Show Notes
Basic Cryptonomics 101: Perpetuals (Aka One Reason Bitcoin Dumped)
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Episode Transcript
[00:00:01] Welcome to Crypto Talk Radio, the podcast for everyday investors like you. Visit us on the [email protected] and now here's your host, Leister.
[00:00:13] Thank you for that, Bailey. And welcome everybody out there in Crypto Talk radio [email protected] wishing everyone out there a very merry Christmas. If you celebrate that holiday, some people don't, others I understand, but hopefully you're enjoying time off and you're, you know, doing something other than staring at cryptographs. I would hope so.
[00:00:34] I. For those that may be curious and there probably aren't a lot of you, but just set. I have been working on power things, you know, backup things because the power keeps going out. And I've got a book and I'm going to be crash course to refresh. It's been a while. I'm going to refresh on all things electrical. I took electric shop. This is back when schools actually taught you stuff, right? So I took electric class, electric shop. So I knew the fundamentals and I still have the fundamentals, but I've not actually done it full scope. Now I'm going to get in and do it full scope. I've got a switch panel, I've got a wire. There's some like a. I'm hardlining the ethernet and I've already done the phone, that one's done. So I'm getting my place to where it should be modern because the previous didn't bother doing it. So I'm getting all that stuff set up separately, setting up backup power and redundant power generators and that kind of stuff. And solar, I'm going to get into solar. I think the area I'm in doesn't get, you know, when we get sun, which is during the summer, we do get a lot of it, but we don't get, you know, we get more, I'll say overcast than we do sunny days. But I still think it's worth doing it because even if I get a little bit of it, it's better than not getting anything at all. And then separately I'm pissed and I've accepted that I'm not going to be here long term. Like I, I'm not going to retire or die here because it's terrible. I thought there was some redeeming. It's like, okay, let me find something positive about this place. And I failed miserably failed. Because what they did. So I drive a plug in hybrid. It's probably the cleanest car out here. Okay. They sent me the renewal for the registrations due in January 31st. And they're forcing me to do an emissions deal now. I just did an EM deal in 2023 before I came here because I had to renew the registration. I had to do it out in the, in Nevada where I was. So I had already done an emissions check and it passed out there. Out here. It failed, but not for emissions related reason. It failed because there's an issue, there's an electrical issue. And that electrical issue is why they fail the test. Well, it's like this is something that, no, none of the dealers at the Ford and none of the dealers can, they can't figure it out because they can't replicate it because they don't know how to test it, right? So now they have this process where you get a waiver. So I got to do something in the new year to get that solved. And then meanwhile I'm being forced under duress to do a certain photo that I don't want to do. And I stress that it's under duress. That rhymes. But I got to do that. And that's coming this coming Saturday. I'm waiting for the snow to get off the ground because right now we're surrounded by it. So I'm, I've committed. Like I can't stand the water company, I can't stand the electric company. I can't stand any of the governmental agency stuffs. You know, I can't stand it. I don't hate the neighbors, but they're not what I want. You know, proximity to shopping, proximity stores, they're shutting down malls. Like there's nothing here that's a redeeming quality for this place. I can't think of anything like literally, I don't like any of it. You know, deer sitting out left, carcasses on the road like nothing. So I said, okay, let me just pay this damn thing down, get to a point where I can easily sell it for profit and then get the hell out of here. And that's kind of the priority. And you know, you just bought it. I know, but this is, these are the breaks. Meanwhile, let's talk some cryptocurrency in the roller coaster.
[00:04:01] CoinDesk.com and let's go ahead and take a look at the month chart for the roller coaster. That is bitcoin Starting up Bitcoin over the past 24 hours, a low at 93.5-a- high of just shy of 100 grand. Currently hovering at about the 98,000 mark as I record this. And then there's a upward trend, strong upward trend, but it's been a roller coaster. You know, we had strong spike up to 105 and then it crapped down to 95 and then went a little bit lower. And in the last week's episode, I did say that, you know, some people were thinking it would go lower than 95, and I didn't think it was going to go too much lower than 95. And it didn't. We recovered very nicely and rebounded. I'm going to be talking a little bit more about what happened in this very specific situation ultimately in the summary, and I'll dig, I'll dig in later. But in summary, there was a lot of gamblers out there and they lost is really what it boiled down to. Wasn't anything wrong in the, in the business. It's just there was gamblers and they gambled and lost the House one. And it is what it is. Now some analysts are saying we're gonna see some more downward pressure. We're not past all of it. There's a lot of, there's a lot of gamblers. That's part of it. But there's also what's happening with the Fed. And just to reiterate for those that missed, if you knew, welcome, but if you missed it, the Fed came out and they raised everything 0.25%. And they essentially said that they don't think that they've got the inflation under, back, back under control. And there's also a, a statement that was made that there's going to be less cuts happening in the future. They're trying to let things cool down is what they're doing, but they're concerned they're not able to die stuff off. Some people talked about and pointed at Powell saying, you know, the Feds can't hold a bitcoin reserve, which is one of, you know, President elect Donald Trump's statements, is that, you know, we should create a bitcoin reserve.
