Bitcoin Fell Below $30,000

What's up Graham, it's guys here! So, I'm interrupting today's scheduled video to bring you a breaking news update. I'm actually wearing pants today because in the last 24 hours, $600 billion was wiped from the cryptocurrency market. The price of Bitcoin quickly fell below $30,000 in a flash crash. Ethereum temporarily dropped below $1,900, Dogecoin dipped to a low of 24 cents, and all of a sudden, the sentiment changed from enthusiasm and excitement for making money to the fear that maybe things could get a whole lot worse before they get better.

That's because China recently placed a ban on financial institutions against cryptocurrency. There's also the fear that mining operations would need to shift towards sustainable energy before they could be embraced on a wide scale, and volatility is going to shake a lot of people out of the markets until things start turning around. This is absolutely something we need to address, so let's talk about exactly what's going on, what's causing this, the issues I see with what's happening, whether or not I'm buying in, and then most importantly, what you could do with this information to make money.

But before we go into that, I gotta say a huge thank you to the sponsor of today's video, the like button. They're a totally free button that appears right below the video, and best of all, you're able to smash it for the low cost of absolutely nothing. Just hear what other people have to say about it.

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All right, so as some background, these last few months have been incredibly eventful for cryptocurrency. After ringing to its previous 2017 all-time high of $20,000 in December of 2020, it continued building momentum, reaching $40,000 on the expectation that it was driven by institutional investors using it as a store of value. This essentially gave the endorsement that Bitcoin was not something to be skeptical about, and the more mainstream investors began adopting it, the more it was seen as a store of value and hedge against inflation.

But all of that skyrocketed on February 8th when Tesla announced that they had bought $1.5 billion worth of Bitcoin with a portion of their cash reserves, along with the announcement that they would begin accepting Bitcoin as payment for their cars. Within 48 hours of that announcement, the price of Bitcoin rallied another 20%, and by mid-April, as other tech companies began following suit and embracing Bitcoin, combined with an influx of retail investors concerned about the impacts of another multi-trillion dollar stimulus package, the price of Bitcoin reached a high of nearly $64,000.

But just as quickly as things started going back up, they started going back down. By late April, the excitement for Bitcoin began wearing off; some investors started taking profits, and the price naturally fell to a low of $48,000, which many would say is a normal correction. In fact, many people saw it as a buying opportunity, driving up the price back to $60,000.

But then, this tweet hit, which lit the fuse for Bitcoin to begin selling off. First, Elon Musk announced that Tesla would no longer be accepting Bitcoin as payment due to environmental concerns, and they would be looking for other possible alternatives that are more energy-efficient for the economy. Well, as you would expect from an Elon Musk tweet, the market violently reacted and immediately began selling off on fears that other companies would soon follow.

Now, second from there, things just got worse. China came out with a statement banning financial institutions from conducting business with cryptocurrency and warning investors against speculative trading. Now, as of right now, this ban is only on financial institutions and not on individuals, but even so, their markets have not always gone smoothly. Like in September of 2017, China was the first to ban initial coin offerings, otherwise known as ICOs, while several exchanges were forced to shut down. By the way, back then, the price of Bitcoin sunk all the way down to $424.

But then, in June of 2019, The People's Bank of China issued a statement saying it would block access to all domestic and foreign cryptocurrency exchanges and initial coin offering websites, further clamping down on trading. This new ban, however, reinforces a lot of the same sentiments they've said before, but now it's expanded across businesses because it's infringing on the safety of people's property and disrupting the normal economic and financial order.

Well, from there, as you would expect, prices quickly fell, falling below $30,000 for the first time since December of 2020. And if you thought that would be the perfect time to go and buy in, well, good luck! You couldn't because Coinbase, along with several other exchanges, were temporarily down with reduced performance due to all the demand.

So, that of course leaves us with today, on a roller coaster ride of cryptocurrency that changes direction by the minute. And the biggest question of all is yet to be answered: Where do we go from here? Could the price keep falling lower? And most importantly, have you gotten your free stock yet worth all the way up to $50 using the link down below in the description? Because that's pretty much like free money.

