BTC Sessions - Bitcoin Price Dumps After Rumors of GOVERNMENT CRACKDOWN! ep 119

Episode Date: November 26, 2020

Bitcoin’s price took a multi-thousand dollar hit from near all-time highs, after rumors the US Treasury is looking to crack down on self-custody wallets. Today’s show addresses the rumors and price action, as well as other Bitcoin stories that happened this week. SUPPORT THE SHOW: LEDN offers Bitcoin backed loans – Sign up and get $50 free https://bit.ly/397rlLN Get Wasabi wallet and enjoy your Bitcoin privacy https://wasabiwallet.io/ Buy a Cobo Vault to secure your Bitcoin! https://bit.ly/2GgMFlH Black Friday Deal https://bit.ly/35emfLB Cobo Vault Tutorial https://www.youtube.com/watch?v=JnRjvZKulrA Crypto Cloaks: Get the BEST Bitcoin swag out there (code “btcsessions” gets you 5% off) https://www.cryptocloaks.com/shop/ Bitrefill allows you to use Bitcoin to purchase gift cards around the world https://www.bitrefill.com/buy/?code=O04UMic9 If you value my work and would like to send me a tip, they are always appreciated! LIGHTNING tips: https://tippin.me/@BTCsessions Join my Telegram channel! https://t.me/btc_sessions

Wasabi wallet and fairly private. What is up, everyone? I hope you're having a good Thursday. It's been a dramatic one, that's for sure. We heard rumors of potential crackdown on privately held Bitcoin Wallace by the Treasury, as the outgoing Trump administration might try to enact something, this rumor coming from Coinbase. And because of that rumor mill, or,

potentially because of that rumor mill. We have seen a big dump in Bitcoin price from a high of around 19,400, close to that all-time high. And at the time of recording this video, it's been like a $3,000 plus drop. So we're going to be touching on that rumor mill what it was all about and the price action that ensued and where some of this stuff could lead. So I am Ben with the BTC sessions. and this is your daily session.

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It also helps the show when you do so. With that, let's dive into the news. Let's see what's going on here. Yeah, as I was saying, the price, we've seen a significant drop. It was up around 19,400 just the other day. And we've seen like basically a $3,000 plus dollar drop. It was as low as $16,000. 270 in and around that range.

Up a little bit since then, but I mean, it could go anywhere quick. Now, if you zoom out, it's not as catastrophic. If you go to the one month, it looks a lot more manageable. If you go to the six month, then it's literally a joke. And if you go to the one year, then what the hell are you talking about? You know, this Bitcoin does have big pullbacks when it has big years like this. but we'll get into a little bit more of the what, why, where, when, how of price later. But at current time, for a U.S. dollar, you can get 6,032 sats.

That's up a little bit. So we'll say that sats are on sale today. Now, as far as fee estimates, next block, you're going to be paying 40 sats per byte. Within an hour, you're going to be paying about 15 sats per byte. Anything beyond that, you're still paying one sat per byte. So if you got some transactions, so Bitcoin to move around and you don't want to pay high fees, could be a good time. Bitcoin Treasuries, again, about 4% of all existing Bitcoin sitting in Bitcoin treasuries.

That totals just shy of $14 billion. And then as far as the percentage of Bitcoin that has been mined to date, 88.36% of all Bitcoin that will ever be created have already been mined. that will get up to 90% by the end of 2021. So keep that in mind. Stack those stats while you can. But the news of the day, what's going on here? So this CoinDesk article says,

Coinbase CEO, Trump administration may rush out burdensome crypto wallet rules. So I'll read a little bit here. He says, it says Brian Armstrong is worried the Trump administration is about to send the cryptocurrency industry a parting gift. The CEO took to Twitter Wednesday night to blast the U.S. Treasury Department's rumored plans to attempt to track owners of self-hosted cryptocurrency wallets, or, you know, your own private cryptocurrency wallet, Bitcoin wallet, with an onerous set of data collection requirements. If the whispers are to be believed, outgoing Treasury Secretary Steve Mnuchin is preparing to clamp down on one of the fundamental tenets of the cryptocurrency ethos, the ability of

the individual to hold their crypto, okay, to hold their Bitcoin themselves. The proposed regulation would, we think, and this is from Brian Armstrong, require financial institutions like Coinbase to verify the recipient and owner of the self-hosted wallet collecting identifying information of that party before a withdrawal could be sent to that self-hosted wallet. If true, the regulation would represent a broadside against the U.S. cryptocurrency industry like few ever levied by the federal government. It would force corporations to know every counterparty to their users' crypto transactions, keeping logs, tracking movements, and verifying identities even before a transfer could take

