Latest / Money Grows on Trees / #311 - He Predicted Bitcoin To Crash To $67k.. Here’s What He’s Calling Next

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#311 - He Predicted Bitcoin To Crash To $67k.. Here’s What He’s Calling Next · Money Grows on Trees

• 0:00
  I called the bitcoin crash and now everyone's asking the same question what's next? When Bitcoin
• 0:05
  was sitting at $105,000 I told you it was overvalued. I told you the Trump effect was
• 0:10
  temporary and I told you the cycle was breaking. I've told you again and again and again, it's rat
• 0:15
  poison. It's meaningless. It's not worth anything. And then it crashed hard. Most people didn't see
• 0:21
  it coming. But if you understood, the fundamentals of the fundamentals are there are none. If you
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  understood the incentives, the liquidity, the structural pressure and the fad and the
• 0:29
  characters around this, you would have seen it was obvious what happens now. Does it recover? Does it
• 0:34
  fall further? Is it the bottom or is there more pain ahead? I've had so many people just in the
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  last week or so, including family members, ask me should they be selling their Bitcoin? And my
• 0:44
  answer is what the heck, did you buy that shit in the first place? Now you've got to make decisions
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  as to whether I should sell well, I go up well, I'll go down and you have nothing to gauge this
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  on. There are no fundamentals to even discern or decide as to whether you're getting a good deal.
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  That's why I can't make that decision. I'd hate to be in that boat right now. Like, should I sell it's
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  why I don't buy gold and silver. Same thing. You just don't know. If you don't know, your money
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  shouldn't be there. Now what is going to happen? What do I think? What do I anticipate will be the
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  case when it comes to Bitcoin? The collapse crypto? First, I want to unpack why I predicted the
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  collapse. Let's be clear it wasn't luck. Bitcoin thrives on three things cheap
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  money, speculation and new participants joining. That's cheap money caused it,
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  speculation propagated it and new participants hold it up. And when new participants follow, which
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  I've seen on X in the last few weeks, people are capitulating. They've got accounts on X, Crypto
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  Guru or Bitcoin, blah, blah. And they're like, oh, I think I was wrong and they're capitulating. It's
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  kind of amusing. But you know, I do feel for them a little bit because that was seduced because
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  everybody knows that a greater fool asset needs greater fools greater than them in the full area
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  to come in and join the party. That's new participants. And Michael Saylor himself stupidly
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  has said it can't be worthless because of the volatility. So everybody knows that people are
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  just speculating on the movement. It's ridiculous. And of course it all started from cheap money. May
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  the government putting rates at zero for two bloody long right? So here's what's happening.
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  Here's why it was never going to work. Because central banks tighten. Liquidity shrinks. What I
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  mean tighten I mean they're going to raise rates. That's what's happened. And even like in Japan,
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  they're raising rates so fast that the Japanese carry trade is unwinding and all that cheap yen
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  money is starting to come home to Japan. And guess what? They've got to sell risky assets. And that's
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  exactly what's happening. Speculative assets fall first and Bitcoin's the most speculative. And
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  we've seen it before. It's happened in 2013 2017, 2021. However those weren't really collapses. They
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  were just little corrections. Um, now we're seeing what happens in a real credit crisis. You know, as
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  I've said before, Bitcoin and cryptos never actually experience a recession. They've never
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  experienced hard times. And when people hit the wall, the first thing they sell is that nice
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  little bit of money they've got in crypto. And they need their fiat currency to pay rent, they
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  need their fiat currency to buy food, and all of a sudden the euphoric parabolic rise starts to
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  collapse just as fast. Now, what's also interesting about this is that the crypto, the bitcoin, the
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  bitcoin markets, they don't have these failsafe systems built into the market. So in 1929 when the
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  stock market collapsed and we had a real stock market collapse, there were no real things in
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  place to prevent that. So the market remained open. They should have closed it for extended periods.
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  They should have banned short selling. They should have held money in banks to prevent bank runs and
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  reserves that none of that was in place. So you're seeing the same thing in crypto markets. It's an
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  unregulated market. There are no fail switches in there. So they can't switch it off. And it's also
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  24 over seven market which is wild. So you think that stock markets collapse. You wait till you see
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  crypto. I mean look at this. In the last week it's down 25% in a week. There's trillions moving out
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  of this. It's not pretty. And you can't stop it with failsafe switches like you can in the stock
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  market. You just can't. So well I think we're going to see it. You know we could see drawdowns in 90%.
