What a day folks. Bitcoin got dumpster fired today over 10 down when I was shooting this video. but it got as low as the 30s. And I'm not talking the high 30s, I'm talking about the very, very low 30s.

And of course, we have to talk violently about what's going on, how bad this is going to get, and what the over leveraging in the crypto market tells us about how long this is going to last, and whether we should dip by because let's be real when you see a flash crash like we had over the last 24 hours. There's a deeper story here. These things just don't happen because everybody decides that bitcoin's overvalued. There's a much, much much bigger mechanical issue here, but the only thing that I ask of you in return for this video is that you hit that ravishing like button.

And also don't forget to subscribe either. Okay, first I want to start with the context for Bitcoin. So Bitcoin bounced back a lot today after its flash crash. But I mean, if you look at this market cap wise, this is just insane.

The amount of money that's being traded even after the bounce back, we are well below its previous trillion dollar market cap at 718 billion dollars. And of course, I don't want to point any fingers on who started this downtrend. I mean, there's one musky individual that I can think of in particular that may or may have not flipped on Bitcoin, But I do want to talk about a little bit of irony. I want you to take a moment to visualize how much Bitcoin has hemorrhaged.

Bitcoin's highs had it around a 1.177 trillion dollar market cap which happened just in April and at Lowe's today, it went all the way down to 592 billion in market cap between highs last month and lows this month lost about 530 billion dollars. How do you visualize 530 billion dollars? Well take Tesla. Tesla's market cap right now is 537 billion dollars. Maybe I'm just a violent nerd, but I find it very, very ironic and cosmically significant that to date, Bitcoin has lost a Tesla amount of market cap.

Very ironic considering Elon Musk's role in the downtrend. And you know what they say, Fate loves irony. Fate loves irony. But jokes aside, this was a cycle that we all knew was going to happen eventually, and the Musk Man gave it a push.

But we're also in this environment where in general people with money are de-risking they don't want to take on risk because there's so much fun around interest rates and inflation. There's so much fun around asset valuations. Are things really, really high or are we set to go much higher after this initial recovery stage? And when you combine that with higher taxes and a lot of these issues that are still poignant for Bitcoin and Cryptocurrencies as a whole, such as environmental concerns and regulatory legal issues with the with the currency, How do you regulate it? How do you monitor it? How does the Irs tax it? And all of this has come together to really bludgeon Bitcoin this time around. But of course, for the most part, we don't really know anything new about Bitcoin.

There's no Bitcoin specific catalyst besides the Elon Musk thing, and maybe a few institutions deciding that they don't like Bitcoin anymore. There's no real Bitcoin catalyst that came out that we didn't know. About a year ago, we knew about the environmental concerns. We knew about the regulatory issues.

In terms of legal, We knew about all these things. A year ago, we knew about them. Six months ago, Bitcoin kept going up. There's a reason that it started to really, really tank now, and it's not just because of the Musk man.

Bitcoin enjoyed a massive massive rally towards the beginning of the year as institutions continue to adopt it and endorse it. And you saw massive things. companies like Tesla decide to buy massive amounts of Bitcoin, causing a lot of other investors and a lot of other institutional investors to feel confidence in it. And Bitcoin matured to a price around 50 to 60 000 and it stayed stable there for a while, continuing to have some resilience in the 45s because of all the institutions that adopted it in that region that built up a ton of support for Bitcoin, and as the leader of the crypto market, allowed all of the other little cryptos, all of the other runner-up cryptos to start rallying to catch up to Bitcoin because people wanted to catch the next Bitcoin and they were allowed to do that because Bitcoin stayed stable.

So people are like, okay, well, we want to find the next one that's going to mature to that stability much much higher than the current valuation. And you saw, of course the runner-up Ethereum, and a lot of other cryptocurrencies go to massive levels of appreciation. And then you started seeing a lot of the more speculative Altcoins catch up. But of course, when the big leader starts getting bludgeons, you start seeing a lot of its followers get bludgeoned as well.