place. Now, so basically what they're saying here is for any type of withdrawal, they're looking at needing to know, I mean, you already get KYC done in exchanges. So what would overreach beyond that look like? Well, it would require knowing that the wallet is your own. So in practice, that could go a couple different ways. Maybe an exchange requires knowing your ex-bub and it's just yours. Maybe the clampdown happens on wallets that can be downloaded via the app store

and only approved KYC wallets are available there. But when it comes down to that, how is that enforceable? Is it? I don't think so. And there's a couple of reasons why. First of all, I don't think that the regulation is going to go this way. I think this is a little bit of, you know, maybe there were some backroom talks, but nothing is really coming to fruition because it's too difficult to get past.

But you see things like in Wyoming, where there's a lot of progress being made here. you have Caitlin Long that wins a banking charter for her Avanti Bank as well as Cracken. So there's basically two Bitcoin banks now in the U.S. base out of Wyoming. You also have in Wyoming a senator being elected that's pro-Bitcoin, holds her own Bitcoin. Beyond that, you have all of these different entities that are taking self-custody. So here's a chart that I'm looking at from GlassNode. and it shows over the course of 2020 the outflows of Bitcoin from exchanges. It went from close to 3 million total Bitcoin, not quite but close, down to 2.4 million Bitcoin

over the course of the year. And meanwhile, the price eking up. So it seems to denote that there are larger players buying Bitcoin and they're taking them and pulling them into their own self-custody. Now, again, it depends on who you're talking to because some obviously custody through things like Gemini, but that would then, again, be considered on exchange. Then you get people like Microstrategy, the company and Michael Saylor, who bought and then moved it into their own solution, their own hardware solution to custody it themselves.

Not to mention, you got to zoom out even more. We're looking at like the 3 million Bitcoin that have been sitting on exchanges. now 2.4 million. But again, we just said that 88.3 something percent of all Bitcoin already exist. 18 something million Bitcoin already exist and have been mined. And the vast majority of that is already held privately in people's own existing wallets. Only about by the end of next year, 10% of the currency even remains to be issued. And even then when it is issued. It's issued to minors not just in the U.S. It's issued to miners across the globe. How do you even begin to get that currency base under control and under the all-seeing eye of the

U.S. government? I would say you don't. But let's say you're a little bit concerned. What can you do? Well, first of all, you can get your shit off exchanges. Don't leave it with custodians if you don't need to. If there's not a purpose for you to doing it, and even if there is, if you must trade or do stuff like that, consider the risks, but also make sure that it's not all your eggs in one basket. You've got a small percentage for that, and you're keeping most of it in your own self-storage securely. And beyond that, if you really don't like the idea of KYC'd exchanges and stuff, check out something like BISC. This is a decentralized open-source project where you can go peer to peer and exchange fiat and a variety of other methods of exchange for Bitcoin.

And you connect peer to peer. It's kind of like a, over time, you build a reputation on there, depending whether you're a buyer or a seller. And it's kind of like eBay, all reputation based. So it's worth checking out. I have not done a video on BISC yet, but all signs point to the, it's time. to do that. So that's in the cards. I'll probably turn that out to you in the near future. But again, I don't see this really taking. We saw tons of FUD from China over the 2017 Bull Run about overbearing regulation. In fact, they did ban Bitcoin. They shut down exchanges. They did all kinds of

stuff. And did it do much good. It did sweet fuck all, really. It didn't really do anything. So I wouldn't worry too much. Maybe this just happens to be the year of U.S. Fudd. And those are the drawdowns. Now, I will say, I'm not saying, but I'm just saying that the timing of Brian Armstrong's Twitter rampage about this, this FUD that I will now refer to as FUD, was pretty suspect. Because again, as always, first of all, he tweets out this stuff and the market crashes and then Coinbase goes down. So Coinbase, as always, shits on its customers and shuts down when they need it most. But that's besides the fact, on top of this, they were also in the midst of shutting down their futures, there's futures trading or margin trading rather. So that may not have looked good

on them. Nobody was really using it anyways, but they shut it down. So that might not look great, and they might not have wanted attention on that. And beyond that, they're preemptively rebutting a New York Times expose that's supposed to drop talking about the treatment of their employees at Coinbase. So it seems kind of suspect that there was like all this negative news about Coinbase that was kind of hitting now. And then Brian Armstrong is like, hey, it's a good idea now to talk about the Treasury Secretary and his potential bad regulations. Again, I'm not saying, but I'm just saying. Anyways, now what about that price action that resulted from that? I want to step back in history and just get some context with what happened last time we got close to the previous all-time high,

back in the previous bull run in 2017. So the first time that we saw Bitcoin price come ekingly close to the previous all-time high would have been the first week of January in 2017. And it got up to around $1,175, with the previous high being somewhere in between 12 and 1300. So it got close, but not quite there. Well, what happened next was we saw a huge drop, a huge sell-off around 40%. And most of the sell-offs through 2017 were between 30 and 40%. And so what happened then about nine weeks later after that previous peak, getting close to the all-time high?

