BTC Sessions - Bitcoin CRASHES! What's going on? ep137

Episode Date: January 11, 2021

Bitcoin dropped from a recent high of nearly $42,000 down to $30,000. What happened? Will it go lower? What should you do?   Are you a Bitcoin newcomer? Hit this playlist to start learning  https://www.youtube.com/playlist?list=PLxdf8G0kzsUWe-rG0X6LDJAMXL7761B42 SUPPORT THE SHOW: LEDN Bitcoin backed loans –  get $25 free https://bit.ly/397rlLN Get Wasabi wallet for Bitcoin privacy https://wasabiwallet.io/ Cobo Vault: secure your Bitcoin! https://bit.ly/2GgMFlH BillFodl: get your wallet backups in solid steel. https://privacypros.io/ Bitrefill: use Bitcoin to purchase gift cards https://www.bitrefill.com/buy/?code=O04UMic9 LIGHTNING tips: https://tippin.me/@BTCsessions Audio-only version of the show: https://anchor.fm/btcsessions Telegram channel: https://t.me/btc_sessions

Wasabi wallet and fairly private. Welcome everybody. Good morning or afternoon, depending on where you are. People are freaking out. Bitcoin dropped. It can go down to. What? What? I didn't know that. I thought it only went up ever. So Bitcoin went to a high of around $42,000 U.S. dollars recently. And, more, more, more recently, it dropped down to around $30,000. So that's a pretty steep drop. In fact, I saw on Twitter just recently, it's the first time ever, it marks the first time ever that Bitcoin had a $10,000 plus or minus in a single day.

You need to strap in because this stuff is going to happen more often. But we're going to get into what exactly is going on. Why is Bitcoin dropping? Will it continue to drop? Is it going to go back up? What's going to happen? You know, typical things, especially if you haven't been around Bitcoin, you don't know how to deal with this kind of craziness because it is crazy.

It's par for the course. It's the price of admission. And you're going to need to check yourself a little bit here. So without further ado, As always, I'm Ben with the BTC sessions, and this is your daily session. Okay, so we're going to get going here. Let's dive in first before we get started. Of course, shout out to sponsors of the show, Lendon.io.

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a solid chunk of steel instead of a piece of paper sitting around. So head over to privacyprose. dotio to check them out. And we're going to keep this up here because, wow, does this chart look scary if you're zoomed in on this particular part of the chart? So yeah, you can see here, we were up around $42,000. We dipped down as low as 30,000, 600, somewhere in that range. We've come up a little bit. We're around 33K right now.

This is all U.S. dollars, of course. So what's going on? Why is everything so scary? You're seeing headlines like this. You're seeing time to take some money off the table. Bitcoin's 21% plunge in two days shakes faith in cryptocurrency run. You're seeing other Bitcoin falls 19% to face biggest one-day drop since March. Bitcoin faces big one-day drop since March after Red Hot Rally.

You've got hot takes coming out from people like Joe here. saying Bitcoin keeps crashing. It's lost over a fifth of its value in the last 24 hours from Bloomberg. You got Peter Schiff, the gold buck saying Bitcoin traded near 42K on Friday and nearly 30K on Monday. An asset that drops 28% over a weekend is not a safe haven, a store value or a viable hedge against inflation. If you want to gamble on Bitcoin, buy Bitcoin.

If you want a hedge against inflation, buy gold. And then you have this guy, Scott Minard. He says Bitcoin's parabolic rise is unsustainable in the near term, vulnerable to a setback. The target technical upside of 35K has been exceeded. Time to take some money off the table. But let's dive a little bit deeper into this guy in particular. Who is he? Well, he's the chief investment officer of Guggenheim.

Now, if you've been watching the news in the last little bit, that might sound familiar. Well, they decided Guggenheim that they would like to start moving money into Bitcoin. The problem is they're waiting on approval. They have to get regulatory approval to do so. When they first wanted to start moving into Bitcoin, it was around $10,000. It's obviously rose quite a bit since then. But in a recent interview on, I believe, CNBC, oh, no, sorry, it was Bloomberg. Scott Menard was on there talking about what they believe the fair value of Bitcoin is.