Well, as of right now, at the time of making this video, prices are down about 40% from their peak in April, which, if you just started investing over the last 30 days, doesn't look so good. But once you zoom out, you'll see that just this year alone, we're still up 30%, and when you zoom out even further, a year ago, we're still 300% higher from where it used to be.

Now, that doesn't mean it can't fall lower, and it could certainly happen depending on the upcoming news. But to me, this is really not something out of the ordinary, and with all things cryptocurrency, you should almost expect that 90% swings in either direction are not impossible and should really be something you prepare for. Now on the positive side, there are plenty of people and businesses who have taken advantage of this as a time to buy in.

For example, the Crypto Bull, Mike Novogratz, who said he would buy Bitcoin around the $40,000 range. We also have MicroStrategy's Michael Saylor who recently announced that they had bought 10 million more Bitcoin for an average price of $43,663, which seems like an insurmountable number until you realize they already have $4 billion worth of Bitcoin, and an extra $10 million is only one-quarter of 1% of their Bitcoin holding.

Then we have a blast from the past, Tom from Myspace, who posted on Twitter that he was buying the dip, and Cathie Wood, as usual, reiterated her stance that Bitcoin will one day be worth $500,000 in a scenario where all institutional asset managers allocate 5% of their portfolio into the cryptocurrency. However, institutional buyers are not immune from these sorts of price declines either, with Square now sitting on a $20 million loss while announcing that they have no future plans to buy any more Bitcoin.

Tesla is also seeing a decline in their stock price since Bitcoin's profit and loss is going to be showing up on their balance sheet, impacting their net profit at the end of the quarter. For example, they were recently profitable due to a combination of selling regulatory tax credits and profit from Bitcoin. But just as those gains were factored in last month as profit, these losses will also need to be taken into consideration, which could very much impact their bottom line.

Now, the same thing could also be said about any company who holds their reserves in Bitcoin, making things artificially look a lot better when the price is going up and artificially a lot worse when the price is going down. Now, in terms of my own thoughts on this, I have a lot to say, but let's start off with Bitcoin. In the beginning of the year, I told everybody that I would be placing 1% of my entire portfolio between a 60/40 split of Bitcoin and Ethereum because I would rather take the 1% risk and be in it than the 1% risk of being out of it, and I did just that.

Then from there, due to a combination of that going up in price along with some dollar cost averaging, that 1% quickly grew to 3%, and recently my goal has been to increase my position in Bitcoin and Ethereum to 5% of my entire portfolio by the end of the year, and I'm sticking with that. Now, I've been very fortunate that thanks to the 40% allocation to Ethereum back when it was $1,150, I'm still sitting on a decent amount of profit, and overall with Bitcoin, I'm pretty much just break even right now.

Now, although I've seen this as a good opportunity to go and buy the Bitcoin dip, and this morning I was able to buy in a little more at $33,000 after waiting 20 minutes for Coinbase to load. Anyway, all of this is to say I'm continuing to buy into Bitcoin just like I would any other stock. I'm using this as an opportunity to increase my position, and my goal is still, by the end of the year, to allocate 5% of my entire portfolio between a 60/40 split to Bitcoin and Ethereum, regardless of where it's trading at.

This is a number that I've carefully thought about; it's an amount that I'm willing to risk, and this recent selloff makes absolutely no difference to my investment over the next few years. The biggest concern that I see from all of this is that too many people are using Bitcoin and Ethereum as their ticket to strike it rich instead of using it as a sensible way to further diversify an already thorough portfolio, which, in my opinion, is really what it should be used for right now.

Because the reality is, during a 30% to 90% drop, those same people are most likely going to panic sell, lose a lot of money, and then be discouraged from getting involved again. Being a good investor is all about analyzing the risk, knowing the volatility, and understanding the importance of diversification so a 50% drop doesn't phase you, and you can continue moving on without emotion clouding your judgment.

