Bitcoin's price is crashing right now, and everybody wants to know the same two answers, why it happened and what happens next. But the reasons that most people they're throwing around they're just wrong. And if you don't understand what actually happened and why, then you're not going to be able to see what's about to change. More importantly, what comes next, because once you see the real cause behind this move, the entire crash suddenly makes a lot more sense.
So today we're going to break down why is the price falling, who is selling, what broke, when will it end, and what you should be doing about it now, whether you're a long term investor a short term investor, we're going to answer that now. Look, I've been building I've been selling tech companies for decades. I invest in bitcoin startups. I hope run a public trade a bitcoin treasury company. This is the same data that we're using internally, all right,
So let's just start with the obvious. Bitcoin's price is crashing now at the time of this recording, probably going to change by the time you watch this, but we're at about eighty five thousand. It's about thirty two two percent off of its previous all time high that was set back in October thirteenth, and everybody's looking around. They're all trying to figure out, like, what the heck just happened,
and of course, more importantly, what comes next. But the problem is that most of the explanations out there that you're seeing maybe online on Twitter whatever, they're guesses, right, they're headlines, it's whatever narrative. People grab whatever they can find the quickest, and none of it actually matches the data. But before we go anywhere, before we talk about the seller, before we talk about the micro structure, we talk before we talk about the timing of the moves, we have
to set the right frame right. This is when I always go back and I listen to good old uncle Warren Buffett, the Oracle of Omaha, because he has all these little lines, these little sayings, ones that I think about a lot, especially when markets start acting very emotional like right now, And he has a really famous one. He said, quote, if you're not willing to own something for ten years, don't even think about owning it for
ten minutes in quote. And of course the other one everybody quotes all the time is price is what you pay value is what you get. But the one I think fits this moment right now, the best, the most perfect one for this moment is in the short run, markets are a voting machine. In the long run, they're a weighing machine. Now, if you've been around these cycles long enough, you know exactly what he's talking about, right because right now, the voting machine, it's in full panic mode.
Bitcoin again, it's down thirty five percent. It's a big move, but really, when you look at the bigger picture, it's not unusual for bitcoin. In fact, it's the third drop of this size in just this current cycle, and we've seen dozens of these previous cycles. But what is unusual is the sentiment this time that, like this drop right now, this must mean something is fundamentally wrong. So let's walk through this very carefully and take a look, like, let's
lay out the framework. Let's lay out the evidence so we can understand what's going on, because once you line up all the facts becomes really clear that the long term picture, it hasn't changed at all, and really the fundamentals have actually never looked better. Now, before we get to the fundamentals, let's stay on Buffett just for one more second, because understanding how he thinks how he became one of the wealthiest men in the world is something
that we should all learn from. And I know he's not a big bitcoin fan, but we can still learn from him. Now, Buffett never buys something and then sits there staring at the price. Every day. He said over and over he doesn't care what the price does today or tomorrow because he's not buying the ticker, right, He's not buying the price. He's buying the business. And if the business is getting stronger and the price is falling,
then he doesn't panic. He just buys more. Okay, So before we get emotional about you know, the red candles, before we get emotion about the headlines, what we want to do is we want to do exactly what Warren Buffett would do. If we want to zoom out, just ignore the noise for a second and let's get to the facts because the facts they paint a very different, a completely different picture than the emotions do. Okay, So now that we've got the right frame of mind, let's
go straight into the first big question. Why is the price falling? Like what happened? Now, before we get into the market, makers and the force selling and all that. We have to start with something way bigger than bitcoin, something that affects every asset on Earth, and it's liquidity. Because when liquidity disappears, it doesn't matter how strong the fundamentals are, it doesn't matter how much demand there is. Everything gets hit. And that's exactly what's been happening over
