Price dips are good for bitcoin. They wash out degenerate gamblers using irresponsible leverage.

00:00 Price
00:02 dips are actually good for Bitcoin and
00:04 make it healthier because they wash out
00:06 the degenerate gamblers using uh
00:09 irresponsible leverage. Let me tell you
00:11 how that works. So, with any financial
00:13 asset, you can use leverage, which means
00:15 borrowed money. For example, you want to
00:17 invest $100, you could borrow $100 on
00:20 top of the $100 you have, and you could
00:23 invest $200 and then pay back the first
00:25 $100 with interest. And if you get
00:28 upside, you get two times your money.
00:30 But of course, the problem is if you get
00:32 downside, you get double the loss. And
00:35 the problem with your when you’re doing
00:36 that is a 50% loss means you lose 100%
00:39 of your money. You have no more money.
00:41 You’re starting from zero. Now, people
00:43 have gotten a lot more creative with
00:45 financial instruments, and often you can
00:48 do mostly outside of the United States.
00:49 People use BitMX in Mexico and Binance
00:52 uh internationally, although you can’t
00:54 do that in the United States for the
00:56 most part. At least I’ve not heard of
00:57 anybody doing this crazy leverage in the
00:60 United States. But Binance, for example,
01:02 will let you do 40 to1 leverage. In
01:04 fact, Bit Bitmax will let you do like
01:07 100 to1 leverage, which is crazy because
01:09 it means if the price moves 1% different
01:13 than the direction you’re hoping it
01:15 goes, you lose all your money, which is
01:17 crazy because no matter what price you
01:19 pick as your entry point, it’s virtually
01:21 guaranteed that the price is going to go
01:23 up or down 1%. uh which is going to wipe
01:26 you out completely. So anyway, there’s a
01:29 company, an analyst company called Coin
01:31 Glass, and they have an uh an app. You
01:34 don’t need to go look at it cuz it’s
01:35 basically pointless, but if you want to
01:37 watch people get wiped out real time,
01:39 you can do that on the Coin Glass app.
01:41 Um they have a tab for liquidations. And
01:44 what they show you is a chart of all the
01:46 people on Binance, which is the largest
01:48 international exchange, all the people
01:50 on Binance who have opened leveraged
01:53 positions. And what you can see is each
01:55 of the bright lines, they start with
01:58 green, which means somebody’s using like
01:60 2:1 leverage or and then it it uh
02:02 gradually shifts to bright yellow, which
02:05 means they’re using more than 40 to one
02:08 leverage. Now, if you’re using more than
02:09 40 to1 leverage, that means if the price
02:11 moves against you by more than 2.5%, you
02:15 get liquidated. That means 2 and a half
02:18 uh for example, the price goes down 2
02:19 and 1.5% times 40 is 100%. So you lose
02:23 all your money. Of course, if the price
02:25 goes up, you get 40 times return on the
02:28 upside, which almost never happens
02:30 because these people pretty much always
02:31 get liquidated. Well, so you can watch
02:33 as the price moves around. You can watch
02:36 people constantly because people are
02:38 idiots sometimes um or I should say
02:41 sometimes some people are idiots and
02:43 they just won’t stop. Uh is a better way
02:45 to say that. And you can see people
02:48 constantly once Bitcoin starts getting
02:49 any momentum in any direction, you start
02:52 seeing the leveraged positions open up.
02:55 You see the short positions o open up
02:57 above the price of Bitcoin, betting that
02:60 the price will go down and you see the
03:01 long positions open up below the price
03:04 of Bitcoin, betting that it will go up.