[00:05:51] And the Powell saying, well, we can't do that by law. There's no such law that prevents them from doing that. There's no law that what he's talking about is that there's no law that allows it, but there's no law that prohibits it because there's never been a law around the cryptocurrency asset and holding. And remember, Gary Gensler himself came out and said, we've always considered bitcoin not a security. There's nothing wrong with holding bitcoin. They never had a problem with it. So when Powell says These things. He's talking about the fact that there's no law, law that specifically allows holding or creating that reserve, but there's nothing prohibiting it. They could do it. But he's holding fast, just like Gensler is holding fast to a certain set of laws or the absence of laws to guide what he's saying. But this caused negative sentiment on multiple fronts. The idea that we don't think we get inflation under control, we're going to have less cuts coming in the new. Some people were hoping because Donald Trump had said, you know, we're going to get the mortgage rates down to 3%, 2%. And nobody expected he was going to be able to do that because a point was made in some articles online and we'll get back to how this affects crypto in a minute. But a point was made around the mortgage business and how rates have traditionally worked. Rates go down when the economy is dastardly struggling. We're talking at a point where homes are just not moving no matter what. Nobody's, nobody's buying.
[00:07:12] And because nobody's buying, what ends up happening is you get too much supply. The banks are struggling because they're not closing loans. There's no originations, they're not getting fees. The real estate industry, the realtors, they're struggling. Everybody's having the insurance industry, everybody's having a harder time. They see that the numbers aren't working because they need to have more velocity. So when you saw, during COVID during the pandemic, you saw rates of like 3%. And that's because people weren't buying because people were getting cut from jobs and people were getting sick and the medical industry was going haywire. Everything was short circuited. So as a result, rates were cut to the extreme to spur buying. Well, then what happens? And I'm telling the story that at the time, you get people who buy in at those low rates. Fast forward, here we are at 2024, and those people now are hesitant to sell. There's demand, certainly, but nobody wants to sell because they don't want to lose that rate. So you might have people who are getting older and they want to get rid of the house, kind of downsize, get some little bit smaller. Their kids are all grown, they don't need as much room. They don't like the maintenance, whatever their motivation, but they don't want to let go of this amazing 2%, 3% rate that they were able to get during the pandemic period. So what does that do? You got all this pent up Demand out there, you know, they want to buy, but the supply. There's a crunch now because people are sitting on the homes and they're not selling. I know in the area I'm at, you know, I bought this house for I think 265 or some, some odd, you know, it's already paid off a third because that's how I work, brother, you know. But looking around, you know, houses are not selling for significant, you know, like I got mine way, not way, but I got mine lower than what they wanted for, put it that way, because there was so much they didn't do. There were upgrades they didn't do. There's work I knew I needed to do, money I needed to invest. I've already invested quite a bit of money into the home fixing the stuff that they refuse to do. When you talk about the, the pipes that had to replace. I've done some electrical work, I've done some garage work, I've done some concrete work, I've done windows, I'm waiting for those to be installed. Done all sorts of stuff where I knew I'd have to invest money out of pocket. I'm not doing loans so I had to negotiate it down. I'm like, you're not going to get full price for that. There's no way it appraised that what they wanted for it. But there was no way I'm going to let them walk away having done no upgrades to the home whatsoever. Seeing that you got this fire nonsense, you got the garage nonsense, the concrete nonsense, the yards out of control, all the roof, you know, all these things that I knew I would have to do and you want to get full price. There was no way. It doesn't work for me, brother. So I negotiated down. Well, other people in the area are doing the same thing. They're negotiating down because we're. This is essentially like a retirement type of community. There's like, I'm fronted by like three schools, but effectively it's a retirement community. We're talking older folks, we're talking, geez, I think 40 is like the minimum you would see of homeowners out here. You don't see a lot of younger homeowners. You don't see like teenagers, you know, other than the kids in the school. And that's like young, young. I'm talking like you're 17, 18, you know, 16 year olds. You don't see them out here. They're either old or they're super young. There's pros and cons to that. If it's like the retirement type of neighborhood. You're dealing with people who are sitting on low rates from way back yonder. Like if they've been here since the 80s or something when, you know, rates were fractional and the home price was nothing and it's already paid off and they don't want a mortgage, right? So then those homes are eaten up. Well, then what's left? You have to build more. Because supply crunch, if there's no place to build more and you might be like, well, how can there not be places to build more? Certain places are not suitable to build new residentials. Certain places, it takes years to build those residentials. The demand is still there though, right? So they're trying to focus now on multifamily. Some people don't want to do multifamily. I'll tell you, I don't regret buying a house. I don't like where I am just because I'm learning as I'm doing business, I'm doing these transactional things that everything just sucks. Like it really has no positive upside outside of the fact that I own a home and there's equity. But that's me. I'm talking in interacting with everybody else. I just can't stand. There's nothing I like. I don't like the water company, I don't like the electric company. I don't like the governmental agencies. I don't like dealing with certain of the people out here. There's no, like, there's no jack in the box. That's killing me. You know, you get the craving for the two tacos. Can't do it. You can't. You know, there's no. The Boston market shut down, so I can't get that one if I wanted.
