BTC Sessions - Bitcoin extends price dip pre-halving, Lebanese using BTC to escape capital controls, cracks in US economy emerge EP024

Episode Date: February 27, 2020

SHOW TOPICS: Bitcoin drops below 9K, but should you be worried? https://bitcoinist.com/bitcoin-briefly-breaks-9k-support-hodl-on-everybody/ Bitmex daily liquidations hit year to date record https://bitcoinist.com/bitmex-liquidations-bitcoin-2020/ Plan B stock to flow believes there is a floor at $8200 https://bitcoinist.com/bitcoin-price-wont-fall-below-8-2k-during-this-crash-planb/ https://digitalik.net/btc/ Cracks in the economy show as auto and credit card loan delinquency rates skyrocket https://tftc.io/martys-bent/issue-682/ Capital controls in Lebanon have some looking to Bitcoin, and paying a large premium to do so https://decrypt.co/20618/the-case-for-bitcoin-in-lebanon https://bitcoinist.com/bitcoin-price-hits-15k-in-lebanon-amid-worsening-cash-crunch/ The Bank Of Canada has a contingency plan for a digital currency – but why? https://decrypt.co/20568/bank-of-canada-is-developing-a-digital-currency-as-contingency SUPPORT THE SHOW: Visit LEDN to check out getting a bitcoin-backed loan https://platform.ledn.io/join/0a00cca3dd61dea5909c95cd41f41685 Get Wasabi wallet and enjoy your privacy https://wasabiwallet.io/ Wasabi Tutorial https://www.youtube.com/watch?v=ECQHAzSckK0 Check out Rise Wallet – the easiest way to onboard your pre-coiner friends to Bitcoin! https://www.risewallet.com/ Rise tutorial https://www.youtube.com/watch?v=X2VUjj6wPM0 Get NORDVPN to protect your online privacy. 75% off a 3 year https://nordvpn.org/btcsessions Check out my website for private bookings: http://btcsessions.ca/ Join my Telegram channel! https://t.me/btc_sessions If you value my work and would like to send me a tip, they are always appreciated! LIGHTNING tips: https://tippin.me/@BTCsessions

Wasabi wallet. I'm fairly private. What's up everyone? I'm Ben with the BTC sessions and this is your daily session. Before we dive in, of course, shout out to sponsors of the show. Ledin.com. This is where you can use your Bitcoin for a variety of different services. They've got Bitcoin savings accounts where you can earn interest on your Bitcoin. They've got Bitcoin-backed loans where you can use your Bitcoin as collateral to a obtain a Canadian or US dollar loan. So if you're in a pinch and you don't want to sell your Bitcoin, but you do need to get your hands on dollars, this could be an option for you.

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So highly encourage you to check them out. Head over to risewallet.com. And in the top right, there's a button that says locations. You can check out where you can pick one out. They're currently only in Canada, but looking at expanding. So be sure to keep an eye out. Also, the creator of these is going to be. down in March at Bitcoin 2020. I myself will also be there. So if you're down there,

be sure to give them a shout out on Twitter. And with that, let's dive into the news. So Bitcoin has taken a bit of a dip, you know, more of the same with Bitcoin. It's never a dull day in the Bitcoin world. So it's broken down below 9K support. Now, where is it? right. I'm just going to refresh this page to get a bit of idea, idea where we're at, yeah, we're around 87, high 87, hundreds. It's been around that 88 zone. So, yeah, it broke below 9,000 support. That's a psychological level for a lot of people. And it has dropped significantly from the previous high that we've had in the past month or so, above, well above 10,000 we go. And it has dropped significantly. got to around 10-5, I believe, at one point, 10-4-10-5, but we're definitely rejected from that level.

So where are we now? We're kind of dipping down, as I said, around the 8,800 level. But there is, if we were to drop significantly below this, the next major resistance or support, rather, would be around. the 8,000 level. Now, overall, it's still been quite a good year for Bitcoin. We're still up significantly from the beginning of the year. But again, Bitcoin is a volatile asset and it goes up and down quite a bit. Now, part of this is because of derivatives markets and people going either long or short. And if they're wrong in a certain direction, then they can be forced to sell or buy at certain price points and that can kind of create a domino effect. We've seen exactly

that happen with this recent dip, Bitmex, one of the largest derivatives platforms for Bitcoin, hit a year-to-date record with this recent dip. And when I say record, I mean liquidations, people being wiped out of their position. So essentially, 150 million. million dollars changed hands on Bitmex. This represents the largest single-day liquidations on the exchange for the entire year. And many suspect that whales are hunting stops and snagging easy money from over-leveraged long positions. So people betting that the price would go up, essentially whales can dip the price and then scoop up that money by taking the opposite of that bet. So there's speculation that we will continue on the trend upwards if we kind of hit that