03:06 In the world of investing, uh making uh
03:09 saying that you are long an investment
03:11 means you’re betting on the price going
03:13 up and saying you are short means you
03:15 are betting on the price going down. And
03:17 I’m not sure exactly how those terms got
03:21 their meaning, but um you know
03:23 technically I’m not even going to go
03:25 through technically how that works, but
03:26 uh anyway, it’s creative. But anyway, so
03:30 what happens when the price starts
03:31 really getting going in one direction
03:33 such as a few days ago when the price
03:35 started uh launching from 118 down up to
03:40 123. I think it touched 124 for a couple
03:42 minutes. The price starts going up very
03:44 quickly. You see all of these people who
03:47 think, “Ooh, the price is going up. It
03:49 will never come back down.” I can
03:50 probably safely open a 40x to 40 to1
03:54 leveraged long position betting that the
03:57 price will never go down by 2.5% below
04:00 the price that they made the investment
04:03 at. And of course, when you see all of
04:05 these leveraged long positions open up,
04:07 it’s like a magnet because for whatever
04:09 reason, whether it’s the market makers
04:11 who run the exchanges or, you know,
04:14 whales that have enough Bitcoin that
04:15 they can move the price a little bit by
04:18 dumping a bunch or sell or buying a
04:19 bunch, which I think in reality never
04:22 happens. I think Bitcoin is just
04:23 volatile enough that these people get
04:25 wiped out. There’s no mal intent by
04:28 everybody. It’s just volatile enough
04:29 that when something’s that volatile and
04:31 you’re betting that the price is never
04:32 going to move by 2 and 12%. And it’s
04:34 moving by 2 and 12% almost every other
04:36 day, then you’re an idiot. If you think
04:38 it’s not going to move 2 and a half%
04:40 ever again. And so the last 48 or 72
04:44 hours, the last, let’s call it the last
04:45 half a week to a week, you’ve seen the
04:48 price, if you were watching Coin Glass,
04:50 you’ve seen the price get higher and
04:52 higher and higher toward 124. And you’ve
04:55 seen all these leveraged long positions
04:57 open up, a lot of them 40 to1, right
05:00 below the price of Bitcoin. So at
05:02 21,000, 22,000, 23,000, all betting that
05:06 the price will never go down by 2 and
05:07 a.5% below the price that they opened up
05:10 that leverage long. And then of course,
05:13 Secretary Scott Bent, you know, goes on
05:16 CNBC this morning and says or yesterday,
05:19 whenever it was, and says, “Hey, the US
05:21 might not buy more Bitcoin.” which of
05:23 course then he later clarified later
05:25 today to say yes the US government is
05:27 going to buy more Bitcoin but again he
05:29 had already said it and it took him
05:31 whatever a day or two days whatever it
05:34 was to clarify it. So as a result of
05:36 that the price dips and you could you
05:38 can see cuz as soon as the price cuts
05:41 through the investment positions that
05:44 means they got liquidated. It means the
05:45 price moved too much opposite the
05:48 direction that they were betting and it
05:50 went to zero. So if you are betting that
05:53 the price will go up 40 to1 and it goes
05:55 down by 2 1/2% you lose all your money.
05:58 Conversely if you are betting that the
06:00 price uh 40 to1 that the price is going
06:03 to go down and it goes up by 2 and 12%
06:06 then you lose all your money also. So I
06:10 am glad that none of the people who
06:11 follow me on Facebook are making these
06:13 ridiculous bets. uh but it’s healthy
06:16 when those people get washed out of the
06:18 market because it means the price of
06:20 Bitcoin is more reflective of the actual
06:23 underlying investment thesis and the
06:26 underlying actual demand and adoption in
06:28 the marketplace. Uh if somebody’s using
06:30 40 to1 leverage that means they are
06:33 buying 40 times as much Bitcoin as they
06:37 really can afford with the money they
06:39 have which is why they’re doing 40 to1.
06:41 Uh but that also means the the price of
06:43 Bitcoin at that exact moment is reflects
06:46 the fact that there is uh more Bitcoin
06:50 being bought than is sustainable. That
06:52 the people using borrowed money can’t
06:55 really follow through on that. They’re
06:57 just hoping they get lucky on the price
06:58 movements of Bitcoin. So when all those
07:00 people get liquidated, it washes them
07:02 out of the market, which makes the price
07:05 stronger because it is more built on
07:07 adoption and fundamentals and less built
07:11 on degenerate gamblers borrowing
07:14 borrowing money 40 to1 betting on the
07:16 price swings. Uh so that is a lot of
07:20 what’s happened over the last few days.
