Transcription
Bitcoin's down. It's down about 40%. While at the same time, almost all other assets, they're making new all-time highs. Stocks, gold, silver, foreign markets, they're all ripping. And there's one red line that's all going the other way.
There's a lot of explanation for why this is happening. But most of it's all wrong. You see, Bitcoin's not dead. It's not being manipulated. Those are easy answers. They're both coping.
But here's what's actually happening. The biggest wave of money in modern history is moving right now. Trillions of dollars. And all that money moves along a single line. And it's pulled by one single force. And that force is the reason for the red line. And that force looks ready to reverse. And when it does, it pushes every one of those dollars back the other way. And almost nobody's watching the one thing that makes all this flip because it's the one thing everyone assumes is safe.
So in this video, I'm going to show you exactly where your money sits on the risk curve right now. I want to show you the force that's about to flip it. And I want to show you how to see the turn coming before everybody else does. You ready? Let's go.
All right, let's jump in. We got a lot to cover and I think it's going to make a lot of sense and I think it's going to change the way you're looking at things. Now, of course, Bitcoin, of course, my favorite asset. It's getting crushed. It's down 40, I don't know, 45% at the time of this recording, whenever you watch it. But the painful thing is not that it's down 40 or 45%. It's painful. The more painful thing is watching all the other assets rip, making new all-time highs while Bitcoin is down. So, what the heck is going on? And uh I had to dig in deep because I care about this. And most of the reasons that I hear, everyone's trying to come up with reasons. They're all wrong.
Okay, let's take a look at this. So, first of all, if we look at Bitcoin versus assets, now Bitcoin has been the best performing asset in, I believe, eight of the last 12 years. We're going to go back and take a look at that exact stat. So, it has been the best performing asset in history over the last 5, 10, 15 years, year by year, like 8 to 12, but right now it's getting its butt kicked. But why?
Now, there's two reasons that most people are concluding. They're saying, you know, Bitcoin's finally broke. You know, it's uh it's finally popped, right? It's the it's the tulip bubble, except two bubbles came and went uh once. And this is what's one it went a bunch of times. Now it's finally broken. Uh a lot of other people who are Bitcoin believers, they don't believe it's broken, but they believe it's being manipulated. So, you got the big banks, you got the Black Rocks, maybe it's Michael Sailor, strategy, whatever, whoever, somebody, China, I don't know, name your boogeyman. They're manipulated. They're selling into the market. They're stacking shorts against it, naked shorting, whatever you want to call it. Paper Bitcoin, all the reasons that you could think of why it's been manipulated. So, either if you don't like Bitcoin like Peter Schiff, you say, "Well, it's finally broken even though it's been broken or dead, you know, 400 times." Um, and if you believe in Bitcoin, you say it's manipulated. Okay.
Well, let's take a look at that. Now, I want what I want to show you first of all is how many times Bitcoin has been dead. And this is important to understand. Just because I've been in Bitcoin since 2015. It was about $300 when I got into it. And I've had to go through many of these bare markets. And every time we go through a bare market, they tell us why it's dead. And the reason why it's difficult is because every single time, every cycle, it's dead for different reasons.
Let me take a look at the chart here. So we can see Bitcoin's price right here since 2010 going forward here. And you can see every single time these are the stories, the articles that are being put out across mainstream media that are being tracked that tell us that Bitcoin is dead. Here we can see 2018 and 2022 the most death calls ever right here, up by a lot. Look how big that was. But you can see it just continues to be dead. Even though the price of Bitcoin, right? So as it drops, the dead spikes, right? As it drops, the dead story spikes. And here, as it drops, the dead story spikes. Of course, it hasn't been dead. It keeps going. They love to celebrate these areas. Uh but I would just say zoom out to that. But the the real key is that, you know, typically we'd say price is truth. Uh price tells us the what, but not the why. And if we want to understand investing, we have to understand the underlying mechanics of why things work. Otherwise, how do we build a thesis? If I, if I believe an asset can go up or down, why? What's the mechanical thesis of that?
And the key thing that we want to understand and we'll carry this forward is that money is like energy. So what that means is that energy cannot be created and doesn't disappear. Energy only transfers. Money is the same way. I learned this the hard way in 2008. My money went to somebody else when I lost it. It's terrible. So now I've always positioned, I've always decided to be on the receiving end of money. I like that better. So money is like energy. It didn't disappear. It went somewhere. And if it went somewhere, could it come back? That's the question we're going to take a look at.