Ethereum, Binance, Cardano, Dogecoin, Xrp, and Polkadot. all massive bludgeons starkly down today and starkly down over the last couple of weeks. Kind of like Hype Cycles 101. We saw this in the growth sector where you had Tesla get to a level where everyone's like, okay, I want to find the next Tesla and then you had all these Ev companies rally and then you had the rest of the growth sector start rallying and then all of a sudden towards the beginning of the year, Tesla started cooling off and then over the upcoming months or really, over the upcoming weeks after Tesla started cooling off, saw Evs cool off and then you saw a lot of the other grow stocks cool off.

and then you saw that cause massive deleveraging across the board, which really tanked the growth sector. obviously inflation concerns and interest rates set that environment in place. But still, when you have a hype cycle, you almost always have a leader that leads the hype. and when the leader cools off, it cools off everything else below it.

And I know some of our crypto die hards are going to be like Charlie. Some of these cryptos have nothing to do with Bitcoin. Yeah, but the way that people invest in the way that the big money invests in a lot of these coins has to do with a broader strategy that diversifies into a lot of coins. So when they pull money out of the strategy a crypto Etf, for example, it pulls money out of all of them.

Let it breathe. No problem. But we want to explain exactly why it's breathing so heavily. And this is because of the role that margin is playing here.

Let me tell you, this massive overnight dumping that we saw and subsequent bounce looks and smells like margin panics. And here's the thing about crypto. Unlike the stock market, we don't really have very good data in terms of how much margin is in the market. But when you see this violent selling off and obliteration of market cap all at once, it implies that there's a lot of margin here.

How much of the big money is leveraging themselves? 5, 10, 20 x and all of a sudden got a massive rude awakening this morning. Think about it, if you're leveraged 20 times. Well, yeah, you're going to make 20 times the return On the upside, but you're going to lose 20 times. The downside.

On the downside, when you see massive flash crashes like we saw this morning, that's almost always a telltale sign of over leveraging because when a very, very leveraged asset class moves all at once so quickly, it accelerates the downtrend because people get deleveraged in mass as they get margin called, or the algorithm closes them out of their position as a risk management protocol. And then that deleveraging causes a massive massive over selling, which then creates an arbitrage opportunity because you can buy in at that bounce and then make money. It's oversold, then because it's a mechanical selling off instead of actual selling off. Well, what happens? Well, you get a whiplash effect because it becomes profitable for others to quickly arbitrage the overselling of that asset, which is why you almost always see the biggest balances after the biggest corrections.

That doesn't mean that the trend has changed, but it does mean that you've got a lot of arbitrage happening. But look folks, you're seeing a lot of symmetry between the growth sector earlier this year and the over leveraging there and the crypto market and the over leveraging here. Think about it. The data is very clear.

Hedge funds have increasingly been exposed to the crypto market over the last three months. Especially, you've seen a massive amount of increase in terms of derivative trading and short selling. And Crypto is basically the wild West, so you have a lot less requirements and regulations in terms of how much you can leverage and how much you can manipulate. And I'm not talking about my rear either.

I know we're always like hedge funds. You know, the men in those funds are screwing everything. No, it's not like that hedge funds didn't cause this crash, they accelerated it, and we have very, very clear data to back that up as well. with Crypto hedge funds overwhelmingly centering themselves in Bitcoin 97 of them, and Ethereum 67 to the leaders of the currencies and the most mainstream currencies.

and with more than half of crypto hedge funds trading, derivatives, leveraging movements, and almost half being short sellers of Crypto, Clearly, leverage and hedge fund trading is adding a massive, massive change to this landscape for Crypto that we haven't seen before. And when you have some studies suggesting that margin is going as high as 100 x in the crypto market and I'm not talking your neighbor Susan down the street with her Robin Hood account 100xing, that I'm talking about big hedge funds using massive amounts of capital and then leveraging it 100 x. Think about how that accelerates up trends, And think about how that accelerates downtrends. Obviously, we've seen very, very aggressive trading in Bitcoin in the past.

It's always been a very, very, very volatile asset, but we've never seen this aggressive level of market cap moving in and out. When we're talking these big of numbers 500 billion dollars, it's a whole different story. Think about it: if you were a hedge fund that was long on Bitcoin in April, probably have embedded in your algorithm risk management protocols that don't just sell your longs, but also switch your longs to shorts, or at least hedge your longs during any sustained downtrend in order to protect your leverage. And in order to protect the capital in your fund.

