Why does bitcoin have to take “breathers” to “digest” different price levels along the way?

00:01 Why does Bitcoin take breathers along 00:03 the way to digest different price 00:06 levels, right? Like right now where 00:08 we've been sort of stuck at 118,000 for 00:10 what feels like a week or two. The 00:12 answer is because the nature of human 00:14 behavior is such that when you reach new 00:17 price levels, people have to get used to 00:19 that price level. And the reason is 00:21 people sell when they're in a certain 00:23 amount of profit. So, James Czech, my 00:25 favorite Bitcoin analyst, walks through 00:28 a lot of these price levels and why they 00:30 are that way. So, think about it like a 00:32 kid in a candy store. So, how long are 00:35 you going to have to spend in the candy 00:36 store? The question is, well, how much 00:37 money does the kid have to shop for 00:39 candy? And uh if a kid is used to having 00:42 $10 uh in their savings and they've had 00:45 $10 for a long time and then suddenly 00:48 they have $20, well, they're going to 00:49 want to spend some time in the candy 00:50 store because the kid is feeling wealthy 00:53 now. They're used to having $10, now 00:54 they have $20. Um, same. If they have 00:58 suddenly $30, so they suddenly have 00:60 three times as much money as they are 01:02 used to having, then they're going to 01:04 want to spend a lot longer in the candy 01:06 store until they have bought enough 01:08 candy that they are back down to the $10 01:10 or so that they are used to having. 01:12 Well, Bitcoin and any other investment 01:14 asset works the same way that when 01:16 people are in a certain amount of profit 01:19 as a percentage, they are inclined to 01:22 improve the quality of their lives and 01:24 their famil family's lives. And you can 01:26 actually map that all out. So James 01:27 Czech, my favorite Bitcoin analyst, that 01:29 is one of his specialties. He looks at 01:32 the Bitcoin price and he says, "Okay, 01:34 right now we're at 118,000. 01:36 The average price that anyone's paid for 01:38 that Bitcoin is whatever. Pick a 01:41 number." He he outlines on a lot of that 01:43 in his research. And for example, right 01:46 now sitting at 118,000, he says 01:49 somewhere between 132,000 and uh, you 01:53 know, so we're going to take a breather 01:54 where we are for some period of time. 01:56 You know, could be days, could be weeks, 01:58 could be, you know, nobody knows. There 01:59 could be a dip along the way before 02:01 we're sort of back on track. No track. 02:03 Nobody knows. For example, we took a dip 02:05 when the US bombed Iran because 02:07 everybody freaked out even though 02:09 there's no reason to sell Bitcoin when 02:11 somebody bombed somebody. But in fact, I 02:14 would buy Bitcoin because it means the 02:15 world's more unstable. But, you know, 02:18 people freak out that there could be a 02:19 dip along the way. But, uh, according to 02:21 James Czech, what is likely to happen is 02:23 look, at some point we will break above 02:25 this $118,000 02:27 that we are at. And then uh he thinks 02:30 sort of the next breathing zone, the 02:33 next time it's going to take to digest 02:35 everything is between 132 and 140,000. 02:38 And again, that's because he's looking 02:40 at all of the Bitcoin that is currently 02:41 owned. He doesn't know who owned it, but 02:44 he can tell the last time that that 02:45 Bitcoin transacted on the Bitcoin 02:47 blockchain, and he can tell how much 02:50 profit Bitcoin is in. So the average 02:53 Bitcoin is in, I'll pick a number, 150% 02:56 profit. and he knows that let's call it 02:59 175% profit people just find it 03:02 irresistible to improve the lives of 03:05 themselves and their family. It just is. 03:07 And you could see that through the 03:09 entire history of Bitcoin. When people 03:11 get a certain percent 03:13 on their investment, they're inclined to 03:16 improve their lives of them and their 03:18 families. And so you got to take time 03:19 for the people who are in that much 03:21 profit to do that. And of course, it's 03:23 not universal. I mean, I'm in, I don't 03:25 know, triple quadruple profit on average 03:27 to the price I've paid for Bitcoin. Um, 03:32 there's nothing I want to buy right now. 03:33 So, it's not it it doesn't mean when 03:35 somebody's in a lot of profit that 03:37 they're automatically going to spend 03:39 some of their Bitcoin improving their 03:41 lives or their family's lives. It just 03:43 means statistically it's more likely. So 03:46 uh for example statistically it is quite 03:49 likely that somewhere between 132,000 03:52 and 140,000 enough people will be in 03:55 enough profit in Bitcoin that we're 03:57 likely to spend a decent amount of time 03:59 somewhere in that range waiting waiting 04:01 for everybody who wants to improve their 04:03 lives and the lives of their family to 04:05 spend whatever Bitcoin they were 04:07 planning on spending and waiting for the 04:09 market adoption of Bitcoin to absorb 04:12 that newly spent Bitcoin until the 04:14 people who are at that level are done 04:17 spending, you know, spending Bitcoin. 