[00:11:42] It's horrible, right? So I can't. Malls shut down, so I can't do the goods and services. I can't interact with these agencies or anything that I want to do. So I don't. There's nothing. There's no saving grace for me to be here. To the point I said, well, the thing is, a third paid off. Now it's getting close to being a, you know, 100 grand paid off of it from its true value, from its appraised value.
[00:12:05] So I got to thinking, I'm going to finish some of these upgrades that I was talking about. So all I've got left now is to repair the garage. That's going to be pretty extensive.
[00:12:15] Get finish the window replacements, finish the flooring replacements, finish the galvanized upstairs, which I really sucks. I think it sucks. Complete the renovation on the first floor bathroom completed. Start the renovation on the second floor bathroom and then complete the renovation in the kitchen and the dining room. But that's everything I'm describing. That's a lot, right? And then add lighting in the great room. That's, that's a lot. It's a lot of work. It's a lot of time. And the contractors I can't find. I have like a couple of guys, they're pretty good. But generally speaking, for some of these larger scope things, I just can't find competent contractors like doing the stairs. It sucks because it's just where we are. They're not, and this is kind of the story. They're not about that business, they're not about profit and that kind of stuff. So I told all that story because the theory has been that Donald Trump would come in here and he would cause, magically cause rates to drop to help everybody because he wants to get more home ownership.
[00:13:16] Anybody's listening to me right now. If you don't own a, if you don't own something, I'm going to recommend that you get into something even if it's just a condo. I would not do a condo because I can't do the shared floors and walls and dogs and I can't do that. I'm sorry. Shared mailbox, Absolutely not. Shared package room. Absolutely not. I can't go back to that world. It's not for me. But if you, if you're first time, you know, you're 18, 19, 20 to 30 somewhere and you've never owned anything, you've been renting, I'm going to recommend that you buy something, stack buy something, even if it's just a little condo. The reason I say that is because building the equity, I'm sorry, you can't put a price tag on it. Obviously you can the mortgage. I'm saying that there's nothing like having your own equity, something you're investing back in yourself. And I suspect myself, rates are going to go higher. So it's going to be hard, it's going to be more expensive to buy a home. Whereas if you get in now, you can lock a reasonably lower rate to kind of weather the storm for the next couple years. You figure about 20, 26, then the rates start coming down, then you can refinance it and hopefully you're overpaying. So let's say you get a mortgage payment of $900. If you could afford to toss, you know, twice that or let's say 1500, add it to pay down principal, then do that. So lock something in overpay to pay towards it, towards the equity to weather the storm. Then if you get to a point where the demand starts to outstripe supply, we start to get to a fever pitch like we had 2008. This is what people speculate might happen. If that happens, you could in theory, and I'm not advocating you do it, but I'm saying in theory you do the refinance. You could do a cash out refi for the additional value and that's cash in pocket. And then you can use that to do something else. Right. Not waste it. Right. I'm talking improve the home or something else, or improve your life or whatever, pay off loans, you know, something to improve your situation, prove your credit and get better.