the last six eight weeks. Now. The first thing most people missed is that the US government went through the longest shut down in American history forty three days. And when the government shuts down, spending freezes. The Treasury General Account the TGA, it's the government's checking account, swells up, and all that money that swells into it comes out
of the system. And of course, every time the TGA jumps, you see risk assets start to pull back because the liquidity is getting rained from the exact places the markets rely on for the day to day funding. Now, on top of that, but a reserve, they're still running QT, or quantitative tightening. So while the shutdown froze fiscal spending, QT was pulling reserves out of the banking system, And if you watch the bank reserve levels, you can see
the floor getting hit pretty quickly. Now this isn't a guess, right, it's all in the data. Reserves fell back to the same danger zone we reached in twenty nineteen, right before the repo market blew out. And while that's happening, the reverse repo facility it's basically empty, which is another major signal that the system is getting tight. Now. The reverse repo dropping to near zero means money market funds have
nowhere to park excess cash. Because no excess cash, overnight borrowing costs between banks have been creeping higher and higher and higher for weeks. Dealers are pulling back. Risk leverage is coming down across the board. So when all this happens, you get a temporary I say, where a liquidity vacuum. Right now, this hits everything. It's just that Bitcoin reacts to this the fastest. Okay, So before we even get to the trigger, we already see the liquidity environment. That
explains why every risk asset's been under pressure lately. Now, if you don't understand that, you're gonna end up blaming the headlines instead of looking at the money flows that actually move market. Okay, but now that we understand liquidity, and that alone explain explains a lot, right, we have
to get into the part that almost nobody understands. This is where things get a little bit weird, because the price action that we've been seeing the last few weeks doesn't look like fear right, it doesn't actually look like normal selling pressure. It looks like something broke. And the date everything changed was October tenth, ten ten. Remember that day.
That's the day President Trump sent out the tweet he said that he was going to put one hundred percent tariffs on China, and then it triggered one of the largest liquidation events in crypto's history. Almost twenty billion dollars in leverage positions were wiped out in less than twenty four hours. Now that's not normal, right. Bitcoin didn't drop fifty percent. The ETFs didn't like give back all, you know,
give all the redemptions back. There wasn't some major macro shock, but the size of the forced liquidations was bigger than what we saw in some of the twenty twenty two candles. Now here's the key. When liquidations get that big, it's not just traders losing money. Market makers took this too, right.
These are the firms that provide the liquidity that lift the books that stabilize the volatility, and when they get blindsided when their hedges get liquidated, and when exchanges use ADL to force closer positions at horrible prices, they don't just get hurt. They pull back right, they reduce risk. They have to shrink their inventory, they quote smaller sizes, and that starts to leave holes in the market structure.
And that's exactly what we saw on ten ten. Now we can take a look at Finance for example, they had one of its largest forced liquidation clusters ever Wintermute Ceo public Is Finances ADL system malfunctioned and hit them with fills that quote make no sense. Now. Then right after that we saw the collapse of Stream Finance. It was a two hundred million dollar Delta neutral fund. They
lost around ninety three million and went bankrupt. Now that's a fund that wasn't supposed to lose money, but their hedges they got caught in the same ADL chain reaction. Now, when you put all that together, a major liquidation event ADL kicking in a large fund blowing up, you end up with exactly what we've been seeing ever since. And it gets even more strange. Than that for almost two
weeks straight. Now, someone's been selling bitcoin every single morning at nine thirty am Eastern time, the exact moment the US stock market opens, the same pattern, the same time and the same pressure. This isn't retail panic, right. Retail doesn't wake up and then dump bitcoin at the opening bill on Wall Street with that kind of precision. Right, this looks like has to be a mandated seller. And this is a fund that's unwinding. It's a market maker
that's de risking their portfolio. Somebody's closing a position because they have to, not because they want to. And the technicals back all this up. Right, We just hit the lowest daily mac D reading in bitcoin's history, lower than the COVID crash, lower than the FTX collapse, and yet the price is only down thirty three percent, Right, I'd be impossible in a healthy market. RSI hit twenty one on the daily. That only happens during true capitulation events.