Well, it blew past it. And it went up to, what was it? 1,360. So it hit a new peak. It was well above the previous all-time high. Well, what will happen next? Another close to 40% sell-off of the total price. Well, this continued to happen throughout all of 2017.

You saw a huge run-up all the way to 3,000, which was more than double the previous all-time high. And what happened next? A huge sell-off, 40%. Boom, another big run-up. You saw one draw all the way up to 5,000, big sell-off down to 3,000. 40% again all the way up you you got close then and by the way those drawdowns were three four weeks each kind of other than like the initial touch of the previous all-time high but the rest of them were around

you know four weeks each three weeks each uh well then you saw a single week drawdown which was less than before it wasn't a full 40% and then you saw the mass of run up all the way up to 20k and the drawdown after that was was decidedly more than the previous ones. It was down to about 50% and then a little spike up and then another massive drop and a little spike up. And so you're seeing lower highs and that's when we started to go into the bear market. But the main thing I wanted to draw attention to here is through the entire 2017 bull run, there were multiple times where you saw drops of around 40%, which were preceded or which were then followed by runups above the previous high that,

we had just hit. So if this drop is anything like the ones that we saw the first time around in 2017 as we kind of hit close to that previous whole time high, which we just did, we could see a further drop potentially. And if we saw that, it would be, you know, you could be hitting like 13K, something like that. But who knows? Will this run be different? Are we in a run. I mean, I feel like it. But yeah, we could see further drawdown. But if you're just accumulating and stacking sets and you believe in this thing in the long term, does it really matter? Does it really matter to you? If you want to take your head out of the game and just auto deal with all this and just gradually accumulate, then dollar cost averaging is probably

your friend if you're worried about making super emotional moves during these kind of crazy moments, but just do know that they have happened in the past and they will continue to happen over time. I would not be surprised to see a drop down to 13K, but at the same time, I wouldn't be surprised given all of the excess demand that we're seeing for the drop that we've seen, the three grand drop that we just saw to be kind of in. So we'll see, but if it does do that 40% drop, then I'm going to be buying dips all through the next year. Anyways, guys, I did, and again, I'll pull up a tweet here from Peter Brandt and this guy's a technical analyst. I don't, I try not to look at too much TA, but I do like seeing patterns repeat themselves in history rhyming.

Anyways, he said a 37% correction from the recent top would bring Bitcoin back to 14. He corrected that. He said 12,300. But then in the tweet that he's retweeting here, he said that, during the 2015 to 2017 bull market. So he's talking from the absolute bottom of the bear run all the way up to the top in 2017. There were nine significant corrections with the following averages, 37% declines from high to low, so close to 40%,

and 14 weeks from all-time high to next all-time high within that, you know, time frame. Okay, so he's talking the average time from. from one peak to the next with the dip in between was around 14 weeks. But those got closer and closer as time got on, especially once you got into 2017, then those peaks were a little bit closer together. It was just the earlier ones that were further apart. Anyways, let's move on from that.

There's a few other things I wanted to mention. PayPal, don't use PayPal to buy Bitcoin. What are you doing? What are you doing? Of course, don't use PayPal. So this story here on Coin Telegraph, PayPal suspends user for crypto trading using PayPal's own service. So what happened here?

A PayPal user reports their account has been restricted after they traded crypto too frequently using the platform. According to the US-based Reddit user, he sent a message stating it had permanently, or rather PayPal, sent him a message saying it had permanently limited their account due to potential risk. The user said they had made at least 10 transactions with the last. week, purchasing during dips and selling when the price was high, and PayPal had asked for an explanation of each transaction. The system flagged my account thinking I was selling items worth $10,000 in one week when I hadn't done so in the six years I've had the PayPal account, the user said. I submitted the stuff for a review with my photo ID and wrote PayPal crypto for each crypto transaction, because what else could I say? In a matter of hours, payout.