[00:15:13] I'm simply saying if you have, if you've been a renter, you've never bought, I would recommend looking at something, get into something, lock something now if you can afford it, lock something now. Because I think it's going to get worse before it gets better. I don't think the Donald Trump era up front is going to be this amazing savings that people speculate it's going to be. I think it's going to get a little bit worse, a little bit more painful in the short term before it gets to that run that we do expect somewhere in like 2026, we have to watch what happens. But then on the bitcoin side, if people are investing in bitcoin and we see the roller coaster that's happening right now where it craps back down and loses, you know, 10,000, you know, or more because we still have the Mount Gox, we have other things happening there. You can toss a little bit off into the bitcoin while you're doing these things. So you're talking about a long term game plan, you're talking about cryptocurrency that you expect to be positive in trend over the future and then some sort of large scale asset investment. Like I said, a home, whether it's a condo town home, house, cottage, mobile home even, I don't care. Get something where you can build equity on it. If you do that and you join that with pay down your debts, pay down your loans, pay down your credit cards, don't. I would recommend not doing any sort of debt type of instrument to let the dust settle a little bit and then see what, what happens. If you can afford not doing a car loan, I know that's hard, but if you can afford not doing a car loan, get like a little used car or something. And I know that's hard. I'm talking a strategy because I'm saying, in my opinion, the next three years are a perfect time to stack chips. Stack chips in multiple different avenues. Stack chips in. In something that builds equity for you. Stat chips in paying down your debts, paying off your loans. I don't know if you heard, but Biden lost. He essentially withdrew all plans for all that giving away on the student loan side. That means you're gonna have to repay those at a point. Now, you do have forbearance options, deferment options, you have options to not pay, but at some point you're gonna need to pay it back. So I'm saying that now if you take the opportunity to stack chips, it frees up assets to improve your credit, prove your situation, get some equity, get some stability, weather the storm, you know, build the nest eggs. So what I would recommend doing, that's what most people are saying at the same time, because we're just saying that short term, what Donald Trump is talking about is likely not going to come to fruition. And if people are banking that like 2025 being this amazing financial paradise, we don't think it's going to be that. I certainly don't. I think it's a long term something. I don't think it's a short term something.
[00:17:56] Separately, then let's talk about Gen Z, right? The millennials and the Gen Z's and everybody's bullish sentiment about cryptocurrency in general. In lieu of what I talked about that most of when Donald Trump got elected, most of the younger folks basically jumped straight into cryptocurrency. They went straight in there because of what Donald Trump was talking about, the bitcoin reserves and you know, trying to legalize and add regulatory framework and make it work for people. And this is the future. And you know, we knew that what he was saying was going to cause that sentiment. What we didn't expect is you still have disruptors, right? I'll talk about one of those at the tail end of the episode. But you still have disruptors out there where people are getting in, certainly. But there's also, and I think people don't understand, there's also people that are ready to sell. Not everybody's going to hold, you know, for the 200,000 or 300,000 or 400,000. Some people just say, look, I've had this Bitcoin since 20,000 bucks. It just 5x, you know, I'm gonna sell out of it. I'm good, you know, and I don't need to get back in. I'm set. So we don't know who how many those are. Remember, it crashed down to 12,000 bucks. There's people that, that bought a lot back then and they're gonna sell out these people like the microstrategies in El Salvador's, they're gonna sell when they need money. So there may be a myth that people are not gonna sell the stuff, they're gonna sell the stuff. That means you're gonna have a roller coaster. You should not expect it to just keep going up. What you should expect is that profit potential. Is there any opportunity for you to take the profit. You should be taking the profit. In my personal opinion. Don't assume it's just going to keep going up and up and up. So these young folks getting in, I think it's good. And I've talked about in multiple episodes, if you're new, welcome again. But I've talked to him multiple times. The idea that we need new money in cryptocurrency. And as many times you got these kids that say to wear a jeep and say they were Keck. It's going to drive them away. It's good to have more money in there. Now the key is, can we keep them there? Unfortunately, pump that fun and all this garbage might drive those people back away. Can't say a hundred percent. But I speculate that's what happened because you have a lot of crap out there. And hopefully they're buying into the bitcoins and the Ethereums and the Avax is the world and staying away from the mean garbage and the gambling, I don't know. But hopefully they're getting into the right types of cryptocurrency because this is the right time for them to get in it. Arguably the numbers, by the numbers, arguably young folks make up a very significant portion of who's trading cryptocurrency these days. We expect that roughly about a third of the population that's in cryptocurrency fits in that, you know, that younger range, you know, to say 35 and younger, 18 to 35 range, that's good. Now, they don't have a lot of money, they don't have a lot of discretionary funds. Their student loans, if they're doing student loans, are going to bite them in the ass. And so these, the flip of them getting it's good, but they're going to be the first ones to dump out when the things get tight. Which is why I'm advocating for people to stack chips and be smart about debt and pay off all these debts and use that money in the right ways to increase