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Transcript of Video:
Rob Booker: And hello everybody. I’m Rob Booker, welcome back. I get a lot of questions about Bitcoin. Let’s read a couple of those questions. Where is Bitcoin going? Boring. Why does Bitcoin only go up all the time? Lame. I want to pay my son’s allowance in Bitcoin. Oh, that’s an interesting one. Should you pay your children’s allowances in Bitcoin?
Well okay, let’s talk about Bitcoin for a moment. Let me describe some of the fundamental characteristics of Bitcoin. It will help if I draw a picture. That’s the fundamental characteristic of Bitcoin. It’s insanity. It’s not worth anything. It doesn’t have any true value. It moves in relation to the whims and expectations of a whole bunch of people that are basically sitting in the same room as each other. There is one country in the world that is basically dominating the entire order flow of the entire currency. In other words, it’s exactly like the U.S. dollar. For more on answering this question, let’s jump on over to the computer box and we’ll take a look at some charts.
SpongeBob: 2,000 years later.
Rob Booker: All right. Let’s take a look at one of the problems with Bitcoin is it doesn’t really respond to any kind of traditional technical analysis, at least indicator based technical analysis. For instance, it rises and it goes divergent, or it goes over bot, or it misses pivot points, or the ADX gets out of control. It doesn’t really matter so much that any of those things happen. The reason it doesn’t matter very much that those things happen is that it’s not really a financial instrument that anybody has ever really seen go through a bearish period of time. There’s been no bear market in Bitcoin.
One of the things that you’ve got to remember if you are interested in paying allowances or doing anything denominated in Bitcoin is that Bitcoin could be the next sort of biotech stock for example. It appears that every time this goes down, it just jumps back up. Kind of like the U.S. stock market, every single time it drops it goes back up. Although, there could be someday in the near or far off future where Bitcoin … Look, as we’re recording this it’s going to make all time highs today. There could be a day in time where Bitcoin drops and it just doesn’t stop.
Here are some of the true characteristics of Bitcoin that you want to watch out for as you’re thinking about trading it. Number one, it’s really important to remember that you could have an experience where Bitcoin begins to drop, and it doesn’t stop dropping all the way into 2,000. It goes down so far that it washes everybody out. Another thing to remember is that it’s like the stock market in the sense that it’s now a risk on asset class, where it just keeps going up and it doesn’t really have to have any fundamentals behind it. If you do catch it, and you do ride the upward movement, you might want to look for Bitcoin eventually to get to 10,000, 9,000, 10,000, or areas like that. But if you don’t currently have any Bitcoin right now, you’d want to wait until that next really big and really significant drop.
For instance, you could buy a little bit of Bitcoin every time it drops 10%. You could say to your kids if they want to be paid in Bitcoin for their allowance, you might say something like I’ll only pay you your allowance in Bitcoin after it drops because as of right now … I mean in the time that I’ve been saying these words, Bitcoin has now gone up like $10 in one minute. You can say to them, the value of your allowance might drop significantly.
The third thing to keep in mind is that the true really big run in Bitcoin is going to come when someone makes it spendable somewhere. If you can start spending Bitcoin, then there’s going to be an enormous amount of transactions that occur in Bitcoin. But then there’s going to be a demand for it because there’s going to be a perception that it’s going to rise in value significantly, and that after it rises in value significantly you could start spending your money, your Bitcoin, on stuff. Say for instance, if Walmart or Amazon start accepting Bitcoin, then you know that this thing is going to be on a run.
The other thing to realize about Bitcoin as opposed to other kids of financial instruments such as the currency market. In the currency market, there is theoretically a fixed number of U.S. dollars out in circulation, and there is a relationship between the amount of those dollars in circulation and the value of the U.S. dollar. The shorter the supply of dollars, the higher the value. Well it’s automatically built into Bitcoin that there is only a certain amount of it available ever that can be mined. The longer it goes, the harder it is to mine. The fact that there is a finite number of these available, even though they don’t truly have any worth except for the perception that’s built into them, that gives this another really, there’s another really strong case for the bullishness over the really long term.
So, when Bitcoin drops by 30% or 40%, I’m a buyer, but until then, I just can’t get in now because it’s just gone out of control. Even if it did go to 10,000 at this point, I wouldn’t really be making a super giant return on my investment.
All right, if you liked the video, don’t forget to click subscribe at the top. Like the video, leave a comment below, let me know what you think about Bitcoin, and I’ll see you in the next one.
Have the best day ever,