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.