Why Bitcoin Crashed 30% And What Happens Next

0:00Hello, everyone. Investor confidence has been rocked and asset prices are falling aggressively. We've got five charts that are going to explain what's happening with Bitcoin. And Palantir's Alex Karp, he drops one of the best rants I've seen on American innovation. We are live today from the desk of Anthony Pompliano.

0:25Before we get into today's show, I need your help. We currently have 38 ,802 subscribers. My first goal is to get to 50 ,000 subs. Hit that subscribe button, help us reach the goal, and let's get into today's episode. All right, ladies and gentlemen, Bitcoin has crashed. It's crashed approximately 30 % from the all-time high of$126 ,000 on October 6th. The digital currency is now negative on the year. Boo. And it's up less than 1 % over the last 12 months. Boo. As you would expect, Bitcoin holders, they're very disappointed in the asset's performance. Me too. Sentiment online is about as negative as I can remember it ever being.

1:04It's horrible out there. But anecdotes on the internet, those can be misleading. Reddit, X, podcasts, those can be echo chambers. So what exactly is the data telling us? Well, I've got five charts to explain what's happening. First up, zero hedge shows the last time Bitcoin was at this price level. Global liquidity was$7 trillion lower. Now, this data point is a big narrative violation. Everyone, me included, everyone expected Bitcoin to close the gap between Bitcoin's price and that global liquidity level. Since that hasn't happened, many people are wondering, is the market fundamentally changed now that Wall Street has started adopting the asset?

1:39Something is different. What could it be? But regardless of that reason, no one can dispute. Bitcoin has corrected 30 % in the last month and a half. Now, James Van Straten, he explains that this is the third 30 % correction for Bitcoin this cycle. Each correction, which is the time from the peak to the trough, that time has actually compressed. And this has accelerated the max fear sentiment that you see online. Back in August of 2024, it took 147 days. In April of this year, it took 77 days. And in November of this year, just right now, it only took 42 days. It's getting shorter. And this correction has now hit oversold territory.

2:17Coin Bureau shows that Bitcoin's daily RSI has dropped to 26. It's the lowest level since February. And that puts Bitcoin in that oversold territory. Now, Quentin Franquois, he highlights a similar dynamic. and it says that it's playing out with the short-term holder supply, whether it's in profit or at loss. We are now seeing more than 95 % of all coins that have been acquired in the market in the last 155 days, those coins are now underwater. People are losing money. That's obviously a fast way to drive fear into a market and to tank sentiment. But markets don't bleed forever. Eventually, an asset gets so cheap that it actually becomes attractive to some set of investors.

2:55And maybe that's gonna be Bitcoin at a$90 ,000 price point, Or maybe it is lower. I don't know the exact level. But what I do know is that the persistent bid will return. But wait a second. Bitwise's Andre Dragic, he says that Bitcoin whales, those that already hold more than 1 ,000 Bitcoin, they have suddenly started buying Bitcoin aggressively at the current level of around$90 ,000 of Bitcoin. So we have Bitcoin's price crashing, even though global liquidity is surging higher. We have an asset that is now deeply oversold, which is enticing the Bitcoin whales to start buying again. And we have a fear and greed index that is still registering below 20.

3:30This is exactly what Bitcoin has done for 15 plus years. It's volatility, it's chaos, and it's uncertainty. Those things forged Bitcoiners over the years. Those who can keep their head straight when everyone else is losing their mind, those are the people who have traditionally done very well. It's much easier said than done though. And so make sure that you keep your head on a swivel. And remember, Bitcoin is Bitcoin and it's gonna continue to be resilient and continue to appreciate over the long run. This week, concerns over high growth technology and risk assets have been driven by a combination of bad news, cracks in the macroeconomic data and Fed officials' hawkish tone.

4:09Binance Research did an amazing job breaking it all down for us. First, there's been a crack in the AI narrative. You can see it anywhere in the market or in the media. Previously, AI was almost the sole pillar supporting the high valuations of tech stocks. AI, AI, AI. But the market's no longer solely focused on the unlimited demand for AI. Investors are now examining the physical and financial costs of its implementation. On the physical constraint side, AI infrastructure provider CoreWeave is a great example. CoreWeave saw its stock plunge due to delays in power delivery. This once more reminds investors that AI expansion has been realistically constrained by power supply and physical infrastructure limitations.