If that happens in mass, tons of funds at the same time, start liquidating, accelerating the downtrend, and again. Big picture here is that there's a lot of leverage, and a lot of this leverage is protected by algorithms. And that's why you see so much selling all at once when you get these flash crashes. But when you have so much algorithmic selling, obviously that's a mechanical issue that overdoes it and over sells.

And that's why you see that bounce because it creates an arbitrage opportunity for funds. then to go and buy the dip and rally it back up. That doesn't mean that the trend of Bitcoin is now upward. it just means that that arbitrage opportunity was taken advantage of.

a lot of that short term money that went and propped it up and took advantage of that. Over selling isn't necessarily going to stay in the position if we see another round of selling off. I wouldn't be surprised to see a broader deleveraging, which could definitely cause a lot of fun for the entire crypto market. And of course, if you get massive amounts of deleveraging, don't be surprised to see this take a while to actually bottom and then take a while to recover.

Obviously, we've been seeing that in the growth sector when you have a lot of fun that starts a downtrend in a market and then you have hedge funds closing out of their margin positions, their margin long positions, and then switching them over to short positions. Well, that accelerates the moves. It creates a bigger issue that takes longer to get out of and longer to reverse, but it does create a massive opportunity for those who are looking and trying to scout out deals. Sure, margin's going to keep creating that springboard effect where it goes up and down, but as people de-risk and people take out, they do leverage.

Well, it wouldn't be surprising to see a little bit more of an extended pushback in the crypto market, But that's fine. We needed some breathing. We needed it to take a breath. This isn't a problem, let it break down and make a higher low than it did last time.

It crashed back in 2017 2018. my thought process is obviously the same as it's always been. I believe in Bitcoin over the long run. Bitcoin has always had massive cool offs, and it's always shook off a lot of investors that bought it at the heights.

That's just a fact. and in my mind, after the selloff, even today, this is a good deal. The question though, is of course, how much better of a deal can we get down the road and nobody really knows the answer to that question. But the downtrend is still there and there's enough fud coming down from these highs.

And after what we saw in the Grill sector, I wouldn't be surprised if we see an extended cool off for the crypto market. But I think the crypto market really really needs to be met with a longer term mindset. and you also have to be very, very patient because this isn't a market that's going to reward you immediately. Maybe you'll get lucky, and there's a couple little bounces, but still at the end of the day, if you're a long-term holder of a currency like Bitcoin, you got to have those diamond hands, so to speak.

in order to really, really, really see any upside here. There's a lot of factors here. There's deleveraging. there's some flood around Bitcoin itself, but the biggest thing right now is just this overall de-risking environment.

and it all has to do with interest rates and inflation. And as long as a lot of funds don't want to take on extra risk except for risk for Jordan. Well, you have to deal with these asset classes pulling back and that's fine. That means it's shopping time.

My only tip is to have this idea that hey, these asset classes can go lower, we can have a lot more opportunities to shop. Sure, it's easy to say in hindsight. Oh, I wish I bought in 2020. I wish I bought in 2015.

I wish I bought in 2013.. everybody always says that in hindsight, but they don't realize that if they had bought during any sell-off in Bitcoin, any sell-off in the stock Market real estate market. Whatever it is, you know you would have had to wait a while. and odds are strong you didn't catch the bottom.

The odds of you catching the bottom on anything is like one in a million. So I would say be strategic, keep a lot of money on the sidelines for better opportunities, and then just keep dedicated to the process. And of course, you never know how long dips will last. So you always want to go into that mindset of hey, I'm buying something that I believe in.

I'm gonna keep holding this and then eventually I'm going to realize that upside because I did my work and it makes sense. Unlike the growth sector in the stock market, Bitcoin is in the situation where it's still relatively high based on where it is year over year. Obviously, you can believe in Bitcoin over the next five 10 20 years, but in the short term, hey, we could see some more cooling off. We're in a crypto winter right now, so I'd say be aware, flood market crypto winter but also understand that hey, there's going to be light at the end of this tunnel that caps off the video.

If you have any questions, feel free to reach out to us below or join us on Zip Trader Circle. If you're wondering what broker to trade these cryptos and stocks on, Well, we always recommend Weeble to new traders. I'll put a link below. They'll give you some free stocks if you sign up and deposit with it.

And of course if you'd like to join Ziptrader U, I'll put a link to that below as well. Anyways, have a great day and I'll see you in the next video.