PayPal reportedly sent a message stating the user would not be able to conduct any further business using the platform. The user stated that the remaining funds in his account, $462, were placed on a 180-day hold, but they've since used other means to withdraw them. Now, the platform has a $10,000 limit recently changed $20,000 for crypto purchases made within a week for U.S. customers. and the Reddit user denies exceeding it. He said, I genuinely 100% know I did nothing wrong,

and it's a misunderstanding because they think I made 50 plus buy cell transactions in the span of one week items when it's just crypto. Yeah, anyways. So what's the lesson here? Well, number one, you should know that if you buy Bitcoin on PayPal, you're not actually holding Bitcoin because you are not allowed. to withdraw it whatsoever. You're basically holding an IOU for Bitcoin. So it's not actually, there's no on-chain transaction that happens. You're just, you're holding an IOU. There's no way to

withdraw your Bitcoin. If you want to hold Bitcoin yourself and you have it on PayPal, right now, the only course of action you have is to then sell your Bitcoin, which would incur, again, a taxable event. And then you'd have to use the cash that you get to buy on another platform. So you may as well just pass bypass PayPal altogether, buy on another platform. If you must use custody, then you can, but then you can withdraw to your own wallet whenever you want. Yeah, again, don't use services like this. I'm, don't get me wrong. It's nice to have a headline of PayPal ads Bitcoin, but then immediately I'm telling other people not to use it. So it's good for the eyeballs, but that's about it.

Now, I wanted to point to this segment on CNBC. This is the Bitcoin interview on CNBC that people holding Bitcoin deserve. Micro Strategy CEO Michael Saylor was on CNBC doing a segment talking about why his company put $425 million of their $500 million cash reserves into Bitcoin. The host was not having it. and I've got to say, sailor just knocked it out of the park. He destroyed every argument against that came at him. And the worst part, the most ridiculous part, is that the host of the show,

she kept on asking effectively the same question over and over again, and he just had to keep dispelling it. And he did an excellent job. And she just, she would not have it. And near the end, she was pushing, you know, are you a technology company or sorry a software company or are you a bitcoin etf? And he's like, the argument is so stupid because like is Apple has, for instance, okay, Apple has billions, hundreds of billions of dollars of cash reserves.

Is Apple a US dollar ETF? No, that's just their reserves. That's where they're holding them. The fact that micro strategy is holding Bitcoin is because they see it's the most valuable place to be holding their excess cash. They don't see the value in holding dollars because of inflation and the rate at which new dollars are being produced. Anyways, highly recommend. I was smiling ear to ear watching this whole thing. I thought it was hilarious. And if this guy is getting on CNBC and Bloomberg and, you know, all of these different, you know, U.S. news networks over the

the coming bull run, he will be doing everybody a service for his no bullshit approach. Awesome. Anyways, speaking of bullish sentiment, J.P. Morgan, God, J.P. Morgan back in the day, they had a huge hate on for Bitcoin. And now they're bullish as hell on it. They recently projected, one of the analysts was projecting like $100,000, which, side note, I think that's, I'd say moderately bearish for the next year. But anyways, besides the point, this article here on CoinDesk,

more institutions are buying Bitcoin says J.P. Morgan analysts. In their flows and liquidity report, J.P. Morgan analysts say institutions are piling into Bitcoin at a stronger pace this quarter than they were in Q3 and may have a bigger role in price movement than commodity trading advisors or CTA. They said institutional investors are looking at Bitcoin as a long-term investment as proof. They cited the growing size in Q4 of Grayscale Bitcoin Trust, whose customers are mostly institutional. In Q3, retail customers, this is retail customers, bought $1.6 billion worth of Bitcoin using Square's Cash App, some three times more than what was invested in Grayscale's Bitcoin product.

Again, these are retail customers, and Cash App gives them the power to remove to their own custody. So again, beckoning back to the original story of clamping down. How do you clamp down on that if people have withdrawn for the people that have withdrawn? Anyways, besides the fact. This quarter, however, the grayscale Bitcoin Trust is at three times its quarter three numbers. There is no data at present for square customer Bitcoin buys. Crazy. So much of the supply is being eaten up.

That's why I look at this dump and I could not care less. It's hilarious. But the scarcity is really coming into effect. Multiple. multiples of the newly created coins are being eaten up. And so the only place for it to be coming from is if somebody else is selling. So always if you're selling coins, think who am I selling it to? And am I going to be able to buy back from them?