4:49You gotta build things in the real world. Now, on the credit risk side, Barclays downgraded Oracle's debt, and they said that it is now a sell rating. It's highlighting its dangerously high debt-to-equity ratio of up to 500 % and potentially depleted cash flow. Now, this reveals a risky shift. The AI race is moving from being free cash flow driven to highly leveraged debt driven. And as we know, debt and leverage, it can be the demise of any great investor or any great company. So this brings us to the external pressures that are facing the market, which frankly are just degrading investor confidence as well.

5:23On this front, we have seen intensified Chinese competition that includes strong AI progress and strong earnings reports from Alibaba and Tencent. These reports raise concerns about the U.S.'s leading position in AI. Is the U.S. leading or is China leading? That answer is not known yet. Now that prompts investors to revalue high valuation U.S. tech stocks as they're trying to figure it out. We've also seen weak global demand, including disappointing earnings from Japanese memory manufacturer Kioxa. This disappointing report triggered worries about the true global semiconductor demand, and that dragged down the entire U.S.

5:57chip sector. People keep saying that there's lots of demand, but we've got to see it in the numbers. And the pain doesn't just stop there. We have macroeconomic forces at play here too. The macro data cracks mainly appeared in the labor market, and that's been the talk of all the financial markets. Last Tuesday, we got a weak ADP weekly jobs report, and we also got an earlier private sector survey that was pretty weak as well. It painted a gloomy economic outlook and it hurt market sentiment. The ADP weekly employment report showed that in the four weeks ending October 25th, private employers averaged over 11 ,000 layoffs per week.

6:30That implies the private sector may have lost around 45 ,000 jobs in October. That data unexpectedly turned negative and obviously signals a clear economic warning. Investors don't like economic warnings. Now, in addition to the bad jobs data, Goldman Sachs, they have this pessimistic forecast. It's exactly what it sounds like. And it shows the decline of 50 ,000 jobs in the October non-farm payrolls report. 45 ,000, 50 ,000, what's a couple thousand between friends? If realized, this would be the worst non-farm payroll data since December of 2020. In the National Federation of Independent Business Optimism Index, that fell to a six-month low.

7:09So that reflects a growing concern among small businesses about the economic outlook as well. Not exactly a rosy picture for the U.S. economy. But wait, there is more. We also have to talk about the Federal Reserve and their recent commentary. Multiple Federal Reserve officials have delivered hawkish remarks to varying degrees. They generally indicated that the threshold for further rate cuts in the near term remains very high. They have to see the data to prove it. And inflation still is the primary concern. Now, they're influenced by these hawkish comments, the market's expectation of a Fed rate cut in December has plummeted from 70 % last week to 50 % today.

7:46So when you take these three things and you wrap them up all together, the crack in the AI narrative, the bad jobs data, and the hawkish commentary from Fed officials, it's not a surprise that investor sentiment has been cratering. But that doesn't mean that the market won't go up. It just means that investors are trying to figure out how to navigate all of the uncertainty. If investors are nervous or scared, asset prices usually fall. That's exactly what we've been seeing. Palantir's Alex Karp, he's the goat. He goes on these rants and it just gets me pumped up. And the latest one about protecting the West and that America needs to be the world's dominant technological power.

8:22Boy, this is a good one. Just watch this. One of the reasons we are in a kind of a doomer AI circle is because you can only explain the promise of AI if you understand and embrace the superiority of America and its culture. Because there are dangers in AI, but the reality is there's only two cultures that are going to win in the next year. It's going to be us or China. Europe, I spent half my life in Europe. At this point, when we talk about Europe, we do exactly the same thing as when we hear about educational programs led by mayors or safety programs in the inner city. We just say, I really hope it works out.

9:05Please. And I want Europe to win, but we're on our own. And that, of course, there are dangers in AI. And AI is also and will never be anything other than a dual-use technology. But we must, must embrace our ability to build it, our ability to own the chips, to own the software, build the large language models, and run very, very quickly. because again, to quote Huntington again, if we are not the ones controlling the violence, we will not be dictating the rule of law. The things we hold precious in this culture, I would say embodied by our constitution and especially in our first four amendments, those things will not be the same if we are not the dominant technological culture in the world.

9:54Now, my favorite part of that, the US should embrace its ability to build AI software. We got to own the AI chip supply chain and we got to construct leading large language models. Karp is on fire right now. He understands that this is good versus evil. This is all about economic dominance. And ultimately it is about the future of the American citizen. We have to win the technology war and having guys like Alex Karp leading the way gives me confidence that the US, we're going to be just fine. That's it for today's show. Thank you guys so much for watching. Please remember 38 ,802 subscribers. Seared in my brain, how many of you are out there?

10:28Please hit the subscribe button on YouTube if you haven't already. And I'll see you guys live tomorrow from the desk of Anthony Pompliano.