In order to understand how money moves through markets, you have to understand this line. It's a simple line, but not quite so simple. Let's break this down. So this line right here is a continuum. On one side over here we have safe. Safe and low returns. Low risk, low return, low reward. Over here we have risk. So we have risk, high reward, high return. Okay. So we have this line. It's like a continuum. And all assets fit onto this continuum onto this line. So over here we have bonds. Maybe one of the safest, right? So government bonds. The government's going to pay you back. Yeah. They're going to print the money and give you back de you know devalued currency, but whatever, you get your money back. So it's the safest, but it also pays about, you know, three, three and a half percent. Then we have uh, you know, over here maybe some gold. Um, then we have some stocks. Then we have, we'll call it AI stocks. And then we have over here, Bitcoin. All right. So Bitcoin is the highest return. That's the highest risk. AI is less risk, less return, and so forth. And so all of these assets sit on this continuum.
Now, why am I breaking apart AI and stocks? Because stocks is a very broad term, right? So we have blue chip stocks, dividend paying stocks, stocks that have been there for a hundred years paying dividends. They're not going to grow. So those stocks would be over here. And then we have like micro-cap stocks, penny stocks, things like that. And of course, that would be over here. So that all of that is stocks, right? AI sits more on this side. So it's less risk than Bitcoin because they're real companies. They have cash flow. They have assets, things like that. Bitcoin, of course, has none of that. It's just an asset. There's no cash flow. Of course, there's no company. So AI is much riskier than a traditional blue chip stock. And we can see this evidence in this chart right here.
So this is one way we can measure. There's a bunch of ways we can measure risk. I'm not going to go through all of them with you. But if we take a look at this right there, this is annualized volatility on a five-year average. And what we can see is cash and T-bills, 0.5% volatility. How much it goes up and down. Uh government bonds, 6%. Just so you can see, I'll write it down bigger. So, government bonds are a little bit riskier than federal bonds, uh, T-bills. Then we have the S&P 500, 16% volatility. That's how much it varies, how much it goes up. Nvidia, which represents the AI trade, is at 52%. And then Bitcoin is at 75%. So, you can see these two are much closer than these three down here. So, this represents this risk curve that I'm talking about.
Now to understand how we want to invest in our assets along this risk curve, we have to understand the engine of how money moves, why we allocate money. Now, you may be allocating money without knowing this, and maybe the randomness is okay for you. Maybe that works out. But professional money managers do this with a system. So we understand we have an engine. And the real question with our money is, how much risk do I need to take? You see, in life, you only want to take as much risk as you need to take. If you take on undue risk, it can cause undue harm. So, the question is, how much risk do I need to take?
Let me give you an example. If I'm, if I, if I need to drive to an appointment and, uh, I put it into my maps and shoot, I'm going to be late. Well, well, first of all, let's say that I'm not going to be late. Oh, I got plenty of time. And I get in my car and I'm like, "Oh, man. I'm going to be there five minutes early. I'm going to slow way down. I'm going to go probably below the speed limit so I could just get there. I don't want to sit there in the parking lot." Right? Um, but let's say that, uh, it says that I'm running, I'm running late. I'm going to be five minutes late. Well, I might speed. I might take on a little bit more risk. Um, I probably don't want to speed and risk getting a ticket if I don't have to. Um, but how much do I need to speed? Well, just enough to get there faster. So, maybe five miles over the speed limit. Let's say I'm really late. Well, I'm not going to make it there unless I go 20 miles over the speed limit. I don't know if I want to take that much risk. I can go to jail. Well, how important is it? Will I lose my job if I don't make it there? Uh, is my wife in the back seat dying and I need to get her to the ER, right? And so that's how we think about it.
So money is the same way. It only moves out on this risk curve when it needs to. Why does it need to? Well, it depends. Because when we have safe and we have a good yield right here, money is going to sit over on this side. But when this goes down, which I want to show you what this means. When this goes down, then the money has to go further out on the risk curve to make money. So like when we had zero, zero interest rates, when we had zero interest rates, money had to go way out to try to find that return.
So let's say, for example, so let's, let's look at it like this. So if I have my return and my risk, so let's say that I could make, you know, let's say, uh, 13%, but my risk is 80%. Here I could make 12%, but my risk drops to 60%. Here I could make 11%, um, and my risk drops to 30%. Well, this is the better deal because my return isn't that far off, but my risk has dropped by orders of magnitude. Okay, so that's kind of what this means. And so what moves this back and forth is risk. And the two forces that have taken money from this side of the risk curve back is AI. So AI is a little less risky than some of the alternatives, crypto, Bitcoin, etc., small caps, etc., venture. AI is a little bit less risky and it's very cheap. We have very cheap money right now. The AI gives us more upside with less risk. So, of course, it comes back from Bitcoin here and goes to AI.