The answer is probably no, at least not of the same price. Okay, moving on here. Just a short tip of the hat to a couple quick stories here. Square and the Human Rights Foundation are backing a new Bitcoin open source developer fund. So veteran open source Bitcoin developer John Newberry just launched Brink, an independent organization for funding Bitcoin's open source developer community, a key component driving the global currency and making it work. Brink will dole out grants to developers working on Bitcoin projects, as well as help fledgling Bitcoin developers embark with fellowships and mentoring.

Love to see stuff like this. Bitcoiners are so passionate, and they'll just throw their weight and effort behind projects like this to help further the protocol because they see the value in it, you know, potentially for the entire globe over the coming decades and generations. So hats off to John Nuberi for helping us. launch this. One other little bit of information I'd wanted to highlight Auto Loop. This has to do with Lightning Network. So those of you unfamiliar what happens behind the scenes with Lightning Network. First of all, what is Lightning? If you haven't used it, Lightning Network allows for more or less instant and very, very cheap transactions using Bitcoin.

Now, it does this by creating channels and locking up Bitcoin between two separate entities. So I could lock up Bitcoin between myself and you, and that Bitcoin would stay locked between us, and in that channel, we could send back and forth over and over and over again without experiencing really, you know, exorbitant fees doing that. Like a lot of lightning transactions will cost you like one Satoshi, or, you know, a few Satoshi. So it's not very expensive to use lightning. Now, the problem with lightning in the back end is in balancing channels. And so what I mean is, let's say I have multiple channels open up. I've got three different channels with Bitcoin loaded into them on my side of the channel that I've locked up myself. Now, I can send to people

all through the network because you can kind of bump transactions from one channel to the next to the next. But the problem is the channels can become unbalanced. So what this means is if I'm I've got a channel open to from myself to you, and there's one Bitcoin sitting in it, but it's sitting on my side of the channel. I can send you transactions over and over to your side of the channel, but if I spend the entire one Bitcoin over to your side and I haven't received any transactions, then I'm kind of tapped out. I can't spend anymore. I've got to open a new channel which uses an on-chain Bitcoin transaction and occurs fees. So what this does is it kind of automates the balancing of channels to make sure that you always have ingoing and outgoing

capacity. Now, a lot of you wouldn't have experienced this even if you are using lightning with something like Breeze or Phoenix wallet, which are a mobile wallets that you can use, because all of that heavy lifting, all that complicated routing is kind of taken care of for you on behalf of a third party. It's not custodial. They're not holding your funds, but they're dealing with the flows of Bitcoin and how they go into and out of the wallet. With something like Autoloop, it further optimizes that for that manager so that they don't have to really think about it. They can just set it and forget it. It also makes it easier for users who want to do it themselves and completely manage that to set some parameters.

So I'll read just a short clip here. So it says Autoloup, Lightning, Liquidity, You Can Set and Forget. We are excited to announce. Auto Loop, a new feature in Lightning Loop that allows the Loop users to automatically balance liquidity, saving time, and making using Bitcoin on Lightning more efficient. Now users can set liquidity and fee preferences, keeping Lightning channels balanced and budgets intact. The introduction of Auto Loop marks an important step in the evolution of liquidity automation on Lightning. So again, I used Lightning for the first time back in 2018 shortly after it launched.

I got a wallet on my mobile and I had to set up channels and it was it was very confusing. Using lightning with something like Breeze or Phoenix nowadays is so simple and I just I use it as a checking account for spending. I'm using lightning basically every day now and all I need to do is consider anything on chain is kind of like my savings account, long term savings. I barely touch it. And if I need more spending capacity in my lightning wallet, then I can pull from on-shane. chain into lightning and then that just kind of stays there and I move it around as I see fit. So yeah, another step forward for lightning. Awesome.

Anyways, guys, I'm going to wrap it out there. Thank you so much for watching and or listening. If you're here on YouTube, you can do me a few favors to really help out the show. Number one, you can hit like, subscribe, and share. All of those things really do help. Every time you hit like or share or subscribe, it bumps up. It appeases the YouTube algorithmic gauze and it bumps. videos like this in front of way more eyeballs.

Thank you guys who have been doing that already. If you want to help with the show in another way, you can hit up the sponsors I previously mentioned. That was Leden, CryptoCloaks, Cobo, and BitRefill. All of those links are down below. And then if you really loved what you saw, and we're just talking about Lightning, you can always drop me a Bitcoin Lightning Network tip

at my Tipin.me page. That is, TIPIN.me, slash at BTC Sessions. With that, I am out. Have yourselves a wonderful day, a wonderful evening, wherever you may be, and I'll see you next time for your daily session.