And they actually interrupted the Federal Reserve Chairman Jerome Powell and didn't go to his live conference on what he was going to do with the U.S. dollar. They stayed with Scott Menard so that he could outline why Guggenheim believes the fair market value of Bitcoin is $400,000 U.S. dollars per coin. Now, you might be asking yourself, why would this guy be kind of casting fear, uncertainty, and doubt on a dip to $30,000 when him and his company that manages billions of dollars that are looking to put 10% potentially of their fund into Bitcoin would be worried about a dip to $30k when they think it's worth $400,000. And I would posit that it's because, well, they don't have approval to buy Bitcoin yet. And it probably benefits them in a way to have this pullback. Because it's not like they're not going to buy if they think Bitcoin is worth $400,000, even if it's at $30,000, even if it's at $40,000 or $50,000, if they think it's going to $400,000, they're going to buy at 100, at 200, at 300, at 300.

If they think it's going to 400, anything below 400, they'd likely be purchasing some ad. So when you start to see this, you might start to get a handle a little bit on what's going on. Now, let's look at a chart in a different light. Okay? So we looked at that scary one before. This is zoomed out to within a single week.

And if you notice where we're sitting right now, We're about where we were on January 5th, middle of the day on January 5th. It's the 11th, so six days ago. Also, let's zoom out a month. Bitcoin for the first time ever broke $30,000 on January 2nd. That was nine days ago. was the first time ever that we got above 30,000. We're sitting at 33,000.

The only people that have seen some red here is anybody that has bought a little bit in the past week-ish, we'll say. Okay, fair enough. But is it scary? Is this going to continue going down? Now, first off, nobody can say whether the $30,000 mark was kind of the, bottom of this drop or if it's going to go further. But what we can do is we can look historically. Now, for those of you unfamiliar, Bitcoin has a baked-in monetary policy that cannot be changed, or rather it would require the consensus of effectively everyone to change it. And that monetary policy

states that every four years, the creation of new coins is cut in half. And it tapers gradually over time until eventually it can't be cut in half anymore. And there will be a maximum of 21 million Bitcoin that ever exist. Okay. So there's our baseline. Bitcoin started in 2009. And in 2012, it got cut in half the number of coins that were being created. Bitcoin gets created every 10 minutes. When it started, 50 new Bitcoin were created every 10 minutes in 2012. That got cut to 25 Bitcoin every 10 minutes. Now, that shock had shock waves through the market. When it got cut in half, about a year later, we saw these huge parabolic runs up in the price. It went from double digits It's around $13 to $1,200 in a single year.

This was in 2013, about a year after the halving is what it's called. Now, it did go into a bear market after that. It went from $1,200 down to at one point, at the absolute lowest, around $150. But, you know, 200 to 300 was kind of that range where it was at the bottom. Let's fast forward. The halving, the cut in new supply, happened again. in 2016. So instead of 25 coins every 10 minutes, it got cut to 12 and a half coins every 10 minutes. If you jump further to 2017, about a year after the halving, we saw these huge parabolic runs up in the

price yet again. It went from around $1,000 at the beginning of the year, up to $20,000. It, of course, then had a bear market. It dropped down as low as low. was around 3,3,300, somewhere in that range. Well, what happened last year? In 2020, once again, we had the halving. Instead of 12 and a half new coins being created every 10 minutes, 6.25 Bitcoin now created every 10 minutes. So for the same or more demand, more people wanting Bitcoin, more people using Bitcoin,

less new supply coming onto the market. The market was used to buying up those new coins, those 12 and a half coins. Well, now I only had half as much. And the demand is increasing because now we have huge institutions like Guggenheim that we just mentioned like square, like micro strategy. There's mass mutual, like mutual funds, hedge funds buying it up. You have institutional interest buying it up. In 2017, it was pretty much just retail, regular people like you and I just buying Bitcoin.

And that kind of drove that whole rally. You've got a new class of buyers coming in right now. And so now you're seeing these bumps in price that are on the scale of institutions just kind of starting to get their hands on some of this. So let's look at historically what happened with Price in 2017. And this is a great tweet by a guy named Vijay, Boyd, And he said in 2017, in the 2017 Bitcoin bull market, corrections found demand after drops of 30 to 40%. Now, we just had a drop of around 28.5%.