magic resistance or I guess, again, support level, whether that be right in the range we are now or maybe it's a lower, maybe it's AK, who knows. But we have been dropping, we dropped about 14% in the last three days. In fact, I think it's a little bit more than that at this point. But, I mean, par for the course, is anybody particularly surprised to see wild fluctuations in either direction? Not this guy. Now, one person who doesn't think that we're going to be dipping too much lower is Plan B or on Twitter at 100 trillion USD. And so he's going by his stock to flow model. Stock to flow model has to do with the total amount of liquid Bitcoin on the market versus the flow of new Bitcoin coming into the market.

And that decreases exponentially over time because of the way that Bitcoin is issued every four years. The issuance of new coins, every 10 minutes gets cut in half. And that's coming up in May. It's called the halving. So he's saying that he's not expecting a drop below 8200 because that stands in line with around the stock to flow level. So taking a look, this is a live chart of stock to flow or, you know, as live as it can be, it's pretty zoomed out. It obviously goes from the inception of Bitcoin to now and beyond. But you can see kind of the smoother line is the stock-to-flow projection based on models predicted and laid out and back-tested by many, many different people, kind of what Bitcoin is kind of given this model expected to follow if the model holds.

And so you can see, obviously, the real price of Bitcoin does fluctuate from this model. But it's kind of elastic. So what that means is while it may shoot up or down below this model at times, it tends to reallocate and center itself around this model. And so we can see that, yes, there's been manias where it goes maybe an order of magnitude, even beyond this stock to flow model, but it does tend to rebound back to the stock to flow model. And we've been pretty close to it. In fact, we're pretty much right in line.

with it now. We're a little bit above. We're at around 8800 and currently that stock to flow model is sitting around the 8300 range. So about 500 bucks below where we are now. Now when that having triggers, the stock to flow model based on a 365 day average begins to rise exponentially. and we see it within by mid-2020 being in the high $90,000 range and by the end of the year, getting close to the $100,000 range. And if we have kind of those deviations where we overshoot a little bit, then that puts us well into the next order of magnitude where you could be seeing prices of a few hundred thousand dollars.

And again, if the model holds, there's no telling if it's going to. It's done quite well so far, but that doesn't mean that it can't be broken or in the future. So that said, again, we're pretty close in line with what stock to flow is designated as being right now. And then we could be rising significantly given the having. Now, what happened previous having was just before it, we saw a rise. a pretty significant rise. So we were in around a $450 range. And then prior to the having, there was a spike that took us up to around $750.

So what is that? It was about a, it wasn't doubling. It was about 70% rise. Somewhere in that range, 60, 70% rise. Anyways, if we were to see something like that from, And that's from like kind of the previous peak just before the rise. We could potentially prior to the having if the same thing were to play out again see something in the $16,000 range, possibly. If it doesn't, if history doesn't repeat and it doesn't rhyme, then then obviously anything could happen.

But I'm just saying historically speaking, if something similar happens, then that's what we would be looking at. it would be cool and interesting to see if that does play out again because if it does, then it may indicate that we may have a similar year and year to a year and a half following the having, which would be, again, quite a mania where we overshoot the stock to flow model by maybe a few times. So, I will tell, again, as I kind of went on, I'm going to open up something here because I kind of went on a bit of a tangent on Twitter earlier. And so I just want to pull up this tweet that I was chatting about.

Okay, so I said, what if, and stay with me here, it's a bad time to sell, and Bitcoin ends up being significantly higher in just a couple months' time. And what if, that could be wrong, what if that was still a bad time to sell because as 2021 carried significant upside. And what if the very nature of the underlying asset was built in a way so as to reward those with the coolest heads and the strongest hands? What if those things were true? Would you still be concerning yourself with the daily noise and short-term price movements? And furthermore, what if you weren't particularly worried about any of the above because you responsibly only allocated funds that were disposable income, as opposed to incurring.

debt while also ensuring that you live within your means. So again, if you're using money that is disposable income in the first place and you're not incurring debt to get yourself into a position and you're also living in a way where you're living below your means and thus having a little bit of disposable income, if you're not overspending on other things just in order to scrape by and incurring debt all over the place, then gradually just kind of dollar cost averaging and stacking stats over time and not overthinking it and not banking on, oh, I need this to be at this price point by this time, then you're going to have a lot cooler of a head around this mentality of long-term thinking and you're not going to be focused on the day-to-day.