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  All right, now let me explain this. If something produces no earnings or no dividends or no income
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  stream or no cash flow, like Bitcoin, like crypto, then what anchors its value? Nothing. It floats on
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  sentiment, right? It floats on sentiment. That's why sailors got to get on X all the time and pump it
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  up. That's why your friends are like, no, come in. Come join the party. Because they know that you've
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  got to join for it to continue to propagate and go up because they don't get any cash flow from
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  it. Right. So what does the collapse prove here and the latest collapse proves or confirm something
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  I've been saying for years on this show. Bitcoin behaves like a high beta tech stock without
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  earnings. And I've said that it mimics the Nasdaq. And it's not digital gold right? It's not digital
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  gold. Gold doesn't drop by 70% in a month or however many weeks it's gone by right now since
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  it was 126,000. It doesn't do that. Gold doesn't depend on venture style inflows either. Um, gold
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  tends to be a reasonable store of value, but Bitcoin is a momentum asset. When momentum dies, it
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  implodes. You get reverse momentum. Okay, so if an asset can lose half its value in months, can it
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  truly be a store of value? That's the question. And I think it's very self-evident as to the answer
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  to that question. So here's a real problem. No cash flow right. So let's compare shares produce
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  earnings and income. They pay dividends. So the shares that the underlying companies that you
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  have shares in the good ones produce cash flow. As companies they are cash flowing machines. And part
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  of that is that they'll pay you a piece of that as dividends. Right. And it's productive. So, you
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  know, if you look at an oil company, for example, it produces it literally drills depending on what
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  kind of oil company it is, it refines and it sells oil. Now you need that to function in a society
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  like ours. It's very productive. And you can own a piece of that oil company and get paid dividends
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  or royalties and participate in the climb of the value. Right. My oil stocks, since I did that little
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  oil episode, they're up 25% in a month. And I'm getting nice fat dividends as well, which is
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  lovely. So that's a far better place, I think, to be investing money, not financial advice, but
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  certainly understanding certain companies. Our railroad business. I did this episode the other
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  day. You go watch it. It's it's probably my favourite episode on the show so far. Except for
• 6:08
  maybe this one. But, uh, I talked about where I was allocating capital, and since then, we've made a
• 6:14
  lot of money just in that one episode. And it really breaks down how I think about allocation
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  of capital, which is why I don't touch crypto or metals. And certainly nothing that I can see is
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  clearly overpriced. Right? But if we look at other productive style assets, even property that I beat
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  up on the show is that it produces shelter. I mean, that's a human need, right? It produces rent. It has
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  utility. You can see if you're getting a good deal or not. That's why I'm not touching it right now,
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  cause I don't think I'm getting a good deal. Yeah. Um, for small businesses, they generate revenue. We
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  have a laundromat business, which is a wonderful business. 40% return on capital, which is amazing.
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  Generated revenue creates value. It's already doubled in value since we bought it. But most
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  importantly, it's productive. It helps the community, right? Bitcoin. What does it do? It does
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  nothing. Its entire return depends on someone else paying more for it later. That's it. That's
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  speculation you know and and it's not investment. So if new buyers disappear, what happens exactly?
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  You are seeing it. So here's what I've discovered. The use case is weak. I'd even say it's dead on
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  arrival. Okay, so let's understand this. Bitcoin was sold as digital cash. Inflation
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  hedge. Listen closely. Banking alternative and store of value. So let's evaluate those
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  things. Digital cash two. Volatile. By the time you go buy something it's changed in price. Could you
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  imagine if things were priced in Bitcoin or you could use it. You it you wouldn't be able to price
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  goods. It's too volatile right. Inflation hedge it literally fell during tightening cycles. It's not
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  an inflation hedge. Right. I'll tell you with actual data scientifically with the laws of
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  physics why it is not an inflation hedge. Because inflation across the board is up
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  between 2 and 4%. Some say more. I agree it could even be five. Whatever it is, Bitcoin is
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  down in a month and in a few months it's down 50% almost. So you bought Bitcoin to hedge
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  inflation to save yourself 5%. And in the process you lost 40%. So how is that an inflation hedge
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  banking alternative. It's still relying on exchanges and stablecoins while I'm recording
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  this episode. Binance looks like it's going broke. Going back it's out. Finished the yanking it out
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  of there as fast as they can. Yank it out of there. It ain't no bank. There's a huge bank run on
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  Binance as we speak. Jamie Dimon, who's the head of JP morgan's coming out and openly beat up Bitcoin.