your situation to where you don't have to sell your cryptocurrency to make ends meet. Everybody's going to be paying check to check if they have to. If that's all you make or, you know, you just lost your job. You know, we, we heard about this whole remote work and maybe you have to quit the job or something might disrupt the ability to sustain. And the worst thing you could be doing right now is to continue living check to check without making moves to try to avoid the need to do that. One of those good ways, as I said, is consider buying something if you can, if you financially have the money to do it. And by the way, when I say buy something, a condo is good enough. Something small, a mobile home is fine. It might be embarrassing, but hey, it's property you own. You have equity, you'll build equity. It's not as much equity as a regular house, but it gives you the experience to give you the experience and that privacy and that, that safety net of the equity piece. But what it also does for you is it sets you up to understand how to manage your money a little bit better. When you're renting, you don't really have that because that money just goes to somebody else. You're just paying somebody else for a place to live. When you're paying yourself an asset for yourself, you're committed ideally to paying it off and owning it outright. Now, obviously in a mobile home situation, you're paying for the land too, and you don't ever own the land. Usually you're renting the land, but it's at a much lower cost than you would do if you're renting it on an apartment situation. The other piece to consider with this is if you can pay down your debts that you have credit cards or something else that maybe you got some flyer in the mail and you accepted it, and that's fine. But the more you can pay down those debts, that frees up discretionary income. Then you just have to train yourself to budget. I'm talking that all out because if you know people who are in this range of the 1835 and they're getting into cryptocurrency, make sure that they're also focusing on the fundamentals. Make sure that they are not dumping all their cash into stuff. Make sure they're putting money Away for rainy day. Make sure that they're paying towards something that benefits them. Make sure they're not just treating it like a casino. You can't, you know, you can't fix stupid. But try your best to get in front of it and help them as they get in it. Because we all that have been in it a while have to be the stewards of making sure people are not getting ripped if they choose to gamble. You can't help them. You can't, you know, you can't stop them. It's what they're going to do. But I think we can at least send the message in the warning and then say it's up to you, but we're just trying to warn you about what that's doing.
[00:23:17] I wouldn't want to see or hear about anybody. And I want to hear the stories. By the way, CryptoTalk FM, hit the contact form and let us know any stories that you have about this business. But I wouldn't want to hear any stories about somebody getting into absolute crap that's going on. Unreasonable runs. Speaking of unreasonable runs, Hyper Liquid, I'm going to talk about this one. It's garbage. But I'm going to talk about this one because I'm giving the warning.
[00:23:42] If you choose to get it, it's up to you. This applies to people outside the United States because they do not cater to people in the United States. But I'm going to share the information about what happened. So Hyper Liquid launches little bit ago, goes on a major run. Billions of dollars flows into this out of literally nowhere. You may have seen it, you may have heard about it. It's called hype, token hype. I'm going to describe it very briefly. Hyper Liquid is a level 1 blockchain. It also is a platform that lets you collateralize USDC to do perpetuals trading. That's what it does. That's essentially what it does. And a significant amount of money flows went in it primarily because of the perpetuals trading. Perpetuals trading is what I'm going to talk about here in a little bit. But I want to talk about the Hyper Liquid a little bit more because Hyper Liquid, allegedly, as it did this unreasonable pump, it got allegedly hacked or at least an attempt was made on Hyper Liquid. The price dropped. It went as high as 34 bucks, down to $27 and then started to rebound. Hyper Liquid came out, said we were not attacked. However, there was analysis done where people saw clearly there is some North Korea transactional happening here. And the analyst said that they're not going to be doing trading for the profit. They're doing trading to try to find an exploit. So the theory, and it's kind of a predictive theory, is that at some point North Korea is going to breach this thing and a bunch of money is going to get dumped out of it. Because since it's just USDC collateral, it's fair game if something does breach to take all that, all those assets, all those collateralized assets out of the exchange and a lot of people are gonna lose a lot of money. I'm not saying that it is going to happen. I'm saying that the analysts believe that any sort of exposure from North Korea to this degree is highlighting the risk that they're looking to see if there's a way to exploit this thing. And if you are using a sketchy VPN or maybe not in the United States and you get on this hyper liquid, there's a risk that you lose your money. So I'm going to stress that you should be careful because if nobody can say for a fact that it is or isn't going to happen, if something were to happen and somebody loses a lot of money, it's going to cause a lot of negative sentiment across the board, I would argue to the degree of like an FTX type of drop. So we might see then that's why people are talking about, okay, bitcoin is up, but we still have some ways to go down if certain of these things happen.
[00:26:09] Bitcoin is potentially under attack in that avenue, but also other avenues. As Wall Street Journal came out and said, you know what, this quantum stuff's gonna really hit that Bitcoin. It's kind of a ticking time bomb. Deep, deep, deep. And you may or may not have heard about this whole quantum computing stuff because Google released their Willow quantum computing chip at the beginning of the month.
[00:26:30] I'm gonna try to summarize and simplify what's going on here.