07:22 the price went up and all the people who
07:24 were shorting Bitcoin got wiped out and
07:27 then the price went down and all the
07:29 people who were leveraged long Bitcoin
07:32 got wiped out and all these dumb people
07:36 which keep I don’t know why they keep
07:37 doing it as the price went down today
07:40 you see all these leverage longs 40 to1
07:43 opening up right above the price of
07:44 Bitcoin these people are betting that
07:47 Bitcoin will never again go 2 and a
07:48 half% above the price today which is
07:52 insane Because what happens as soon as
07:54 all those leverage longs uh get out
07:56 there, the price then takes a turn, goes
07:59 up, and all those people get wiped out.
08:00 Again, this just happens over and over
08:03 and over until people finally have lost
08:06 so much money doing this that they
08:08 either have no more money or the market
08:10 has just exhausted these people at which
08:13 point it just marches higher based on
08:15 the fundamentals of supply and demand of
08:17 actual real money that actually real
08:19 people have. Now, is it wrong to do
08:23 leveraged bets? No, it’s not wrong. I
08:25 mean, if somebody’s willing to lend you
08:27 money 40 to1, you know, there’s nothing
08:30 morally wrong about doing that other
08:32 than it’s extremely irresponsible. I
08:34 mean, I don’t know, maybe it’s not
08:35 morally right to be that irresponsible.
08:38 It’s a whole lot like casino gambling.
08:40 Um, but it’s not impossible that you
08:43 could win on your bet. It’s just highly
08:45 unlikely with an asset as volatile as
08:47 Bitcoin that it’s never going to move up
08:50 or down 2 and 12% in the wrong direction
08:53 from whichever way you’re betting that
08:54 it’s going to go. So, what’s the answer
08:56 to all this? Super simple. Buy as much
08:58 Bitcoin as you can with money you
08:60 actually have and sit on it for as long
09:02 as conceivably possible. Because if
09:04 you’re not using leverage, if you’re not
09:06 doing crazy to one, you know, 10 to1, 30
09:08 to1, 40 to1 bets on Binance or Bitmax,
09:11 you can’t get liquidated. There’s no way
09:13 for regular people like you and me to
09:15 get liquidated the way these degenerate
09:17 gamblers are getting liquidated because
09:19 if you’re not using borrowed money, it’s
09:22 impossible to get liquidated. Also, it’s
09:24 impossible to get liquidated if the
09:27 money that you are investing in Bitcoin
09:29 comes from an asset uh if you’re not
09:32 backing it with something. Well, let me
09:33 put it this way. If you did what I did
09:36 when I bought my Tesla, which is I
09:37 borrowed money at 6% interest from
09:39 Trustark Bank, and instead of
09:42 liquidating Bitcoin to buy that Tesla at
09:44 $85,000 per coin, I instead kept the
09:47 Bitcoin, I would have liquidated, and
09:50 I’m going to slowly pay off that Tesla
09:52 over it’s either five or six years,
09:54 however long it is, with Bitcoin that
09:56 for the vast majority of that time
09:58 should be radically higher than $85,000
10:00 per coin. But I’m never going to get
10:02 liquidated on that. The price of my
10:04 Tesla is not mark to market. An
10:07 appraiser does not come out to my house
10:09 and re-evaluate the price of my
10:11 collateral every day. In fact, that
10:13 never happens. As long as I make the
10:14 payments for the next 5 or 6 years, um,
10:17 nobody cares what I do with the Tesla.
10:20 Um, the market uh the the securities
10:22 market is not like that. If you’re
10:24 borrowing money 40 to1 with collateral
10:27 like Bitcoin that where the price does
10:30 go up and down, then you can get
10:31 liquidated. Again, you don’t need to
10:32 worry about any of this unless you are
10:34 borrowing against your Bitcoin. If you
10:37 are borrowing against your Bitcoin, you
10:40 do have to worry about being liquidated,
10:41 which is why I do not ever recommend
10:43 people borrow against their Bitcoin in
10:45 the future when Bitcoin is more stable.