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  And he said it's a Ponzi, which he's right. But he's taken the blockchain technology. And the
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  entire banking system now basically runs on a blockchain payment rails and system. So why do we
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  need an alternative to that. Right. And finally a store of value. Is it a store of value. I mean do
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  you get extreme drawdowns of 40% in a few months of something that's stored value? I'd say it's the
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  opposite of stored value. I'd say it's anti value right. So each narrative or each one of those is
• 9:04
  basically now stress tested, right? Each has cracked. It's actually happened. I have anticipated
• 9:10
  it has happened. Right. If you've been watching the show for a while, you'll see. I've been talking
• 9:13
  about this just quickly. If you're ready to take control of your finances but feel stuck on where
• 9:17
  to start, I have a solution. My book, Money Buys Happiness Simplifies Investing and Wealth
• 9:23
  Building with practical steps to help you achieve financial peace. Get your copy via the link in the
• 9:28
  show notes and let's get your money working for you. Now back to the episode. So if the core
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  stories don't stack up anymore or hold under pressure, what's left? Speculation. And all it is
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  now is people spruiking. It's just a bunch of spruces effectively now. Right. And
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  so if we look back in history as to some of the things that have done the same thing or, you know,
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  history doesn't repeat, but it rhymes. So if we look at a history of speculative manias, we've got
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  the tulip bubble in the 1600s everyone knows about seemingly, it's pretty crazy. But similar
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  thing because tulips, I mean, at least you'll smell nice and they look good. Com bubble to 1999. There
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  were people just selling URLs. No cash flow, nothing. That's kind of what happened there. It
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  sucked. And you could say the same for a lot of stocks that happened in 1992 because people were
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  just going crazy for them. Spac bubbles, meme stocks, NFTs. You know, I think now those those
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  monkey NFTs, the apes, they were like 500 K or 5 million actually to buy some of them now they're
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  worth less than two packets of chips. So, you know, the this pattern has emerged in the past and it's
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  always the same one revolutionary story. Because in marketing, if you don't have a compelling story,
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  you don't bring people on your journey. Right? So, uh, Michael Saylor has been, you know, been the
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  storytelling genius behind this revolutionary thing called bitcoin, um, massive inflow of capital,
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  which you've seen. So if there's fast money to be made to, it brings new capital, exponential price
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  rise. So you see huge gains in a short period of time, which brings a lot of the other fast money
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  people over. And then a collapse, which we're seeing now. And what really what has propagated
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  the collapse is not just the fact that Japan's increasing rates and they're selling risk assets
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  to cover their yen interest payments in their bonds in Japan. But the fact of the matter is,
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  Bitcoin has gone through a branding problem because what they've uncovered or discovered
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  since the Jeffrey Epstein letters that have come out is that Jeffrey Epstein was right behind
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  Bitcoin, and they're now calling it the pedo coin, which is music to me. I mean, what the fuck? The
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  fact that he what he used it for, it's ridiculous. It's disgraceful. I mean, but the fact is that
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  that's what it's used for and that's why I don't get behind it. So, you know, if you're getting
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  behind bitcoin and crypto particularly bitcoin, because in the Jeffrey Epstein letters back as
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  early as 2011, he was talking about Bitcoin specifically to use for some of the things he was
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  doing. So if you are a holder of it, you're really just saying, well, that's what I like to hold
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  assets that can create and cause those things. And and it's hurt the Bitcoin brand a lot. And I think
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  a lot of people are like I don't want to touch that. Right. I don't blame you. That's why I haven't
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  touched it from the start. So it needs all those things anyway. We're in a collapse. And then
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  survivors kind of consolidate a bit. But you know, most participants lose money and you're seeing a
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  huge capitulation and it lose a lot of belief in it. It seldom comes back and it may blip a little