[00:26:35] The quantum computing. The idea behind the quantum computing is to be able to do certain computing and transactions faster than traditional computing that we normally do. And the theory is that that also will enable the ability to crack encryption at a faster rate than we currently can. Bitcoin and certain other cryptocurrencies use a form of encryption in order to protect it. So what you transact, there's also some encryption and privacy things built into the very protocol that are designed to help protect your assets. Which is why, for the most part, unless you entrust your asset to a third party, like an exchange or something, and as long as you don't give away your private key, it's nearly impossible for you to lose your assets. If you give away your key or you expose your key somehow your private keys or the JSON file that some wallets will generate, that would get you breached. But that's due to something you did, right? It's. It's an action you took that set yourself at risk. Doesn't have in the bleeds because he's connecting sketchy wallets to a browser and they're browsing sketchy sites. That's what happens, right? You're. You're exposing it. Don't realize that's what's happening. Hardware wallets help mitigate this to some degree. But then you take it to another level when you need to do the transactions. If you plug into a D app of some kind, let's say, ever rises to do a trade, if you don't trust that or it gets breached, your stuff could get took. And that's the risk that we're talking. But as long as you keep control of these things, and as long as you don't connect to sketchy stuff, there's no way your stuff can be breached because of the encryption. What the quantum computing concern raises is the idea that the encryption could be hacked faster roughly sometime in the next 10 years. I don't think they're saying this to try to freak you out. What they're saying is simply the level set the expectation that right now it would take hundreds of years in order to breach Bitcoin's encryption, by which none of us would be alive. The old forum where Satoshi was out there and he was chatting with all different developers at the time about the protocol, and they were calling out some of the vulnerabilities that they were fixing way back yonder. So you're talking, you know, early 2010s, they were talking about all the vulnerabilities, and they were fixing all this other stuff. And then they said, they actually even said it'll take hundreds of years before this will be a problem with some of the things they found. What this is saying is that quantum computing will accelerate the rate at which something could be breached, where it could cause a risk to Bitcoin at the protocol level if it caused the risk to Bitcoin at the protocol level. Remember, consider right now all these different, you know, governments, and everybody's kind of going in and saying, let's go ahead and do this. Not understanding if that were to get breached or hacked, that's not something that could really happen on the financial end. Like if you have banks, let's say a bank gets completely breached. This happened, bank is completely breached. FDIC will cover your money up to a certain threshold.
[00:29:22] Plus there's other ways that the government can get involved to replenish funds because they can print money out of thin air, right? With the Bitcoin, something were to happen. There is no fallback, right, that the price of Bitcoin, the value of Bitcoin, the perceived value of Bitcoin, it is fake in a. In a form, because there's nothing behind it. Obviously there are, you know, assets backing in storage, like at the exchange level. But if Bitcoin itself gets breached, it. It is what it is, right? It's going to cause a major drop, it's going to cause a dump. So the concern is, well, let's see how high that goes. But let's say it gets to this super high peak and then all of a sudden there is a breach. And now that protocol is vulnerable. It would cause dramatic damage. Now, it's possible I don't even live that long. I don't know, I'm old. But I. I saw and I was intrigued. How realistic is it? I mean, it's possible.
[00:30:16] I don't know that a lot of it is. It's like the Y2K bug, right? Where they said, oh, the world's gonna end just because the Y2K and the computers are not programmed to do that. And we take that for granted now because we understood it's no. This is. It's the unknown. We don't know for sure that there will or won't be an impact. That's what I see here. They don't know that there is or isn't a problem. They suspect that there likely might be because they see what the encryption is today. They understand how much faster the quantum computing can crack encryption, and then they're just drawing a correlation. Could be less than 10 years, could be more than 10 years. Nobody knows for sure. So I. I say there's no call to action other than to say diversification is your greatest friend. The one thing with the different protocols out there, and by protocols, I'm talking on the level of a bitcoin. So you're talking Bitcoin, you're talking Cardano, you're talking Avalanche, you're talking Doge, you know, Solana, I'm talking at the highest levels. You're going to be different. Different, Right. Each one will take time. So if you diversify across spectrum, chances are one of them is going to get cracked and drained so that you'll see that the rest of it's at risk. Right. And then you could pull out if that happens. But if you put all your eggs in one basket, yeah. You might be setting yourself up to failure. So that's something to be aware. If that's the thing with the hyper liquid, then back to that one, the hyper liquid. It sets it up in this breach with the North Korea that came up. The reason it caused the concern is that North Korea was targeting it specifically because of what's doing perpetuals on that chain. And some people may not understand what is the value. Why is there such an appeal? What is the enticement on the perpetual side? Because they may not fully understand about the perpetuals and the power of perpetuals and the value of perpetuals, what they do and how they work and how you can leverage them. You even. And how you can, you know, make some money on perpetuals. And I'm not advocating, by the way, that you get into perpetuals. This is simply educational. Given the situation that happens. You can understand why there's such an appeal there, but also why there's such a risk. Let's break down what that is for a perpetual. If you think of the word perpetual, perpetual at a simplistic form simply means continual. It keeps going. It keeps going until it stopped. Until it's purposely stopped, not necessarily endless. Because at some point a person or a technology will stop it. Simply that it's kind of auto renewing. It's going to continue until something or someone stops it. That's perpetual. Just the generic definition of said.