Sure, it's super fun to watch it when it wildly fluctuates, but for your own sanity, it's probably much better to be responsible about things. Take a gradual long-term approach if you decide to allocate into Bitcoin and don't spend money that you don't have. Okay, that's my Uncle Ben chat to you. With great power comes great responsibility, I suppose. Let's move on here. This from Marty Bent, one of the hosts of Tales from the Cript,

and he dropped this in today's issue of the Bent. By the way, if you're not subscribed to the Bent, it's an excellent newsletter. It's every day he drops one of these. I don't know how he keeps up with it, but kudos to him. And then also, if you're not listening to Tales from the Crypt, what are you doing with your life? That's a podcast you have to listen to, particularly Rabbit Hole Recap.

They do a lot of news roundups like this, but weekly. So be sure to check that out, and they've got some killer interviews as well. Anyways, Marty in his issue today was talking about top signals, top signals everywhere. He's talking about the regular markets, the traditional markets. And so he has a few graphics here that outline kind of the state of things. And one of them is credit card delinquency rates. So people that cannot pay back their credit cards or are behind in paying back their credit cards. And so in this chart, it shows a huge spike in delinquency rates in and around the financial crisis.

So around 2008 and a couple years following, and you see it spike up in around 2007, and then it dips down for a little while. And there's two lines on this chart. One of them is for smaller banks, and one of them is for all banks as an aggregate. And what we see is both sets of these spike up considerably during the financial crisis. they come down, though smaller banks does stay a little higher during, we'll say, around 2012 to 2018 or so, with all banks just below it. And then all of a sudden, in and around mid-2017 to early 2018, a massive spike in delinquency rates amongst smaller banks. In fact, at current time, right now in 2007, around a 7% delinquency rate of people with credit card debt at smaller banks.

And just for context, the peak for smaller banks was 6% in 2009 or just before the beginning of 2009. So it's already up 1% above what it was before. Meanwhile, other banks, like the all banks metric, is still relatively low, but these smaller dominoes could be pointing to a bigger problem that could extend to larger banks over time. Furthermore, they've got 90-plus-day delinquent auto loans in the billions. So people that have not been able to make a payment on their auto loans, on their car loans, in more than 90 days. At its highest in and around the financial crisis in quarter four of 2010, it was getting close to the $40 billion mark that was 90 days delinquent.

Well, currently in quarter four of 2019, we've finished the year at 66 billion. $66 billion worth of auto loan debt that is more than 90 days delinquent. I remember a couple years back saying after looking at what happened in the financial crisis, and by the way, if you're unsure what happened in 2008, well, essentially, people extended credit to those who didn't warrant it. So people that had no collateral, no income, nothing, were given credit to buy homes. These were called subprime mortgages. And when shit hit the fan and people couldn't pay those back, the effects ripple throughout the financial industry and toppled banks and essentially led to the point where the government had to print trillions of dollars just to bail everybody out because all of this money and derivatives were based around these shitty loans that they handed out.

well I remember a few years back starting to see consistently all of these signs for car dealership saying like bad credit no credit doesn't matter come in you can get zero percent on your auto loan and and you can pick it up right away and so it kind of was indicative that they were just willing to give loans to anybody for a car and and a lot of people apparently were scooping them up. A lot of people that could not afford them in the first place. People buying cars with money that they didn't have as income, with money that they weren't expecting to be making. And it shows because we are rounding the corner to having double the amount of delinquent auto loans as we did in and around the peak during the financial crisis. and the interesting thing about this, by the way, let's further look at the auto loan delinquencies. So the percent of auto loan balances. So now the percent were peaking up in and around the same range as we were during the financial crisis at the same time.

So back then it was around 5.27 percent of auto loan balances were delinquent. And right now it's currently around 4.9. 9, 4%. So just shy of 5%. So in and around the same levels as percentages, but keep in mind that the outstanding auto loan in the billions, so $66 billion, is now that 5%, whereas before, 30, you know, close to $40 billion would have been 5%. So the amount of outstanding auto loan debt as an aggregate is much, much higher. And we're just, starting to see these delinquency rates hockey stick. And they're starting to go up quite a bit.

And the funny thing about this is you hear a lot that this is the best economy ever, particularly from the president. But again, like the stock market has been booming until recently. And people were saying, oh, it's great. Everything's amazing. The economy is incredible. But underneath it all, there are, these signs of decay, which are rather worrying, I would say.

