Why Bitcoin Is Falling: Capital Rotation Into AI Stocks

All right, ladies and gentlemen, let's just call it what it is.

Bitcoin is falling and falling and falling

and people are freaking out.

But remember one thing real quick.

We hit $126,000 all time high.

People were euphoric.

Everyone was super excited.

And then Bitcoin fell all the way to $60,000

back in February of this year.

So that big drop, that freaked everyone out.

Literally, the fear and greed index went down to a five.

I've never seen the fear and greed index hit single digits,

but that's where we were just back in February.

Now, the reason why that's important

is because we're back to about $62,000

here now in the month of June.

So between February and June, what happened?

Everyone got a little light of hope.

They saw that Bitcoin went from 60,000

all the way back up to 82.

Everyone said, maybe that was the bottom.

Maybe that bear market is over.

We're headed back to all time highs,

but not so fast, my friends.

Bitcoin came back down

and is retesting the lows of this market.

Now, the reason why this is interesting

is if you look at the RSI, it has been this low.

This is the third time.

You can see back in March of 2020,

we hit this level.

Then in February of this year, we hit this level

and now we're hitting it again.

That usually tends to suggest

that Bitcoin is super oversold.

But just knowing that Bitcoin is oversold,

knowing that the price is going down,

it don't feel good for me, for you, or for anybody else.

But understanding why it's happening

is usually much more important.

If we go and we look at Binance Research,

they say that the mechanism

as to why this is occurring is very simple.

They say that outsized equity returns

in the public markets

is pulling capital into the public market.

So capital is chasing returns.

It's chasing momentum in the public market.

And so you see this rotation occurring.

Well, when you get that capital

concentrating in the public market,

it becomes a capital black hole.

Capital black hole means that the liquidity

has got to come from somewhere.

Now, liquidity right now is coming from Bitcoin.

So people are selling Bitcoin

and they're rotating their capital

over into the public market

and they are going and chasing the return.

Now, that means that Bitcoin's price drops

and stocks take off.

And you can see here that the NASDAQ is going up

and Bitcoin is going down.

But it's not just Binance Research that believes this.

Michael Saylor, the biggest Bitcoin bull of them all,

he came out this morning and he said that capital markets

are funding the AI build-out at historic scale,

about $400 billion over six months.

The Bitcoin ETFs have seen about $4 billion of outflows

since May 14th.

And he says that that is pressuring Bitcoin.

This is a capital rotation, not a Bitcoin impairment.

Volatility creates opportunity.

Now, the reason why I think that that is interesting

is because you have to remember

that Bitcoin has become out of favor.

Why is that important?

Well, most investors, you know,

they've got this idea that they are going

to take their capital and they're going to chase momentum.

So they see AI stocks and public markets going up

and they start to chase it.

And guess what?

When they buy those stocks

and they go up a little bit in the short term,

people get very excited.

They think that they're geniuses.

There's lots of geniuses in a bull market.

But the problem with that is that usually

you start to pour more and more capital

into the top of the market.

So what do great investors do?

Great investors take the opposite approach.

They look at the things that are very popular

and they say, I'm not interested

in the bubbly, frothy, very euphoric type things.

Instead, what I'm interested in,

let me go find the assets that are out of favor

that are going to come back into favor.

The things that nobody wants right now

that are cheaper than they were previously.

So if you take a look at Bitcoin,

that's exactly where it is.

It was $126,000.

Nothing has changed about Bitcoin.

It still is producing block after block of transactions.

It is still a store of value.

It is still being adopted by Wall Street

and sovereign wealth funds

and many, many other types of capital pools.

It is still becoming the backbone for digital credit

and many other aspects of these financial instruments.

Yet, the price went from $126,000 down to $62,000.

So if you liked it at $126,000,

you should love it at $62,000.

It's the whole point is you go

and you find assets that are out of favor

and then you have strong conviction

that they're going to come back.

Now, the other thing that people are talking about

in the Bitcoin industry

that I think is very noteworthy

is that Bitcoin is knocking on the 200-week average.

And the reason why that's interesting

is because historically,

when Bitcoin gets down to around these levels,

it has been a screaming buy.

It has had great forward returns.

Does it mean the history is going to repeat?

No, but likely it will rhyme.

So my guess here is as Bitcoin has come down here,

it is going to become more and more attractive.

You're going to start to see people step in.

They'll buy the asset.

And we probably will not see all of the fear,

all of the chaos,

all of the uncertainty that we've seen in the past.

When you read the headlines,

relax, take a deep breath, calm down.

Everything is fine.

People are going to be freaking out.

But you, if you can control your emotions,

if you can simply make smart long-term decisions,

you have an advantage.

And so if Bitcoin falls, great.

It means that it is cheaper

for you to continue to dollar cost average into it

and everything will be fine in your portfolio,

in your life and around the world.

And people who tend to allocate their capital to Bitcoin

at times like this,

they understand don't allocate your money

looking in the rear view mirror

as to what has already happened.

Instead, you got to look forward.

And my guess is that there is optimism

and hope going forward for Bitcoin

because everyone hates it.

And when everyone hates Bitcoin,

that usually means that Bitcoin is preparing itself

to do what Bitcoin does best.

The asymmetry will be back.