Bitcoin is Finished? (EMERGENCY UPDATE & TRADING PLAN)

Bitcoin is crashing. Is the worst over? I don't think so, and I'm going to tell you why. I'm Ronda Ley with ETF Guide. Thanks for joining us. Let's take a look at what is going on, not only with Bitcoin, but with Strategy, which owns about 3% of all outstanding Bitcoin. They've been a furious bullish acquirer of Bitcoin, and both have been sinking like the Titanic.

You can see here over the past nine months, IBIT, which tracks spot bitcoin, an ETF from iShares, is down over 32%. And then MSTR, which is strategies, ticker symbol, is down almost 73%. It has been ugly, and this is what happens when you use a leverage strategy and the prices begin to turn on you in the opposite direction.

This is one of the other reasons why I love the ETF marketplace. You can make money in any kind of market. You can make money in up markets, down markets, flat markets, and certainly there's money to be made on the short side. These are some of the ETFs that have been benefiting from the crash in Bitcoin prices as well as Strategy. SBIT, which aims for 2x or 200% daily opposite exposure to Bitcoin, that ETF is above 62% over the past 9 months. Biddy, which aims for 1x or 100% daily opposite exposure to Bitcoin, also a strong performer. And then the standout has been MSTZ, which is ahead by over 456%. And that ETF uses leveraged inverse exposure or bearish exposure to Strategy.

So what's going on? Here's the quick update in terms of Strategy, which is run by Michael Sailor. The problem is that they've been acquiring Bitcoin for an average price of approximately $76,000 per coin. And when you do that on leverage and Bitcoin is trading above $76,000, you can talk all kinds of smack and trash talk and go on all these channels and tell the world about how great Bitcoin is. But when prices crash, as they've done, and are now trading below $76,000, everything changes.

Now, I'm not saying this is not an anti-Bitcoin rant at all because Bitcoin is a totally valid asset. It has a place inside a portfolio. The problem is when we get these folks that use leverage and are one-dimensional one-trick ponies and they tell you to buy Bitcoin at any price and because they're doing it themselves, they're buying it at any price and they're buying it on leverage and they're mortgaging their companies and they're mortgaging everybody's future and they're telling you to mortgage your house to buy Bitcoin. That's a problem.

That one directional trade creates a very fragile situation and shocks, and that's what we're seeing right now, not just with Bitcoin, but with all cryptocurrencies because Bitcoin is digital gold, right? It's the yard stick that all other cryptos are measured by. And so if Bitcoin crashes, they are all also going to crash, and they're going to crash even harder. And that's what we're seeing right now, not just with cryptos in general, but also specifically Strategy stock.

Now, Strategy owns about 3% of all outstanding Bitcoin. This is a real-time picture of their balance sheet, which is Scribble Scrabble right now. It looks like a sidewambly drawing. By the way, it looks a lot like Bitcoin's performance chart over the past nine months. They're both converging. The performance chart of Bitcoin and Strategy's balance sheet and my take on when we're going to see a bottom because you're probably wondering, well, what's Ron's opinion? What does he think?

Well, here's what I think. We see a bottom when Sailor is forced to start liquidating some of his Bitcoin holdings. And we're going to get there at some point if Bitcoin continues to trade for a long enough period under $76,000, which is the average cost that Strategy has been acquiring Bitcoin at. Bond holders and those that have been lending money to Strategy are not going to go on indefinitely holding, running along with whatever Sailor's saying and saying, "Wait for Bitcoin to go up."

Wait, at some point if this continues long enough and deep enough, Strategy will become an impaired company and they won't be able to operate. So that's the real risk. And this is also another risk. You get that phone call, that margin is calling. And that margin call usually comes at the worst possible time, probably when you're sleeping in the middle of the night, right? But that call has to be answered. And right now, Michael Sailor is on the line.

Now, this is also something that's reminiscent of something that was said in the past that markets can remain irrational longer than you can stay solvent. And that certainly is true when you're borrowing money to buy not just Bitcoin, but any asset. And again, this is not a knock on Bitcoin, per se. Bitcoin, like I said, has a place within your overall portfolio. I'm going to tell you the context of if you're going to own Bitcoin, where it belongs inside your portfolio, where it goes.

But I see many investors and traders misusing Bitcoin the wrong way. They're using it as a safe haven. They're thinking that it's going to protect their capital when in fact it's not designed to do that and the performance action as of late confirms that. I was thinking about what similarities is there between Michael Sailor at Strategy and Ocean Gate. Ocean Gate was, I don't know if you saw it on Netflix. There was a documentary all about the implosion and there was so many similarities.

I got to thinking about this and I ran it through co-pilot and co-pilot summarized it really nicely. Strategy versus the Titan submersible implosion and there's so many similarities in the decision making and the risk posture of each. For example, both pursued an extreme concentrated bet on a single thesis. Oceangate bet on a rapid innovation with minimal regulatory oversight. Well, Strategy did the same thing. They did it with their corporate balance sheet, betting on Bitcoin as a long-term monetary revolution.