Now, if that makes sense to you, the next question you probably ask is then, okay, if that's true, you're, I'm tracking Mark, then what moves it back? Well, let's take a look at that. I'm glad you asked that question.
Okay, so the big shift is looking at how much risk and how how cheap it is. We're looking at inflation. So right now inflation is about 3.8%. Treasuries, US treasuries, safe, also pays you about 3.8%. So the safe money could just sit in the safe assets and earn a pretty good return. We call that a positive real yield. When yields pay more than inflation, that's positive. And so they'll just sit there. But what's going to change? Why would this change?
Well, take a look at this. What we have right here is the federal government current expenditures. This is the interest that they pay on the debt. Just take a look at this chart. So what's going on here is we can see that the amount of interest the government has to pay on the debt has been going up and not just a little bit, parabolically. So this line was tracking here, and then it, the new rate of change started going here, and then it started going here, and now it's going here. As you can see, the rate of growth of the interest payments on the debt we have is unsustainable. How much steeper can we go? I mean, I guess we can go straight up. I mean, can we go back this way? No, obviously we can't. And so, the question is, that's a problem. How do we get that down? There's two ways. When we pay off the debt, that's not likely. Or the rate of interest that's being paid is going to have to go down. That's the whole thing with rate cuts. Of course, the government needs the rates to come down. Why? Because the debt is unsustainable. This is not a political thing. It's not about Trump. It's not about Jerome Powell who just left the Fed. It's not about Wors who's coming into the Fed. It's just that the interest payments on the debt is unsustainable.
Now, what's going to happen with the debt? Well, the CBO, Congressional Budget Office, projects out this for 30 years. So, we can see this past 2050. And they show us a percentage of gross domestic product and debt. So, what we have here is 2020. That's what this line represents. And what we can see is the primary deficit here. And the net interest, the net interest on what? On the debt I just showed you, uh, gives us our total deficit. And what they're projecting through 2050 is the debt and the deficit continue to blow out. Now, the primary deficit, not so bad. Not so bad. Government's going to continue spending more than they bring in. So, they're going to continue bringing in debt. But look what's happened with the net interest. This is unsustainable.
Okay, we can look at it another way. Take a look at this. This is again from the CBO, Congressional Budget Office, and they project out here we are 2020. And what they're projecting is a debt as a percentage of GDP. And of course, we can see it went up in World War II and back down. I talk about this on the channel quite often. We're back up to about that same level. But look where they're projecting it to go through 2050. It's just insane.
So, what am I trying to tell you with all this? What I'm trying to tell you with all this is that rates have to come down. So where the, where the, where the money can sit safely earning 3.8, that 3.8 ain't going to be there no more. They got to bring that down. They can't afford to continue to spend the 3.8 on a growing pile of debt. The math just doesn't work. And so the Fed is stuck. Inflation is hot. 3.8. The inflation is going to go higher. Wors. The Fed wants to allow they want to calculate re re recalculate the way that we calculate inflation so it can run even hotter. So inflation will go up and yields will come down. That creates an era of what we call negative real yields. Meaning I can put my money in the safe asset, but I'm losing money to inflation.
Now this chart right here demonstrates this for us. All right. So what we have here is the 10-year. This is the one that they measured off of. Not the two, the 30, but the 10, the TIPS real yield. This is from 2003 to 2026. And what we can see is that when it's going up, real yields are going more positive. When it comes down, real yields are going down. Obviously, this is negative territory here, and this is negative territory here. Meaning that I'm losing a lot of money sitting in the safe yield in the bonds.
Now, what we can see is that when it goes up, that typically hurts Bitcoin's price. And when it comes down, that helps Bitcoin's price. Why? Well, it's because of the line, right? We have safe over here. We have risk over here. And money only goes as far as it has to to get the return that it needs. It only goes as far as it has to. So as m as the as the real yields go up, it, it can come back a little bit. As real yields go down, it has to go further out on the curve. That's how this works. That's what's going to make it go back down.
So we look at the, the assets are being pulled and pushed around based off of those assets. So, it's not so much about adoption. It's not about news driven things like that. It's about the risk curve.
Now, here's one we can look at. If you take a look at this, this just shows you again the interest and how big this is on the federal budget. This is Social Security. This is the defense department. Now, first of all, the United States has the largest military in the world. I believe it's 10, I think it's bigger than the next 10 nations combined. Uh, Medicare, a trillion, Medicaid, and you can see where this sits. It's the second biggest line item, the interest on the debt. The only way to get this down is to bring it from 3.8 back down to 1%. That's where rates are going during Trump's uh presidency. At least that's what he wants.
