Oscillator 6.3.10 Volume Moving Average 6.4 Common Trading Patterns 7.0 Introduction to Patterns 7.1 Gaps 7.2 Head and Shoulders 7.3 Triple Bottom 7.4 Double Bottom/Top 7.5 Saucers 7.6 The T-30 8.0 Understanding Derivatives Bitcoin: What It is and How It Works The story of digital payments begins with an international man of mystery: A heretofore unknown computer programmer, referred to only as Satoshi Nakamoto — the Japanese equivalent of John Smith1 — devised a unique methodology for digital payments. The year was 2008. In the wake of the subprime mortgage bubble, the pillars of the global financial system stood askew, threatening collapse. Consumer trust in government, banks and fiat currency – that is, those little bits of paper emblazoned with engraved portraits of presidents, statesmen and monarchs issued by central banks – evaporated. The notion of a secure, transparent means of exchange resonated and quickly gained traction on Wall Street as well as on Main Street. This was the state of a world ready for something new — ready for Bitcoin. In those days, bitcoin actually had no monetary value. It wasn’t worth anything. It was just an idea to see if the concept would work. Well, not to ruin your day, but sure that was a great time to get in... Because today, the value of a single bitcoin is several thousand dollars. But take heart, because even with bitcoin’s rise to date, there is still plenty of money to be made. The worldwide cache of these digital golden nuggets is worth some $50 billion, or roughly half of the total market value of all cryptocurrencies. Bitcoin is the 400-pound gorilla that can’t be ignored, so we might as well use it as the starting point for understanding this new frontier. Let’s be clear, though, this is a frontier that could put the power of currency into the hands of investors – sorry, “the people” – instead of governments. It’s an idea whose time has come. Worldwide global conflict and a decline in longstanding institutions, particularly of the financial type, has created the perfect conditions for digital currency to begin to enter the mainstream. Some houses on the market are even being priced in bitcoin right now. That’s the good side. The trouble with any currency is that the dark side of human nature tends to take over and mess up a perfectly good thing: Bitcoin is also what hackers have started demanding from corporations as payoffs not to torpedo their computer systems. What’s more, any time any item of value is created, society eventually must deal with theft and counterfeiting and other potential means of defrauding someone of their property. One rather elegant solution, then, is to reward transparency and honesty. This is what bitcoin is built on. It takes the weakness of stealable and fakable old greenbacks and turns them into a strength. If there is no reward for dishonesty, most people won’t be dishonest.   1 No one really knows who Satoshi really is. (Really!) 10    If dishonesty can hamper the system, then, presto, everyone who chooses to act in an honest way has an advantage and, critically, one who seeks to engage in dishonest behavior has an active incentive not to. The answer was something called the blockchain. 2.1 The Blockchain (In 250 Words or Less) It breaks down like this: Andy pays Jennifer for a new hoodie. He uses the private key to his bitcoin to initiate the transaction, which, in this case, means a change in the ownership of the currency. Nothing else changes hands. The bitcoin network, known as miners, get word of this transaction using their very powerful computers. They run these machines full blast using a trial and error approach that fills in the blanks on the data from recent transactions. This creates a big puzzle that has only one solution. The first miner to fill in all the appropriate transaction numbers correctly wins the right to bundle all of the recent deals into a patch of data known as a “block.” But that’s still not the end. After other miners verify that ALL of the data in the block is 100% error-free and that all the transactions in the block meets all the requirements to be deemed valid, the block is added to the larger blockchain of ALL previous transactions. This is the so-called “public ledger.” The miner who put the block together gets a bitcoin (or part of one) for the effort. Bitcoin has no central computer: It farms out all the data jockeying to a bunch of the computers connected to the Internet. This is called distributed computing and it is why cryptocurrencies are referred to as “decentralized.” There’s no “central” mainframe in some data farm keeping everything going, like with credit-card approval networks. Blocks are limited to one megabyte of data.  11    All of the blocks are linked, all must be correct all the time. That is what the technology demands. When they are, the system is secure and the transactions sail through at a certain maximum rate, with a certain maximum reward for the miners. That’s it. That’s what all the fuss is about. Not so hard, right? 2.2 Buying Bitcoin We have to start, as financial stuff always seems to do, with a little bit of fine print. You’ll want to have some of this alphabet soup front of mind as you make your decisions about how to buy bitcoin or one of its alternatives. Banks and financial institutions are heavily regulated, and they wider their reach, the more stringent the regulation. In the context of digital money, the primary concern is the world’s various anti-money laundering laws, or “AML.” Chief among these is a subset of rules referred to as “Know Your Customer.” This is often abbreviated to KYC, which a lot of traders confuse with a chicken joint. In any case, it has three flavors, and which you choose should be based on how much personal information you want to reveal about yourself to, well, the entire Interweb. KYC isn’t sinister or painful, it just means verifying the identity of new customers through various methods. It also depends on where you live, as AMLs vary from country to country. Zero KYC means the site or service provider asks no questions as to who you are. They have no ID document requirement, and you can pay with cold, hard cash or a wire like Moneygram or Western Union. This is typically the case when the transactions are Peer to Peer with real oversight or verification attempts other than the inherent blockchain technology that safeguards the currency, if