04:19 The same thing happened at, you know, 04:21 let's call it $108,000. 04:23 Again, it bounced around a good bit, but 04:25 on average, it just seemed to be stuck 04:26 for a while until one day all the people 04:30 that wanted to spend at that level 04:31 suddenly were done spending and we 04:33 rocketed up to 123 and then came back 04:36 down to 118 and now we've been showing 04:38 at 118 uh 118 uh around 118 for a while. 04:43 Okay. So, what happens at higher levels? 04:45 Well, according to James Czech, once we 04:47 get north of between $160 and $165,000, 04:51 things are getting pretty steamy, as in 04:54 now the average holder is in a lot of 04:56 profit and a lot more profit than they 04:59 normally are willing to sit on without 05:02 spending some. And so according to him, 05:05 once you get up in that level, if you 05:07 get there really fast, you might end up 05:09 with a little price correction to get to 05:12 get as some of those spenders, they 05:14 spend and the market can't quite absorb 05:17 enough of that Bitcoin uh you know to to 05:20 keep up. Now always eventually the 05:23 market adoption of bitcoin since you 05:25 know in the ballpark of 5% of the world 05:27 owns any bitcoin and 95% doesn't that 05:30 means at that adoption grows over time 05:33 they absorb that bitcoin from people who 05:35 are spending it and the price eventually 05:37 goes up in the long term once bitcoin is 05:40 adopted 100% by everybody in the world 05:43 then you won't get these ups and downs 05:46 like that you know everybody who's 05:47 spending bitcoin will be offset by 05:49 somebody who is saving Bitcoin and the 05:52 spenders and the savers will just cancel 05:53 each other out on a daily basis because 05:56 the only profit in Bitcoin will be 05:58 everyone's Bitcoin going up by between 05:60 3% and 5% per year which is the rate of 06:03 human productivity growth. We get better 06:05 at making stuff and doing stuff 3% to 5% 06:08 per year. And so because Bitcoin has a 06:11 fixed supply of 21 million, the average 06:13 Bitcoin will um will increase in 06:15 purchasing power by 3% to 5% even when 06:18 it's fully adopted worldwide. But when 06:20 that happens, the spenders and the 06:22 savers will just offset each other. And 06:23 on an average day, hundreds of billions 06:25 of dollars of Bitcoin will change hands, 06:27 but the price won't really move because 06:29 the spenders and savers on average will 06:32 cancel each other out. But in this case, 06:33 we're so early in the adoption cycle of 06:35 Bitcoin that they don't always cancel 06:37 each other out. Um and so you get these 06:39 price movements. So according to James 06:41 Jack, you know, at some point the people 06:44 who are willing to sell Bitcoin at 06:46 118,000 06:47 will run out and they will run out just 06:50 like the people at 105 or 108,000 ran 06:53 out and then the price will, you know, 06:55 launch to a new higher level in his 06:58 opinion probably between 132 and 140. 07:01 And then we'll spend a while digesting 07:02 that with to and to so that all the 07:04 people who are suddenly in a lot of 07:06 profit, you know, have time to spend 07:09 whatever they want to spend, have time 07:11 to improve the lives of them and their 07:13 families and we'll hang out between 132 07:15 and 140. Again, these are guesses, you 07:17 know, there's no guarantee it'll be in 07:19 that range, but this is generally 07:21 statistically that would work. And we'll 07:23 hang out in that range for some series 07:25 of weeks or months. And in that range 07:27 between 132 and 140, everybody's going 07:29 to be all annoyed. Why is Bitcoin's 07:31 price not moving? And why do we have to 07:33 sit here? And why is it going nowhere? 