10:48 Um, and obviously when it’s more stable,
10:50 it’ll have less upside. The two always
10:52 go together. The volatility is
10:54 reflective of the economic upside. So,
10:56 anything that has less volatility is
10:58 going to have less economic upside. So
11:00 at some point in the future, Bitcoin
11:02 will be more stable. Uh but it will also
11:04 have less economic upside and it will
11:07 make sense to borrow against it. But
11:09 even though I have enough Bitcoin that I
11:11 could borrow against my Bitcoin and I
11:14 could over collateralize it, meaning the
11:16 price would have to move against me by
11:18 some radical number like 90%. I’m still
11:20 not going to do it because I don’t lay
11:22 in bed at night wondering if I’m going
11:23 to get liquidated. I own the Bitcoin I
11:25 own. It’s as much Bitcoin as I need
11:28 right now. Hopefully, I’ll have a way to
11:29 buy more in the future. But right now,
11:31 I’m 100% Bitcoin, so I don’t have
11:32 anything to buy more Bitcoin with. Um,
11:35 and I’m not going to use leverage. I’m
11:37 not going to do stupid stuff, and I
11:39 don’t have to worry about getting
11:40 liquidated. And you don’t either because
11:42 the vast majority of the people in the
11:43 United States don’t even have a way of
11:46 doing 40 to1 leverage or even 10 or 2:1
11:49 uh to my knowledge cuz for the most
11:51 part, you can’t you just can’t do that
11:52 sort of crazy stuff here in the US. So,
11:54 anyway, that is the quick rundown.
11:57 Bitcoin is now stronger. It is better to
11:60 have Bitcoin at 118,000 with all the
12:03 degenerate gamblers washed out than to
12:05 have Bitcoin at 118,000.
12:07 That reflects still the fact that a
12:09 bunch of degenerate gamblers are still
12:11 there. So those people have all been
12:13 taken to the woodshed, lost a bunch of
12:16 money. Bitcoin is stronger and it’s
12:18 similar to the way a tree is much
12:20 stronger if the wind blows it around a
12:22 good bit. And if a tree never gets hit
12:24 by the wind, then the tiniest little
12:25 wind knocks it over because it never got
12:27 strengthened by the back and forth. Um,
12:29 so Bitcoin is the same way. It’s
12:31 strengthened by contact with the
12:34 marketplace. And the more degenerate
12:36 gamblers that keep losing money on these
12:38 ridiculous leverage bets, the stronger
12:40 get Bitcoin gets because the more times
12:42 these people touch the hot oven, the the
12:44 more they stop doing it, which means the
12:47 price of Bitcoin is even better
12:49 reflective of adoption and true market
12:52 upside potential. So much better to have
12:54 $118,000 price with the whipsaw getting
12:57 a bunch of the digit generate gamblers
12:59 out than $118,000 that still has a bunch
13:02 of 40 to1 leverage still in it. So Scott
13:06 Bent has now said the US government will
13:08 indeed uh buy more Bitcoin after all at
13:11 some point. I really don’t care one way
13:13 or the other. I I’ve got mixed feelings
13:16 about whether I want the government to
13:17 own a bunch of Bitcoin anyway, but it
13:19 will make the price go up if they do for
13:21 what it’s worth. Uh so anyway, uh we are
13:24 as strong as we’ve ever been, possibly
13:26 the strongest Bitcoin has ever been with
13:29 118,000,
13:30 having set a new all-time high so people
13:32 know it can get up there and having
13:34 washed out all the stupid high leverage
13:38 gambling activity that was taking place
13:39 around these price levels. Although
13:41 inevitably there will be somebody new
13:42 who steps up wanting to lose some money,
13:44 but they will get washed out as well. So
13:48 buy as much Bitcoin as you can, hold on
13:49 to it for as long as conceivably
13:50 possible. That is the formula. It’s not
13:53 that hard. Thanks everyone.