I'm going to take the stance that yes, you can safely invest in cryptocurrencies. They can be a part of a blossoming portfolio, and long-term, I believe in them just like I would in stocks. But you should not go all in; you shouldn't be investing more than you're willing to lose. And during a time like this, if you're panicking over the drop, that's a sign that you've invested more than you're comfortable with, and I would seriously consider dialing it back so you don't lose any sleep.

For me, that amount was 5% of my entire portfolio, and if it drops 90%, well, that would suck, and no one likes losing money, but it wouldn't affect my quality of life. It's more important instead to craft a portfolio around as many different asset classes as possible so that way, over the next few decades, you're nearly guaranteed success without the chance of losing everything through a series of poorly timed buying.

I also want to take this opportunity to say one more thing: you should be extremely suspicious anytime you see someone boasting about a new coin going up in price. Literally, every day, I see people pumping up these ridiculous coins with screenshots of their profits, with a disclaimer that it's not financial advice, while suddenly hinting that you should buy in otherwise you're going to miss out.

To me, MIL is a perfect example of this, and yes, this is a real thing. This last week, it made its rounds on social media for what appears to be paid advertisements trying to boost the price high enough for the original buyers to sell out to unsuspecting people who are about to lose a lot of money. And you guessed it, today it's down 75%.

I just have a little rule when it comes to this nonsense: Chances are, by the time you see a screenshot of someone's profit, that's not financial advice, most likely it's too late to buy in. I would also be extremely wary of any coin being mentioned in the comment section or anybody asking me to review a coin that you've never heard of. I've seen several of them using bots to push the comment to the top, hoping that people will see it and want to buy in.

Now, I know I sound like a Karen right now trying to dampen the party, but I say this because I'm seeing 99.99% of these coins as nothing but a money grab that serve absolutely no purpose and that does a disservice to the authentic legitimate coins that just don't get the attention they deserve. It's also a good idea not to trade based on the tweets of Elon Musk, both positive or negative, because even though he does influence the price, those movements are only temporary, and really any trading from that is just pure gambling.

From here on out, though, it's still unclear where it's heading, and there's very much a chance it might continue dropping lower and testing the previous psychological barrier of $30,000, at which point we'll see where it stabilizes. But like I said, if this volatility worries you, then I would take that as a sign that you should reevaluate your position and realize that perhaps you have more money invested than you're comfortable with.

The problem with that is that when you get that sudden panic, you're more likely to trade emotionally and make quick decisions that you otherwise wouldn't have made. It's a lot better to be able to trade with less so that you can think objectively. Realize that there are risks with investing in cryptocurrency; it's still relatively new, and that just comes with the territory. You should invest your money accordingly.

When it comes to myself, I'm not selling anything; I'm buying more Bitcoin. If it drops around $30,000, I'll buy more Ethereum if it drops below $2,000. So, long story short, yes, I do think cryptocurrency can be a strong part of your portfolio. I wouldn't be concerned over any fluctuations in price, and I would expect to see a lot more volatility over the coming few months.

But if you've invested more money than you're comfortable with losing, and this recent volatility has spooked you out, it might be worth it to take a more balanced approach instead. This shouldn't be seen as a way to strike it rich; you should not be trading based on someone's tweets, and you should not be buying anything from someone posting their profits while getting bottle service at the club. Instead, come up with a plan ahead of time, only invest a small amount, and most importantly, above all of this, make sure to get your free stock worth all the way up to $50 down below in the description.

So, with that said, you guys, thank you so much for watching! I really appreciate it. As always, make sure to destroy the like button, subscribe button, and notification bell. Also, feel free to add me on Instagram; I post pretty much daily. So if you want to be a part of it there, feel free to add me there, as on my second channel, The Graham Stephan Show, I post there every single day I'm not posting here. So if you want to see a brand new video from me every single day, make sure to add yourself to that.

Thank you so much again for watching, and until next time!