[00:33:01] When you have a contract with an exchange, because it's almost always an exchange, when you set up a contract, you're setting an agreement with that exchange that you're going to buy or sell, and I'll get into the difference, but buy or sell whatever asset at a future date. So when you go long, you may have heard different influencers or whoever say that they're longing or they're going long on something else, that what you're doing is you're creating a contract. So there's an agreement with you in the exchange that says, I'm agreeing to buy that at the price that you know, this agreed upon price as opposed to whatever the market price is at that time. So let's do a very generic example of what that means. And now you'll hear that you'll see the appeal of perpetuals. Let's assume. Let's take Cardano. Okay, Cardano is roughly about a dollar. I'm just going to round numbers. So Cardano at a dollar you say, I think Cardano in your mind, I think Cardano is going to get to 20 bucks. Okay, but I don't want to pay 20 bucks per. I want to pay $1 because that's what it is right now. So you're creating a contract with said exchange saying I'm going to agree to buy, let's say a thousand Cardano right now for a dollar each. So I'll give you a thousand bucks and for that thousand dollars, I'm agreeing as contract.
[00:34:18] I'm going to buy, you know, this many and I want the dollar price contract set in there. You're gambling because you're watching to see if that price is going to go up. The perpetuals part of this, the reason perpetuals comes in normally in that kind of a long contract. If I just do a straight up long, I'm saying that at some point it's going to expire. At some point this contract's going to. This deal that I made is not going to be in place. And if it expires, okay, I'm just out my money. We're done. Deuces, right? Perpetual is ongoing. It does not have that expiration. It's saying it's going to get there sometime. It'll just keep on going. Now the problem is there's a lockup of funds, right? Because you've said I'm committing this money for this purpose.
[00:35:08] People like the perpetuals because of the lack of expiration, because they're so in this case bullish on a certain one, I'm talking long on a certain one, that they're okay leaving the money because they know it's going to get there, right? To thousand dollars or by a thousand of them, rather at a dollar, those $20, you just made 19,000 in profit and then subtract for fees and whatever else. So it's appealing because you can make a lot of money if you knew it's something that's going to likely go up. Now, I talked about the difference between buy and sell. You can also short an asset. It's still a contract, but it's now the difference. Now you're saying I agree to sell at a certain point rather than at the market rate.
[00:35:52] Now shorting is where it gets kind of tricky because you make way more money on assets that are crapping. So ave, at one point a was just taking, tanking take icp, tanking, tanking, taking. When Bitcoin was going down to, you know, dropping, dropping, dropping, down to tanking, tanking, taking. There are people that were shorting it, right, and they short up to a point and they say, okay, I think it's going to go down to X, whatever X is. And I'm going to, I agree to sell at X. Well, what happens if it goes up? If it goes up, you're losing money because you agree to sell at X, but you're not, you're losing money because it skyrocketed to 50,000 bucks or something. Right.
[00:36:36] Again though, if you do the perpetuals and it's something that's constantly, you know, bone, right, bone. Seems like it cannot go beyond a dollar at this point. And it's, it's this roller coaster or something. So there's this longing and shorting that certainly is happening.
[00:36:51] And some of it is manipulative. That's the whole point. Now let's, let's take it a step further. Let's talk about options, right, for the options on all this stuff. Options says options are cheaper, number one. So I can say, well, I want an option to buy a hundred at said price and usually there's an expiration date on these. Well, now you can get a lot of the asset at a really dirt cheap price or really advantageous price, better said. But you're doing it in bulk and you're doing it on the cheap. Because what's happening is that somebody else on the exchange is, let's say for the purposes of long, somebody else on the exchange wants to sell. You know, they're selling at a loss or they're selling at market because they have to get out, or they're trying to take whatever it is, but the asset's scheduled to go up because there's a lot of open orders. So you're saying, okay, I'm helping this person out because I'm willing to buy at the price they're trying to sell at and I'm cool doing it where somebody else might not be willing to buy at that price because maybe somebody else's, you know, basis is way out of whack and they don't want to buy at that price. But you're cool with it because you're trying to get in the market.
