What happened to Bitcoin...

What's up you guys? It's Crypto Graham here, and I think it's time we have the talk. You know, it's been seven months since I made a video discussing the prices of Bitcoin and cryptocurrency. And you know what? I thought I was done. I didn't think there was anything left for me to talk about. That was until recently when I saw the price of Bitcoin near $3,500. I figured, you know what? It is time I come out of cryptocurrency retirement and put on this shirt. That's a Lamborghini, it's on the moon, and the license plate says Ethereum on it.

But let's talk about what just happened. If this is a good time to buy, what this means for the future of cryptocurrency prices, and also how to smash that like button if you haven't already. Let's get into the video!

So first of all, what happened to Bitcoin? A year ago today, it had just broken past $10,000 with absolutely no end in sight. Less than two weeks after that, it was nearing $17,000, and on Sunday, December 17th, it reached the price of just over $20,000. And then the sell-off began.

Many large investors began taking some massive profits here, causing the price of Bitcoin to fall closer to $13,000. And then the sell-off just continued, and that's where we got to see some problems. We've had several exchanges hacked, we have China's ban on cryptocurrency, the SEC's attempt at regulation and taxation, and like many of us can remember, the fall of the almighty BitConnect.

Well, the technology behind cryptocurrency remains, people's confidence in Bitcoin did not end. The sell-off continued. Today, we're faced with continuing taxation, regulation, the crackdown on scam ICOs, and some issues with adoption and scalability, all of which present massive hurdles for Bitcoin and cryptocurrency to overcome.

However, we have begun to see some stabilization around the $6,500 range, and that was until just now. At the time I'm making this video, the price is around $3,600. So why the recent drop? Here's what I think. First of all, the prices we saw a year ago were never a true indication of what Bitcoin was ever actually worth. For all we know, it could have always just been worth $2,000 to begin with.

A combination of media frenzy, enthusiasm, and speculation caused it to skyrocket way higher than was ever sustainable. So I feel like this is most likely Bitcoin simply returning to the price it was always worth to begin with, not really Bitcoin losing any value because that value was never there to begin with—it wasn't worth that in the first place, if that makes sense.

Though the second thing in terms of Bitcoin's recent drop, we have a somewhat recent criminal investigation into Bitfinex, a cryptocurrency exchange, which may have manipulated Bitcoin prices in its favor. Now, whether or not this investigation actually concludes anything is way beyond me; that's all speculation.

But one thing is for sure, and that is that the price of cryptocurrency is heavily influenced by both positive or negative press, and in this case, just about any negative press results in a lower price of Bitcoin. In addition to this, a study published a few months ago by a college professor who specializes in financial fraud estimated at least half of Bitcoin's price jump last year was a result of price manipulation.

Now my third thought here, and this is probably a very unpopular opinion, but this is what I'm gonna say: people are impatient. I think it's pretty safe to say that, not all, but a lot of people who invest in Bitcoin do so to make money, not to use on their day-to-day purchases. This means the people who speculate in cryptocurrencies do so to make a very quick high rate of return in terms of profit. They don't do it just to make 8% on their money annually; otherwise, they would just go and invest in stocks or real estate or anything else.

It's a lot safer. They wouldn't waste their time with Bitcoin for 8%. So, given that after a period of relative stability over the last five months, if you haven't made a profit by then, it just makes sense that you would sell and move your money elsewhere.

I'm sure a large part of that demographic still holding on to Bitcoin has simply bought it a long time ago and is still holding on to it. It's very easy to hold something when you haven't lost money. For example, I'm sure there's a lot of people out there who bought Bitcoin in August of 2017 for $4,000 and just held it. When they saw it drop to $8,000, they thought to themselves, you know what? It's still pretty good. I've still doubled my money.

Then when they see it drop to $5,000, they think, you know what? That's still pretty good; I've still made a 25% return on my money in just under a year and a half. Then all of a sudden, they see it drop to $4,000, and they think to themselves, oh, now I can actually start losing money; I better sell so that way I'm at least even.

Just trust me on this one: it's very easy to hold on to something when you're still ahead. As soon as you start losing money and it starts going into the red, you're going to panic, and you're much more likely to sell.

So I think it's to be expected that a lot of people are gonna be selling off these lower price ranges to avoid losing money, even though they may have been in the green and profit for the last year and a half. When you combine all of those factors together, it starts to make sense why we've seen the prices of cryptocurrency just continue to drop.

But at the same time, any prediction when it comes to the price of cryptocurrency is literally just a guess. I'm taking the stance that it's impossible to predict what the hell it's actually worth beyond what someone is simply willing to pay for it.

Now trust me when I say this, and I say this as someone who's built up a multi-million dollar net worth through diligent investing and saving, that any cryptocurrency price predictions you read that are based on historical trends or graphs are entirely worthless. It's our own human nature that leads us to identify and find patterns where there are none.