07:35 And why is it not exciting anymore? And 07:37 it's just the fact that a bunch of 07:38 people are in a lot more profit at 132 07:40 to 140 than they are at 118. And some of 07:44 those people are going to want to spend 07:45 their Bitcoin. and we're going to have 07:46 to wait for the kid at the candy store 07:48 to finish buying all the candy because 07:50 they're feeling rich because they're 07:51 used to having $10 and now they got $20 07:54 or now they got $30 and they that money 07:57 is burning a hole in their pocket and 07:59 they want to improve the lives of them 08:00 and their families or in the case of the 08:02 kid in the candy store, they want to buy 08:04 candy and we're all going to have to 08:05 wait. And the faster we go to 140,000, 08:09 the longer we're going to have to wait 08:10 for the kids in the candy store to spend 08:12 whatever they want to get done spending. 08:15 And if overnight we catapult to 165,000, 08:19 one second. 08:22 If we catapult to 165,000 or 180,000 08:25 overnight, then guess what? There's 08:27 probably going to be a pullback because 08:29 a bunch of people who were planning on 08:31 spending some Bitcoin when it got higher 08:33 to buy a new car, put an add-on on their 08:37 house, go on a nice vacation, bunch of 08:39 those people are going to side decide to 08:41 do it at the same time. If we catapult 08:43 higher really fast and we'll get a 08:45 pullback in price, we might shoot up to 08:47 $180,000 08:49 and then pull back fall back to 08:50 $145,000. 08:52 And why is that? Well, it's because we 08:54 catapulted higher fast enough that there 08:57 was a bunch of people that were planning 08:59 on spending some Bitcoin that didn't get 09:00 a chance. And now there's a bunch of 09:02 kids in candy stores that want to go 09:04 back and spend some time in the candy 09:05 store because they uh you know, we 09:08 passed the candy store that they wanted 09:10 to spend time at. Now we got to go back 09:12 and visit it because you know that's 09:13 where they want to be. They want to 09:15 spend a little bit. Eventually always 09:18 the market adoption of Bitcoin by the 09:21 95% of the world that doesn't own any 09:23 Bitcoin catches up. It absorbs the 09:26 supply that's being spent by these 09:27 people who are spending. And eventually 09:30 because Bitcoin is finite, the supply uh 09:34 the demand always outstrips the supply 09:37 over time. Sometimes it takes a while. 09:39 and the price eventually always goes up. 09:42 So even in major price corrections like 09:44 in 2022 which was caused by a bunch of 09:47 crypto stupidity blowing up and Sam 09:49 Bankman freed, you know, that resulted 09:51 in a lot of people panicking and 09:53 freaking out and selling Bitcoin and the 09:54 price, you know, declined for like a 09:57 year in a row. But eventually the 09:59 adoption of Bitcoin outstripped that 10:02 supply of panic sellers and the price 10:04 marched higher and then higher and 10:06 higher and higher until record record 10:08 highs and now it's you know twice as 10:11 high as it ever was in 2022 at the 10:14 highest point in 22 and six times as 10:16 high as it ever was at the lowest price 10:18 in 2022 because again eventually the 10:21 demand always outstrips the supply. But 10:24 like a pig in a python, the marketplace 10:27 has to digest higher prices because 10:30 there are people that want to spend 10:31 Bitcoin those higher prices. And one day 10:34 that will be you. One day your Bitcoin 10:37 will be in so much profit that you will 10:39 be going on a nice vacation. You will be 10:41 buying a new house, a new car, building 10:43 an ad on on your house, whatever it is 10:45 you do when you're feeling wealthy. And 10:48 other people who are new to Bitcoin will 10:50 be annoyed that some people somewhere 10:52 are spending Bitcoin. And you'll think, 10:54 "Yeah, but I bought this Bitcoin in 2025 10:56 and here we are in 2029 and I've 10:59 quadrupled my money." And you have every 11:01 right to spend some of your Bitcoin 11:03 because you'll be deeply in profit just 11:05 like the people are in 2025 that were 11:07 buying in 2022, 2023, 2024. They're up a 11:12 lot. And you know, that's what they do. 11:15 That's how humans behave. But that's how 11:16 you will behave, you know, in the long 11:19 term. So, uh, enjoy the ride. It's just 11:21 the way all markets work. It's not 11:23 unique to Bitcoin. It's the way all 11:24 investments work. They all take time to 11:27 digest new price points. It's just part 11:29 of the journey. It's part of the 11:30 process. And if you wait long enough, 11:32 the price always eventually goes up. 11:34 Have a great day, everyone.