[00:37:58] The point is with this whole, this type of structure where all you're doing is taking people's money, USDC in this case, and you're setting up these collateralized positions so that you could do nothing but perpetual straights, it's just a giant casino is what it is. And As a result, billions and billions of dollars flows into the thing. Usually because people know I can get in and it's a different blockchain. I can get in and I can make some quick money on something that's new. It's an initial FOMO push effect. Binance is notorious for this, right? They'll launch something brand new with perpetuals trades and you'll see big easy dollars flow into it because they they're getting that initial FOMO pump do chain. Great example.
[00:38:43] My point is this that's happened with the hyper hype, Hyper liquid. This that's happened didn't surprise me. But what it did, it caused Ever rise to have a fake pump because Everrise is not on the chain. But there was another token that did launch with the same tag. And as a result, the, you know, the different scanners, they couldn't tell the difference because they're looking at the call tag name, not the contract address to determine the uniqueness. So then this major, major pump, just amazing amount. And then people FOMO buy into the ever rise and it doesn't make a difference. Now ever rise is flatlined. If you look at coin market cap, the reason I told the story and why I want you to understand how the perpetuals and how greed plays into perpetuals and the popularity of them. You're going to see a lot of these that launch and billions go into it. And you don't understand why. I can almost guarantee you every time you see that it's got perpetuals going on, because they're gamblers, that's what they do. And they're usually very rich people. That's why there's billions of dollars, because they're rich people that they're getting in to maximize how much they're going to make on that stuff. And they can long if they know that it's something that's long. You know, it's long play. Like if you can get in and create those kind of situations on an $80,000 Bitcoin and you target 120 or 130, 140 on a long position that's perpetual, that's almost a sure bet. So you're going to see a lot of that too. Now that helps push price up for sure, because there's pressure, there's constant pressure. But then what happens and what recently happened with bitcoin is there's liquidations. If the thing goes down for why ever it does, it becomes a domino effect. It just steamrolls to clear out those liquidation positions. But the liquidations are A good thing, because the liquidations actually make the token available at more reasonable prices and people will buy back in. So at some point. My point is, at some point, everything will go right back up again. But you're going to continue to cycle because those gamblers are going to continue gambling on the asset and you're going to have those peaks and valleys. That's why you never should have a token that just goes up and up and up. I saw a bunch of tokens launching on coin market cap. Just up and up and up and up and up. Like lock pay, like. No, you should never have that because that means something's wrong. You should always have peaks and valleys. There's nothing wrong with it. Where it becomes a problem, a big problem is when you have something like bone that just never seems to peak, hardly at all. Then you know something's wrong with the asset. Whatever that is. It might be devs, it might be whatever summary of everything else. We have a lot of stuff going on and 2025 is going to be very interesting. And the worst thing you could do, the worst thing you could do is just take a step back in 2025 and realize that Donald Trump is not going to change the world in January or February or March. We're going to start seeing a little bit more painful price movement in cryptocurrency overall until the dust settles and we get away from a lot of the damage from the Biden administration. That's going to take some time, it just is. So you're going to see rates go higher. I think you're going to see some bearish sentiment at points. I suspect you're going to see some drops. Bitcoin might very well go in the 80s, I'm being honest in this. But then everything's going to recover, I think, and everything's going to go back up, I think. And then profit opportunity plays in and then patience plays in. And during those points, so you look at it points where it's going up, to me, that's where money should go into these other assets that I describe. You know, focusing on being able to buy a home or some sort of condo or something. Savings. I wouldn't do a bank savings account, but you know what I'm saying, Sometimes savings some type of asset savings, some way to improve value, paying off loans, paying off debts to improve your position and increase how much disposable that you have, so that when there are these dips you can buy in there and then dollar cost average, that's what I would personally recommend doing because we're going to take it, I think, about three years before we see any significant, you know, recovery from what happened before. Because it took about that long. Actually took about a year and a half for him to damage stuff. So I think it's going to be about three years before we see a significant recovery. Then we also have to see what happens. Big picture with banking, because banking's starting to get into cryptocurrency at least a little bit. We have to see the regulatory spectrum, we have to see the international spectrum, we have to see the war situations. All of these are going to play into the price movements you see.
[00:43:05] Just saying. I don't think we're going to see positive price movement in the short term. I think we're going to see in the long term. And it's a. It's one of those waning games. But there are things you could do in the interim to improve your position to make it easy to get in so that when you do get those dips, you're able to leverage them better and improve your position so that when you go to the peaks, you could get more profit out of them. That's my stance and that's how I put it. Others may disagree with it. That's great. That's why we all have a voice, we all have opinions, and we all. And perhaps the reason that you listen to me is because, you know, I hit it conservative, I don't hit it aggressive like some of the other ones that tell you to roll the D SA.