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  bit, but I really think that this time is. This collapse is way different, and we're probably
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  approaching some sort of credit crunch here. There's a lot of things happening in the world,
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  but I don't think it should survive it. Right. So is it this time different or is it just another
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  cycle of human psychology? You can guess if you want. I'm pretty sure I know what's going to
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  happen to it, particularly if it just goes sideways for 25 years. That would hurt because
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  there's no story anymore about fast money. Right. But here's three potential outcomes. One, it's a
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  dead cat bounce, meaning it's going to fall down and bounce back up. And really it's going to be a
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  fake bounce. It's not really going to recover to the nth of what it was. It's going to fall. It's
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  going to bounce back up and then it's going to fall again. Right. It could be that speculators
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  will basically return for a bit of a time. They'll short squeeze it, there'll be a temporary rally
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  and then it'll fade. Yeah. Scenario two long grind lower. This is what I think will happen. Years of
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  sideways action. Right. And slightly downward movement. But eventually the attention Of it will
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  disappear and it'll be the boring old. It'd be like, um, Myspace and and then scenario three, which
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  it's hard to know if this is going to happen. I actually don't think it's going to happen because
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  I, I made a solemn promise after Covid never to underestimate human stupidity ever again. So I
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  actually think that this is going to stick around this dumb thing. There's always pundits and fools
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  to play around in this space, so I don't think we're going to run out of fools. And so I do
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  believe that it's not going to permanently decline. That's the third outcome, permanent
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  structural decline, where it actually goes into zero, um, and loses relevance. I just don't see that
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  happening because there needs to be a place for scumbags to hang out and talk. So they probably
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  will have to go there and do that somewhere. And there will always be this, uh, you know, it's like
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  tobacco causes lung Kat. There's always going to be smokers, you know, uh, not to beat up the smokers
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  too much, but, you know, there's always going to be that element of people that need to play in this
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  space of fast money spruiking, blah, blah. It's like Myspace, but, you know, in the world. All right,
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  here's what I do know for a fact. Without earnings yield, without any cash flow at all, without
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  productive output, without goodness to the community, it can't compound. Evil things don't
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  scale infinitely, right? If you don't agree with me, go back and look at what happened to Hitler. I'm
• 14:22
  not saying Bitcoin holds it. Hitler. Just calm down. But you can't scale bad behaviour. You just can't,
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  right? Compounding is what builds wealth and society doesn't reward poor behaviour and poor
• 14:34
  things. It just doesn't long term. Right. So let me ask you this. What would you rather something that
• 14:38
  produces cash in your own investing or something that you just hold for hope and hype? If I'm
• 14:44
  allocating capital, I want businesses with durable competitive advantages. And I've said this on the
• 14:48
  show many times before, companies generate real cash flow assets with real pricing power and
• 14:52
  things that compound over decades. I'm building a 100 year portfolio they don't have to touch, right?
• 14:56
  That just produces and produces. I love when we get dividends, right, because time plus cash equals
• 15:01
  wealth. Time plus hype equals volatility. And I don't build wealth on volatility. How can you do
• 15:06
  that. How can you do that for yourself? You're the next generation. How can you build portfolios that
• 15:11
  stand the test of time? Right. So I predicted the collapse because structure does matter. Bitcoin is
• 15:16
  a narrative. It's a narrative asset. And narrative assets eventually revert to reality. Right. If you
• 15:22
  want to speculate that's your choice. But don't confuse speculation with investing. And don't
• 15:27
  confuse hype with value. It's not the same thing. All right. So comment below. Do you believe
• 15:33
  Bitcoin is a long term store of value, or that this collapse is going to continue and you've
• 15:39
  changed your mind now? I'd love to know. Right. If you want disciplined cash flow investing and so
• 15:43
  forth, and you want to make sure you understand what your money is doing, hit the subscribe button.
• 15:47
  Stay smart. I'll see you in the next episode. Thanks for listening to. Money Grows on Trees. If
• 15:51
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• 15:56
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• 16:01
  check out the links in the show notes and follow me on all social media platforms at Lloyd James
• 16:06
  Ross for more. See you in the next episode.