So we'll see how it pans out, but you're starting to see some cracks in the system. And speaking of financial crises, interesting in Lebanon right now. So in Lebanon, Lebanese banks are imposing strict capital controls to deal with its current economic crisis. So right now, Lebanon is currently experiencing its work. economic crisis in decades. So the local banks, they've begun to impose these kind of capital controls and increased restrictions when it comes to foreign currency movements. So that kind of forces people to withdraw their savings in the pounds at the official exchange rate. So Lebanese pounds,

they have to withdraw from their accounts in the local currency at the official exchange rate. The problem is the official exchange rate is quite different from what you can get on the free markets with the Lebanese pound. In fact, when you withdraw and you try to exchange it elsewhere outside of official channels, you're going to be getting hit by basically a 40% loss on everything because the exchange rate within the country given by the banks is not in line with what the real market is willing to pay for Lebanese pounds. So citizens are also now limited to making foreign currency withdrawals of between $50 and a few hundred dollars per month, per month.

So maybe if you're lucky, you'll get a few hundred bucks out of your account in a different currency other than your own. Otherwise, you've got to withdraw as pounds and then exchange it externally, at which point you're taking a 40% loss. And transfers out of the country entirely are capped at $50,000 a year and only for so-called necessary matters, which is completely subjective. It just depends on what they decide is necessary.

And so what this has led to is some people are trying to utilize Bitcoin as a way to get their money out of the country. And when you look at the Bitcoin price in Lebanon, it's actually, at one point, it hit around double of where we are right now. Now, this was from the other day, so we were up a little bit the other day. but still a significant premium. It hit around the equivalent of $15,000 in order to obtain a Bitcoin in Lebanon. Now, this is a little bit of a funny metric because we're using two external indicators, the Lebanese pound, the US dollar, and we're applying them to Bitcoin. But really, the rock in this foundation is actually Bitcoin.

It's not that Bitcoin is more expensive in Lebanon. It's that the Lebanese pound is worth less. People are not willing to give up their Bitcoin unless you pay an exorbitant amount more of Lebanese pounds. Because they recognize the limited utility of Lebanese pounds because they're constricted to within the economy. and you can't always get what the exchange rate is stated. In fact, in most cases, you cannot if you want to move any meaningful amount of money. And so there's a massive premium on Bitcoin, but again, it's not a premium on Bitcoin. It's a discount on the Lebanese pound because it lacks utility and mobility.

So very interesting to see how global markets react to this kind of thing, because it really does make you think about different. how value is allocated and decided when it comes to currencies themselves and where you can actually utilize them. So really, again, unfortunate for those in Lebanon and people that have family there that are trying to allocate funds elsewhere, but an interesting study on how markets react to these kinds of capital controls. And then finally, I just wanted to bring up that the Bank of Canada is, of course they are, they're developing a digital currency. The interesting thing about them talking about this, this is not particularly interesting that they're developing a digital currency.

Oddly enough, central banks just have gotten in this mindset where if they digitize, then they've caught up. But what they seem to be missing is the fact that Bitcoin was created in response to shitty monetary policy. Digitization has nothing to do with your monetary policy. If you want to catch up, stop printing money. That's what you need to do. You don't need to make it digital.

I mean, sure, you can move it around a little bit easier if it's digitized. But that's not really the key factor when it comes to Bitcoin. It's that you can't fuck with a monetary policy. fact I I I'm going back to my Twitter here I got to see there's something earlier that I replied to um that I had to mention as well okay so so it was somebody brought up here we go okay so so somebody um was talking about how bitcoin is is well a psychedelic albarto if you don't follow them on Twitter you probably should but regardless He says, Bitcoin is not old tech.

Whoever told you that straight up lied to you and you're too technologically illiterate to figure it out yourself. No other shitcoins have been battled tested like Bitcoin. Bitcoin is resilient. Shitcoins are not. And he's quoted a tweet of somebody saying, we started with candles. Let's end with candles. Fuck electricity. And they're kind of alluding to the fact that Bitcoin was first, but people have tried

to iterate on it and make incremental changes and allow it to do more things. But they're applying this logic to sound money. And so I replied with kind of my hot take on the subject is that it blows my mind that people don't understand this. Bitcoin was necessary because previous monetary systems got fucked with, right? We had the gold standard and we lost it because of some of the inherent properties, it's difficult to store and audit gold and transfer it internationally and so and so forth. And it led to centralization and then the removal of the gold standard. Regardless, Bitcoin was created to be unfuck withable.