not the individuals using it. These sites are usually on the expensive side. Evidently privacy has a price. A “light” version of KYC can sort of figure out who you are by tracing your phone number, bank account, paypal info or credit card details. A lot of exchanges will let you dip a toe in to buying at least some bitcoin knowing only this traceable info. The full KYC Monty means you gotta come up with documents that truly and unequivocally prove your identity. Passports, licenses, even utility bills or voter IDs can be on the approved list of the ID that a financial institution will accept — and generally you’ll need a combination of them. This process can go a long way — you might even be asked to submit a photograph of you holding your driver’s license or require a notary signature or a letter documenting your identity from your bank. The point here is to track down bad actors who might try to use bitcoin to launder drug money or otherwise avoid taxation, so the larger the amount you are trying to buy, the more hoops you can expect to be asked to jump through to verify your identity. 12    After you’ve convinced your cryptocurrency provider that you are, in fact, you, the next hurdle to clear will be to choose what you will use to buy bitcoin. The answer here is almost always dollars for new investors, so you’ll wanna have some sense of just how you want to send those greenbacks in. If you live in the United States, good news, you have lots of choices. Other locales may have more limited options. To review: •Bank transfers. When you bank chooses some electronic means of beaming dollars to your service provider, which is the only deposit method many will accept. This can take as a little as a day. Expect a wire fee in the $10- $40 range regardless of amount sent. •Plastic. You can buy with a credit card, but this isn’t particularly common in the crypto space. Yes, the whole world lives on plastic, so it’s natural to assume everyone would take American Express. But the kicker is that any credit-card transaction can be reversed with a phone call, while bitcoin transactions cannot be unwound. Of course, there is also the risk that someone could be using a card they filched out of your Burberry when you were eating dinner, which is a risk trading platforms and exchanges just don’t want to bother with. Ditto PayPal. •Other popular U.S. payment channels like cash or Western Union are not usually accepted. If you’re in the EU, though, you’re in luck, because some of their widely used money-sending methods are accepted by domestic- based exchanges, among them Germany’s Sofort or the Dutch iDeal system. Actually Making a Purchase Where are we? Fine print explained. Methods covered. Now let’s actually put hammer to nail. Here’s how to buy your first bitcoin. Don’t worry: It’s actually very easy. Method 1: The specialized ATM. You buy with cash and typically need to go through some minor KYC steps, usually employing your mobile phone’s technology or a biometric reading, like a fingerprint. Online, you can find one of these machines anywhere on Earth by visiting Coin-ATM-Radar.com. Expect to pay a pretty fat toll to drive this highway, though, as fees to purchase can reach north of 6%. That cost comes right out of the profit margin on your trade, so keep it in mind. For this reason, this method is not recommended. Some vendors sell gift cards that can be redeemed for bitcoin, though generally not in the United States. Again, the fees are high and it’s prudent to look elsewhere. Method 2: Exchanges/Brokers. This is where you set up an account, a wallet and your payment method just as if you were going to open an account at Merrill Lynch. These are covered in greater detail in an upcoming chapter. Method 3: Peer-to-Peer Sales: These online gathering places of bitcoin owners are where buyers and sellers meet to exchange directly with each other. Fees are low — 1% is generally top of the mark, and nothing isn’t 13    unheard of. The difference between the asking price and the selling price — called the “spread” — will vary in direct proportion to the network’s liquidity. If you have one seller who wants $5,000 for a bitcoin and one buyer who's willing to pay $4,000, the two sides aren’t likely to come to a deal. Add 10,000 traders into that cauldron and the deals start to pop as the bid and ask prices dance ever closer. You have the option of entering what amounts to a limit order — I will sell for this but no less — in addition to simply accepting the current lowest offer/highest bid. 2.3 Inflation and Forks Cryptos are unique among currencies in that they “release” additional money to pay the miners that run the network. These coins are generally unleashed upon the successfully verified addition of a new block to the block chain. Each individual coin very, very, VERY slightly decreases the value of all the others, which is the same thing as inflation. It is important to bear this in mind, as it is a factor in determining your ultimate profitability. Additionally, another feature of cryptos is a phenomenon called the fork. At the center of digital currencies are, you guessed it, digits. There is an enormous ton of data stored in the public ledger that details all previous transactions, and as this file builds it grows more cumbersome for even the fastest computers to digest it. The solution is the fork, which is when a section of the currency breaks off, or forks, into a new sub-species of the old, using the same underlying code but changing its name and going off on its own. This can manifest itself in a number of ways. For instance, bitcoin has a maximum block size of a megabyte. If enough users (miners) agree, then that could be raised to two megabytes, twice as large, which theoretically would slow the rate of forks by half. Other solutions include dumping some sort of functionality while retaining the rest of the code. With three forks, there are three varieties of bitcoin. Plain old bitcoin has the one-megabyte file size limit and allows for a technology called segregated witness. Bitcoin Cash has an eight megabyte limit and no segregated witness. “SegWit2/New York Agreement” — a catchy, roll-off-the-tongue name if ever there were one, moves the limit to two megabytes and retains segregated witness (which is a way of stuffing more transaction details into the same amount of space, a sort of file compression methodology).