In the current bull market, the demand seems to appear after corrections between 15 to 20%. Of course, we went a bit beyond that. He said, this is probably indicative of a difference in buyers, retail in 2017 versus institutional today. And let's take a look at 2017's run. This is the entirety of the run from kind of the halving in 2016 into 2017 and that huge run up around here was when it was a thousand bucks and then it went to 20. But look at all these drops. They were all very scary at the time. 38%, 38%, 33%, 38%, 36%, 29%. All of those happened over time, and every time people freaked out, they got rid of their Bitcoin,

only to see it blast through what they previously sold it at and achieve new highs, sometimes within a couple weeks, sometimes within a month or two. It kind of depended, but it was pretty insane. Now, this is the past few months here. We saw a 12% drop back in November. We saw 20% drop earlier, and we saw, well, you know, a bit more than that. Now, we saw 28% drop around now. I think we're going to continue to see this.

Now, I think the drops maybe, and again, this is just kind of speculation on my point. But I think the drops will be a little bit more muted because of like Vijay was saying here, the type of people buying in. Will there still be huge runs up and then dips afterwards? I think so. I think we've clearly seen that so far. But should you dump everything you have right now? I mean, it's up to you. But personally, that's not what I'm doing. So I tweeted this out earlier because it's so familiar all of this. It feels like a replay of 2017. And I said,

the information asymmetry here is almost criminal. You have the halving, new all-time highs within a year, a new bull run with massive pumps, and then double-digit corrections. And then you have the media that pumps all of these articles that's fear, uncertainty, and doubt

every time I drops, but then has huge, wonderful exposés on how everybody's getting rich when it pumps and everybody follows, basically does what those articles imply instead of doing the opposite. Or instead of just stepping back, as I allude to here, Bitcoiners that have been around the block, all the ones that I know are just relaxing and they're DCAing through it all. And DCA just means dollar cost average. You set what you're comfortable with. You set a time interval and you say, I'm okay with 50 bucks a week. If I lost 50 bucks, it's, I'm not going to be starving, you know? And you just

kind of sit back and whatever you set that date, maybe every Friday at a certain time, you're like, okay, 50 bucks is fine. Or maybe once a month, 50 bucks on the first of the month. You say, okay, I'm going to put 50 bucks. It's fine if I lose 50 bucks. It's fine if I lose 50 bucks. whatever. And you just, whatever it's at, who cares? If you, if you, if it's high, then you buy a little bit less Bitcoin, but it's still $50 worth. If it's low, then you get a deal on your Bitcoin and you get a little bit more Bitcoin for your buck. But you know, you take the emotion out of what you're doing. So do I think this is scary? Absolutely not. And to really drill this point home, there's this guy, great guy. His name is Alex Miller. He's at the Alex Galaxy on Twitter. And I want to play this video

that he made a few years back and the sequel that he then made. So this is great. Enjoy it. It's only a minute long. But just watch this and it's really going to put things in perspective. This one time, Bitcoin went from six cents all the way to 36 cents and then it crashed down to 21 cents. And then another time, Bitcoin went from 85 cents all the way to $29, and then it crashed $3. And then another time, Bitcoin went all the way to $213.

And then it crashed all the way to $70. And then another time, Bitcoin went all the way, all the way to $1,100, and then it crashed all the way to $2.39. So the moral of the story is don't buy Bitcoin because you know it's going to crash again. I love it. I love it. Anyways, so he made this video years ago, and everybody's like, Alex, you've got to make a sequel. You've got to make a sequel.

So he did. And here it is. And then another time. Bitcoin went from 20,000 and then it crashed all the way to 3,000. Are you happy now? I love it. But it does put things in perspective. Everybody freaks out at these drops. And had they just sat and relaxed and just kind of dollar cost average through it, they would have been fine.

And the thing is, if Bitcoin succeeds in its goal, which in my opinion is, First and foremost, a world reserve currency, which I think it has a shot of doing because nobody controls it. It's a global monetary standard that everybody can adhere to. And nobody can interfere with the monetary policy, which is the reason it was created. And that's really apparent in the past year with all of the money printing that we've seen. But if Bitcoin achieves that, you're looking at the scarcest, best. reserve asset on the planet and you're trying to play spikes and dips in the price,

take a load off your shoulders and sit back. It is the best performing asset of the last decade. Even with this drop, it is still up on the year. If you go pack a month, it's way up. So I think if you take these movements with a grain of salt, again, if you don't have disposable income, you know, maybe it's not best for you to be panicking over this kind of stuff. But if it's just if you have disposable income and you've decided for yourself that you're going to be dabbling in Bitcoin if you're just getting started, you know, do yourself a favor and try and take, you're going to be dabbling in Bitcoin. to if you're just getting started, you know, do yourself a favor and try and take the emotion out of it. Dollar cost average tends to work for me