It's designed to be difficult to change, if not impossible to change, to preserve that monetary policy. So even if a lot of people want to change it, it's just going to be super difficult. And it blows my mind that people still complain that Bitcoin is not malleable and able to be easily changed. They claim that that's something that's desirable when the whole innovation of Bitcoin was that you couldn't fuck with it. Was that it was meant to be this kind of bastion of excellent monetary policy where nobody could come and decide, hey, you know what, I think I want some mild inflation. And now that we have mild inflation, I'd like 2% inflation.

And now that we have 2% inflation, hell, let's just print a few trillion dollars. That is what is inherent to Bitcoin's design. And everything else superfluous to that is complementary and meant to be building upon that foundation to make sure that it cannot be changed. And when you have an easily malleable protocol, that's the antithesis to what Bitcoin seeks to achieve. Anyways, I digress. Let's get back to Bank of Canada, Clos, Central Banks, Digital currencies, all of that. Okay.

So they said that they had, they wanted to do this as a contingency. So what possible reasons could they see? as a reason that merits the need for digitization. And so what they said is Bank of Canada doesn't necessarily believe a digital currency is needed right now, but we'll prepare one as a contingency. The bank outlined two scenarios in a press release, which it said would warrant an introduction of digital currency by the Bank of Canada. So very curious about what could possibly make,

digitization an absolute requirement as as thought of by a central bank. And so one scenario they said would be if physical cash was reduced or eliminated altogether, leaving some Canadians left out, which I find interesting on kind of two fronts. Number one is if there was a reduction or elimination of all cash, it would actually be the central bank itself carrying it out, wouldn't it? they would be the ones executing that plan. And so their contingency is in case they do something. So they have a contingency plan in case they themselves decide to do something.

Okay. The other thing about the people being left out. So I imagine what they mean is less fortunate people that are unbanked, suddenly being unable to use the currency because the cash is no longer available. But a lot of those same people that are left out from lack of cash being available. Also, if they can't get banking, odds are it's probably difficult for them to get a cell phone plan and an internet accessibility and a device itself. So those are going to be other roadblocks that also leave people out if you revert to just a digital central bank issued currency. But hey, we'll see.

Anyways, their second point, they said another scenario would be if cryptocurrencies make serious inroads, causing privately owned companies to become concerned over privacy and handling controls of payments. So they're talking about privacy, but later on in the article, they actually go on to say, How can we give people privacy, but also make sure they're not doing anything bad with their money? And the answer is you really can't. Because in order to stop somebody from doing something that you deem to be not allowed with their money, you need to know what they're doing with their money. So those two ideas don't mesh.

And so if they're talking about allowing for privacy for companies that are concerned about it, odds are privacy is not going to be there. And if they feign privacy, odds are it will be very difficult to have that argument hold up because they're going to want some sort of an inroads to accessing what's happening with the money. That's just my opinion of how they're going to approach it. They're going to try to feign privacy in some way, shape, or form. The ECB talking about the digital euro very much did the same. thing where they said, oh, you have privacy credits and you can spend those privacy credits

within a certain threshold of like, you know, 10,000 euro or whatever. But once you run out of those credits, then you have to go through approved channels and say where the source of funds is and where they're going and so and so forth. So I imagine it might be something to that effect. And then handling controls of payments. I mean, if there's a central bank digital currency odds are that bank, banks are still going to store it and they're still going to fractional reserve it. And so handling controls of payments likely also will be a thing that banks do.

So in that situation, I don't really understand that, you know, yeah, I mean, everything, yes, it will be new. It's digital. It's different in some way, shape, or form. If you're dealing with the direct digital currency itself, you might have to deal with some sort of wallet. but yeah, I don't know what they're getting at here. Either way, it sounds like the contingency plan is a contingency based on if they decide to do whatever the hell they want to do. So I don't know, I just found it to be an odd article. And I don't think they really know what the hell they're doing. I think they're just saying things to say things to look like they're doing something.

Anyways, that's my hot take there. I'm going to wrap this up. This is a long one, guys. I guess I'm sorry. I don't know if you guys want it longer or shorter, but anyways, I hope you enjoyed it. Thank you guys very much for watching and or listening. If you're on YouTube, of course, hit like, subscribe, and share. And if you're listening to this audio only on the podcast, please do share it on your social media. It will be great to get even more people listening via the podcast version. If you want to help out the show, of course, do hit up the sponsors I mentioned down below. Those were Levin and rise wallet and also check out with Sabi wallet, which is great for Bitcoin privacy since we're just talking about that. And finally, if you want to help out the show, one final way you can check out NordVPN. This is a service that allows you to hide your IP address, encrypt your browsing data, and has some other added benefits like being able to unlock geo-block content. So if you can't access something in your area, you just change your area within the app and then boom, unlock for you. If you want to check them out, there's a link in the show notes below

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