We've evolved in such a chaotic world where things that are pretty victim are safe. That's why you can go and stare at a white wall for a few minutes, and then afterwards, you start to see a face take shape in the texture of the paint. Go, go and try this, by the way. It's so much fun to do this. If you can't see a face taking shape, just keep staring at the white wall until it does, and comment down below until you see that face.

Our minds have grown this way because this is what leads to the highest chance of survival. But when we no longer need to fend off lions and tigers and Tai Lopez ads, we simply use our pattern recognition skills elsewhere. It's always easy to point back and say, look at Bitcoin, it's lost 80% of its value. But look at it now; it always keeps coming back.

I've seen some other ones where people say look, it always drops in May, but then it comes right back. So as long as you buy in May, you're gonna make money because it's always done that year after year. You know what? This may continue to be true until it doesn't.

No, we can certainly look back at past performance as an indicator of what a reasonable person might expect in the future, but these assumptions are usually tied to an income-producing business, product, asset, or something with utility value. Now without that, valuations tend to be pure guesswork, and when it comes to guessing, it's very easy to overestimate the value of something.

When you do that, the higher the chances are that you're going to be losing money. And as far as what I think prices are going to do in the future, my honest answer is simply: who knows? I'm a firm believer you cannot predict the price of something like this, and there are too many variables that could affect the price positively or negatively. Anyone else who says otherwise is simply just guessing, and take that for what it's worth.

I had never, you guys. I have never lied to you; I had no reason to lie about something like this or try to spread FUD or what anyone else says. I really don't have any vengeance against Bitcoin; I really don't care either way.

I simply look at this from a neutral perspective and give my opinion on it, and for whatever that's worth, like I said. Now I will say this: when it comes to reading Bitcoin charts, definitely pay attention to support and resistance levels because these are psychological trends that people will follow regardless of the investment.

So definitely use that to your own advantage by understanding and knowing human behavior. I will say this, however, that it's going to take a while to restore confidence in Bitcoin before we start to see an upward movement in prices. Too many people got burned, too many people lost money, and too many people will not return again because of that.

While everyone loves to say, I don't want government regulation in cryptocurrency, and believe me, in a perfect world, I am all for it, the sad truth is that we do need to be protected from ourselves. Even the most honest people can take a turn for the worse as soon as money is involved.

If this is ever actually going to be used as a form of currency, and you actually believe this is going to be around for a very long time, you should really be viewing it more like gold in the sense that it's a preservation of wealth, and you should—wait, go and make money.

Now this is usually the point in the video where people comment down below and they say something like, but Graham, educate yourself! It's the blockchain technology that is the future. I get that, but that's almost just like saying it's the internet technology that's the future.

Like, I don't doubt that there are some amazing uses for blockchain, but a currency really shouldn't be seen as necessarily an investment; it should be seen simply as a medium of exchange. We shouldn't really get excited if things are raising or lowering in price. If you're using something to purchase, you really want that purchasing power to be relatively stable so you know if you're saving up for something what that's going to buy you a week, a month, or a year from now.

And one last thing I want to mention: for everyone that says that you haven't lost until you've sold, the answer is no, you've lost. I get it, though; it's a reasonable statement—until you sell, you never really officially lock in that loss.

With many assets, with a long enough time horizon, any short-term price fluctuations really don't make any difference long-term. But that also implies that you just shouldn't sell any non-performing assets just to maintain the status that you have never officially locked in a loss because you never sold.

The exact same thing can be said about someone who says, I haven't lost any money on the $10,000 of Beanie Babies that I purchased in 1999 because I've never sold them. Now, bro, you've lost money. My point being this: if you wouldn't invest your money at the price it's currently trading at right now, then you should sell.

If you would buy it at the price that's currently at, then hold on to it. Don't hold on to something just because of sunk cost fallacy, making it seem more attractive than it actually is. See, every single investment you do is an investment in today’s dollars, not something where you don't lose until you sell.

Because the reality is that, yes, you've lost on paper, and only time will tell if it ends up correcting in your favor or not. And that's the risk you end up taking anytime you invest, especially if you invest on speculation without the fundamentals to back it up.

So that's all I have to say about that, and I am officially going back to cryptocurrency retirement for another seven months. I'll see you guys soon.

So, as always, you guys, thank you so much for watching. I really appreciate it. If you made it to the very end, if you didn't already completely disagree with me by now, make sure to smash that like button, make sure to subscribe, make sure to also add me on Snapchat and Instagram, oh, Sandstrom. Now, I post pretty much daily, so if you want to be a part of it there, feel free to add me there.

Thank you again for watching. Links that I have a whole bunch of links in the description, so read the description to comment down below for engagement, and that's it! Until next time.