and has worked in the past and I can just kind of set it and forget it and not have to worry about it. But that's kind of my hot take on what's going on right now. Honestly, like it's, it's the longer you're around, the less these kind of crazy spikes

and troughs tend to affect you. but again, it's worth kind of taking the time, doing some reading, looking historically at what's happened to give yourself a little bit more understanding. And I find if your allocation to Bitcoin directly reflects your understanding of the asset itself, then you're much less likely to behave in a way that will be detrimental to you in the long term. So if you want to get started with some basic stuff, if you're brand new, I do have a ton of content and it will kind of pull you away from the speculative, oh, I'm going to dabble in alt coins and I'm going to try and do all these crazy things. Because remember, as you're trading Bitcoin,

if you're trying to trade, not only are you trying to figure out when it's going to be high and when it's going to be low, which most people are not going to successfully do that. But you're also, if you make a gain, you're incurring capital gains, even when you trade from Bitcoin to an alt coin. You don't have to trade back to dollars to incur capital gains taxes, any trade you make. You can really screw yourself by trading around with a bunch of alt coins during a bull run. And then when it dips back down, tax time comes. All of those gains were quote unquote realized when you were trading.

and you should have put tax money away when that was happening. Whereas if you just dollar cost average Bitcoin, then none of that, it's not taxable until you actually convert to dollars if you choose to do so. So and for me, for the most part, other than my day-to-day expenses, I'm just, I'm holding it because I value Bitcoin as a money more than I value dollars. If I have dollars, I'm going to spend those. I'm going to get rid of them. If I have Bitcoin, I'm going to hold it long term as my savings account, as my savings

mechanism. That's what this is for me. So anyways, I have a playlist called Getting Started. It's on my YouTube channel. I have a whole bunch of different stuff. You can start with stuff like top five tips. And it takes you through like, well, what stuff do you need to learn about wallets and security and all that kind of stuff?

I talk about exchanges. I talk about wallets. I talk about hardware for proper security. I dive into all coins and kind of what may have happened to you if you dabbled in that last time for the Bull Run in 2017. Yeah. And there's just a whole bunch of different tutorials here. So check that out.

It's not linked right now, but I'll add it in the links down below afterwards. And I hope that that gets you started off on the right foot. Furthermore, if you want to better understand Bitcoin itself as a money, as what may be taking place as it gets monetized and potentially becomes a new World Reserve currency, if it can achieve that, then two books. Give me a second here. Okay, I got them. All right.

Book number one, the Bitcoin standard. I mean, pretty much if you're going to read one Bitcoin book, you should probably go down this route. This will give you a good history of money and why Bitcoin continues to be king and why Bitcoin is very likely, in my opinion, and the author's opinion, to potentially become a world reserve currency. Book number two, Magic Internet Money, a book about Bitcoin by Jesse Berger. This guy's Canadian, by the way. He's awesome. Check him out. But this one, very excellent. It goes through all of the things of how Bitcoin works, and it goes into things about Bitcoin as a money, as a reserve asset, all of these different things. And it summarizes it very well, very short

chapters. Everything is super concise. I found things that I would go through and say, oh, I used to take 20 minutes to explain that. And here it is in a single paragraph. So, you know, those two books will get you started. I mentioned them in my getting started with Bitcoin videos. So head back, Check those out. But all in all, am I panicking? I don't know. No, not at all. I don't think so. I don't think anybody that's been around on the block in Bitcoin for more than a few years is really panicking right now. So relax, sit back, enjoy the dip, grab a bag of chips. Guys, thank you so much for watching and or listening since this is going to be on the podcast

later. Of course, there's, there's like damn near 300 people here. So be sure to smash, like, subscribe, and then share this thing because it gets in front of more eyeballs that way. I know you guys have been in the chat. It's a little harder when I'm just doing a video by myself to be answering the chat messages. But thank you guys for being in there. Of course, I love having you here. If you want to help out the show in another way, you can hit up the previously mentioned sponsors down below. That was Ledon, Cobo, BitRefill, and Privacy Pros for that Bill Fottle. And of course, if you really like what you saw it, you can always hit me up with a Bitcoin Lightning Network tip at my tippin.me page, t-i-p-p-in.me.combe-n.me slash at BTC Sessions.

With that, I'm out. Have a wonderful day, a wonderful evening, wherever you may be. And I'll see you next time for your daily session.