And again, maybe that'll happen with Bitcoin. Maybe it'll be it will become a long-term monetary revolution. But again, the way that that Sailor is going about his business and how he's financing Strategy and how he's going about his Bitcoin accumulation strategy is highly questionable and we're seeing that right now. Both leaders faced or framed skepticism as ignorance rather than caution. We saw that with Stockton Rush who dismissed safety concerns as a resistance to innovation with Ocean Gate. With Michael Sailor, he repeatedly framed Bitcoin critics as simply not understanding the technology or the monetary future.

So many similarities between Stockton Rush and Michael Sailor. Both embraced a break the mold identity. Both took an asymmetrical downside risk. That's a big one. Ocean Gates downside risk was catastrophic because the risk involved human life. In strategy's case, its downside financial impact is massive impairment risk, shareholder volatility and balance sheet fragility. Again, these are some of the things that I see the similarities between the ocean gate scandal implosion and the real time implosion of Strategy.

So, let's talk a little bit about Bitcoin because I alluded to this earlier as to how Bitcoin should be used if you're going to own it, right? Bitcoin, if you're owning it as a safe haven asset, you're doing it wrong. Bitcoin, although they try to sell it and make it seem like it's a safe haven asset, it's not. And the reason it's not is because it does not protect your principle. So it does not protect you against volatility and also it can lose value right as it's doing right now.

So if you're going to use safety in your portfolio, you need to have the right types of assets in your safety container. It's okay to own Bitcoin. This is again not a knock against Bitcoin. If you're going to own it, just make sure you don't own it in your safety container. That's safety 101, right? We teach this, I teach this in my online courses, safety, a guide for investors, and the link is in the description section below.

But the three cornerstones of an architecturally sound portfolio. There's three places where you can divide your money. And there's three containers. You've got your core portfolio, your non-core portfolio, and your safety portfolio. And these three, think of these three containers as basically forming your overall portfolio. So your portfolio can be allocated to each one of these areas. And you see the safety bucket there is in green.

But where does Bitcoin go in these three buckets? Can anyone tell me where does Bitcoin go? If you're going to own it, it doesn't go in your safety bucket. It can go in your non-core bucket because right now Bitcoin like all cryptocurrencies is a non-core asset class, right? It's not an established asset class. So, it's non-core. And so, Bitcoin, if you're going to own it, you can put it in your non-core portfolio, which is designed for high risk, high potential, right?

Safety is designed for protection, right? And what are we talking about protection? Well, we have minimum safety standards, right? for assets that go in your safety bucket. They must provide liquidity. Bitcoin does that. It's pretty liquid. But where Bitcoin misses is it doesn't doesn't protect you against market volatility. Bitcoin is jam-packed with volatility. So that's a problem. And then it doesn't give you 100% principal protection.

So your safety bucket again, all the assets that you use in the safety bucket must have all three of those attributes. Not one of three. Not two of three, all three. And again, that's why Bitcoin does not meet minimum safety standards. And again, if you're going to use it, only use it in your noncore investment portfolio.

By the way, ETF guide is here in all markets, up markets, down markets, flat markets, volatile markets. With the crash of Bitcoin, a lot of these one-dimensional one-trick ponies, they're just going to say the same thing over and over like a broken record and tell you to buy Bitcoin at any price. What I will say is yes, you should buy when a favorable time to buy is when markets are trending down, right? So that's for any asset class, not just Bitcoin, right? We want to buy when prices are beaten up, when they're down.

But like I said earlier, I don't think we've seen a bottom in Bitcoin. I think the real bottom in Bitcoin happens when Sailor and Strategy start being forced to liquidate their holdings, then watch out. Then we start to see some really scary prints on Bitcoin prices. And that's when I think we really begin to start to get in and have prices that might represent a really really good value, even better value than prices right now.

So those crazy moments can happen in all financial markets, but cryptocurrencies specifically in Bitcoin, these are the kinds of draw downs that we've seen before in Bitcoin. Deep draw downs, draw downs as much as 80 90%. And we're not there yet. And so again, for those of you watching, so important to be using the right safety techniques within your portfolio. If you've been using Bitcoin to protect your capital, if you've been using it as a safe haven, it's not necessarily any of that. And so it's important to have the right approach.

This is exactly what I teach safety, a guide for investors. Hit the description section below to enroll in my online courses. And of course, we've got a lot of other great content on this channel, ETF Battles, Metals in Motion. We've also got First Look ETF, and also wonderful content and playlist from USCF Investments, a leader in commodity focused ETFs. You want exposure to things like gold and natural gas and oil. That's USCF investments.

And of course, direction has lots of great choices in terms of leveraged and inverse performing ETFs. So direction of course has their playlist and then of course metals in motion which is now entering season 3 talking about all those metals like copper as well as uranium and the ones that there's a massive shortage of and where there's global demand and also those precious metals. Let's not forget about gold and silver.

So, that does it for today's episode. I hope you've enjoyed the program. Hit me up in the comment section below. And again, I'm Ronda Legy with ETF Guide. We'll see you on the next episode.