Okay, the gauges. So, cool. Mark, you explained it to me. When, when does this happen? When do I move? What do I do? What do I watch? Okay, let's take a look. So, forget the dates. We don't know dates. What we know is conditions, right? Uh, marketers don't know anything about dates. They don't have a calendar. They're not watching the calendar like you are. What they're looking at is the conditions. So what we want is again, real yields. We're looking at real yields. We're looking at are the, we look at the bond market. What is the price of the debt? We want to look at the four-year cycles. Understand how assets move within those.
And let me show you what I'm talking about. So if I look at Bitcoin and we look at it over real yields, we can see something interesting. So, for example, during the period of 2020 to 21, real yields were negative minus 1.1, and Bitcoin went from $9,000 to $46,000, or went up 400% in that period. But then in 2022, rate, real yields went positive. Why? Because Jerome Powell went on the fastest rate hiking cycle in history. Raised the rates up, brought the real yield up, and Bitcoin dropped from $46,000 to $17,000, or went down by 64%. So it went up 400%, then it went down 64%. Then October 2023 to October 2025, we went back to positive plus two. Now you might be saying, "But Mark, it said positive. So why does Bitcoin go up in positive?" Well, it went from $17,000 to $126, which is up 640% during that period. Amazing. Why? Well, because we had the four-year cycle intact. So, right now, Bitcoin moves on these four-year cycles. And the, the peak of each market is typically 18 months after the halving. And October of 2026, or I'm sorry, October '25 was our peak, which was 18 months after the halving. And so, now we're in the bare market. So in this, even though we're in positive rate territory, the four-year cycle overrode that. Now we have the rates and it's working with the cycle pushing prices down. And we can see October '25 to now, still positive. Rates are still positive about 2%, and it went down 126 to 75. And so the cycle peaked and we had the headwinds started to take back over. Now I would take some consolidation in this because typically we've seen 70, 80% drawdowns, and we haven't seen anywhere near that, even with full positive rates.
Okay. So what we want to understand is that cycle theory. Here's a chart. I'm not going to spend a lot of time on this, but you can just kind of see how this works. And so we can see the correlation. So as the real yields come down, Bitcoin's price goes up. As they come down, Bitcoin's price goes up. But when they go back up, Bitcoin's price comes down. So you can see the correlation here. When it comes down, the price goes up, etc. And then I just want to show you this chart real quick just to go back to this four-year cycle. There's a lot of people, including myself. I was sort of in the camp saying, "Hey, I think maybe the four-year cycle's dead this time. I don't know." But this clearly shows us what we can see is that, yeah, eight of 11 years, Bitcoin has been the best performing asset in the world. Um, over this time, it's also been the best performing asset. But each year, and what we can see is we have three good years and a bad year. Three good years and a bad year. Three good years and a bad year. And so what that means is that 2026 should probably be a pretty good year. It should end the year pretty positive, at least as we're looking for. But again, I'm not looking at the calendar. What I'm looking for for is the inflation rate. I'm looking at the debt, the interest on the debt, and I'm looking at the rates, the real rates. Are they, are they falling or are they still going up?
Okay, now that we know this, what do we do with this? Well, we have to learn how to navigate the line. We have to understand that assets move based off of risk. Now, most people, you know, a lot of people, young people, unfortunately, are sort of like gambling and they just have such a little bit amount of money, they're just gambling and they're just taking as much risk as they can. As you get more money, you have to take less risk, obviously. And the markets are being driven by what we call the smart money, institutional money. This is how they do it.
So, the key thing is here is that Bitcoin isn't broken. It's moving along with four-year cycle theory and it's moving along the risk curve based off of real rates. We understand that Bitcoin is just one of the furthest seats out here. Of course, sure, there's further seats, but Bitcoin is pretty far out when we look at major assets. And we have to understand that it's basically as we, you hear the term risk on or risk off. Risk on or risk off. That's what we're doing.
So, what we don't want to do is not watch the line. Forget the line. That's like looking at the ground in front of you while you're walking. What we want to look at is the signs. So, watch real yields. Watch the cycle timing. Watch real yields. That's what's what the Fed is going to do with the rates, what the rates are going to do overall, and what happens with inflation. If you understand that, you'll be able to understand this cycle much better. Hopefully, that makes sense. Hopefully, that uh gives you a little bit of ease of where the Bitcoin price is. It's certainly not broken. It's not being manipulated. It's moving based off of this. The money moved to AI like energy and it will be coming back as soon as this flips.
All right, that's what I got. Let me know what you think in the comments down below. As I always say, to your success, I'm out.