Lesson 1

Summary Notes

Diploma in Cryptocurrency
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CONTENTS
Legal __________________________________________________________
Cryptocurrency Market Overview ____________________________________
Bitcoin
Etherum
Ripple
Litecoin

What Makes Markets Move? Supply and Demand!

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LEGAL

Any information or opinions provided by the Shaw Academy is General Information Only - It does not
take into account your personal circumstances, please do not trade or invest based solely on this
information. By viewing any material provided by the Shaw Academy or using the information you
agree that this is general education material and you will not hold any person or entity responsible for
loss or damages resulting from the content or general advice provided here by Shaw Academy, it's
employees, directors or fellow members. Futures, Contacts for Difference (CFDs), Options, and spot
currency trading have large potential rewards, but also large potential risk. You must be aware of the
risks and be willing to accept them in order to invest in CFDs and leveraged forex markets. Don't trade
with money you can't afford to lose. No representation is being made that any account will or is likely
to achieve profits or losses similar to those discussed in any material provided by the Shaw Academy.
Students of the Shaw Academy are responsible for their own accounts, trading account and their own
trades. The Shaw Academy Limited is not responsible for any financial loss suffered by any student
from leveraged Trading or any other financial investment.

The Shaw Academy does not give investment advice and any opinions expressed or discussions that
take place in the Shaw Academy cannot be deemed to be investment advice. Your financial trading
account, trades carried out on your account and funds held in your account are a matter between you
and your financial trading account provider. Any issues in these areas are between you and your
trading platform provider and are not the responsibility of the Shaw Academy . The past performance
of any trading system or methodology is not necessarily indicative of future results.
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Cryptocurrency Market Overview

Let’s begin with some basic information to ensure you fully understand exactly what is happening in
these markets. Some of this information will be already known to you, however some may not, so
please review all information to ensure your foundation is solid.

Cryptocurrencies, virtual currencies, electronic coins, digital coins, digital tokens and blockchain
tokens are different names for the same thing.

— A cryptocurrency is a chain of digital signatures stored on a decentralized public ledger known as a

blockchain.

Having a cryptocurrency means having a private key (similar to a password) giving the holder the
ability to transfer the cryptocurrency to someone else. Private keys are stored in digital wallets.

— Cryptocurrencies are transferred from one owner to another by adding a transaction to the
blockchain

Zero Sum Game!? – Statement or Question?

Trading cryptocurrencies is not quite a zero sum game; it is best described as an almost zero sum
game.1 What is meant by the term Zero Sum Game is that all possible outcomes’ individual statistical
likelihood when combined must equal 100% as there is no in-between. For example if one were to flip
a coin there would be a 50% chance of heads and a 50% chance of tails, that would be a Zero Sum
Game as there is no in-between and all outcomes equal 100% ie 50% plus 50%. Put another way
there are participants/position holders on either side/direction of a trade, be it Long or Short and the
gain on one side represents a loss on the other. What this also means is the net change in one
participants wealth is equally matched by that opposite change in another’s wealth i.e. the net change
in total wealth among participants is zero, the wealth is just shifted from one to another. For you to
win, another[s] must equally lose and vice versa.

Remember in cryptocurrency trading for each long there is a matching short.

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Bitcoin

Bitcoin is the head of the cryptocurrency pack. Its current market cap is USD 65 billion. The Bitcoin
blockchain provides a decentralized peer-to-peer electronic cash system. Critics could say bitcoin has
no intrinsic value, arguing it is a financial asset whose monetary value is entirely derived from people’s
perception and, unlike fiat currencies, it has no central bank reserves backing.

Ethereum

Ethereum is the second most popular cryptocurrency and the leading system for Blockchain-As-A-
Service. Like Bitcoin, it provides a decentralized peer to peer electronic cash system. Unlike Bitcoin,
Ethereum allows for the creation of smart contracts (i.e. programming code that auto-executes once
certain conditions are fulfilled). And unlike Bitcoin, with Ethereum developers can build and deploy
decentralized applications (e.g. an Ethereum-based decentralized Facebook).

Ripple

Ripple is the catchall name for the cryptocurrency platform, the transactional protocol for which is
actually XRP, in the same fashion as Ethereum is the name for the platform that facilitates trades in
Ether. Like other cryptocurrencies, Ripple is built atop the idea of a distributed ledger network which
requires various parties to participate in validating transactions, rather than any singular centralized
authority. That facilitates transactions all over the world, and transfer fees are far cheaper than the
likes of bitcoin. Unlike other cryptocurrencies, XRP transfers are effectively immediate, requiring no
typical confirmation time.

Litecoin
Litecoin is based on the same open source code behind bitcoin, with some notable differences.
Created by engineer Charlie Lee to be the silver to bitcoin's gold, one of the main disparities between
the two cryptocurrencies lies in their transaction speeds. It generates blocks about four times faster
than bitcoin, litecoin can confirm the legitimacy of transactions a lot quicker as well as process a much
higher number of them over the same time frame.

While bitcoin has a limit of 21 million coins, litecoin will max out at the 84 million mark.
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So why do markets rise and fall?

If there are more potential buyers than sellers, those participants who wish to sell would be more
inclined to hold out for higher offers from those buyers which results in an uptrend. If there are more
sellers wishing to liquidate, then those looking to enter will wait for a lower price. This is a very basic
definition to illustrate the point.

Let’s look at it another way – supply and demand – which we will examine in much more detail. Supply
is those financial positions people want to sell and demand is those that people are looking to buy.
When there is a great imbalance between the two, prices will tend to move in favour of the stronger
until a new price equilibrium is reached. This may be due to fair adjustment price wise and/or the fact
one or both sides will make the relevant adjustments based on the supply and demand shift – for
example increasing/decreasing production and/or purchasing more/less dependent on the
circumstances. It is also worth remembering that for some items increasing the supply may not be
possible either instantly or in the immediate future for example Gold, a nation’s currency, a crop etc.
The greater the disparity between supply and demand - the larger the potential move. Hence price
gives you an insight into the emotional state of all parties involved – their confidence, their opinion,
their will as exercised by their very trading.

Trading is in essence an exercise of probabilities and money management combined with

psychology.2

“The greater the disparity between supply and demand - the

larger the potential move.”