But there's no capitulation this time. The price action is all pressure. It's no panic, right, that's the tail that we're looking at. This is one or maybe more forced actors unwinding through a broken microstructure. The ten ten event, it damaged liquidy. Now the seller that we're seeing is basically dragging their inventory through the weekend market. All right, So now you understand the liquidity was low and then the ten ten event was the trigger that sent the
cascading down. Right, But then we need to zoom back out for a second. We have to look at the fundamentals because this is the part that really matters, at least to me. Right, price, it moves around, sometimes it moves around pretty violently, But if you care about the long term outcome, and of course that's what Buffett always tells us to look at. If I look at then what actually matters is whether the asset you're holding is
fundamentally getting weaker or stronger. So while everybody's panicking about the price, you know, dropping thirty thirty five percent, fundamentals, they've been doing the exact opposite. As a matter of fact, they've been getting stronger in ways we've literally never seen before. Let's start with a couple of them, like institutional adoption, because that's changed more in the last two years than in the previous ten spot Bitcoin ETFs finally launched in January.
What most people don't realize is that these ETFs created permanent pipelines from traditional financial institutions into bitcoin. I mean, we're talking pensions, downmends, insurance companies, We're talking about boring money, loan money. Right. This is the exact opposite of the leverage traders that blew up on ten ten. Then we have the credit side, which is something I've been talking
about for a really long time. I mean, we have JP Morgan, one of the largest banks in the country, in the world, is now accepting bitcoin as collateral for institutional loans. I mean that's a massive milestone because it means bitcoin has crossed the line from being just an asset that you can speculate with to actually be in an asset you can borrow again. Now, once Wall Street starts accepting something as collateral, then it enters the credit system.
Once it enters the credit system, demand becomes structural, not cyclical. And it's not just JP Morgan. The FHFA, which regulates Fannie Mae Freddy Mack. They announced this year that mortgage underwriters are allowed to consider bitcoin holdings when evaluating a borrowers financial strength. Think about that for a second. For decades, bitcoin was treated like some fringe internal asset. Now it's something that helps you qualify for mortgage. I mean that's
a massive shift. It's a regulatory shift, which is even more important. And custody has gone fully institutional as well. Fidelity City, US Bank Corps, Standard Charter, they're all running regulated bitcoin custody operations now. And the important point is that when institutions buy bitcoin and custody with firms like that, those coins they disappear from the liquid float for years. Maybe right, they're not trading on binance, they're not part
of this noise. They're effectively locked away in deep dark, cold storage. Bitcoin mining investment it hasn't slowed down at all. Hash rate hit and new all time high this year. It means the network is more secure than it's ever been. And when you see miners investing one hundreds of millions of dollars into hardware energy contracts, tells you one thing. They're not worried about short term price moves. And then
got sovereign adoption starting to accelerate. The US now holds over two hundred thousand bitcoin between seized assets and strategic reserve discussions. Now multiple states are exploring bitcoin treasury allocations. Other countries are openly studying strategic bitcoin reserves. Now this part is still pretty early, but the direction, it's undeniable.
So when you stack all this up, institutions are accumulating bitcoin, entering the credit system, mortgage underwriting guidelines, changing regulated custody, exploding minor security at all time high sovereign interest building. Then you compare to the price dropping thirty five percent,
becomes really obvious what's happening here? Right? This is exactly the kind of setup that long term investors wait for when the weighing machine hasn't caught up to the voting machine yet, or what I like to call the mismatch multiplier, how far off of reality is to perception the mismatch. The greater the multiplier, the better the opportunity. Okay, so now we understand why the price is falling, we understand who's doing the selling. So then the next question for
us is when does this all in? Because if all you see is the chart going down, it's easy to assume it means something's fundamentally broken. But when you strip out the emotion and you just look at the structure, the timeline for how these events resolve is actually pretty clear. You see, for sellers always have one defining characteristic. They run out. They don't get to choose the price, they don't get to choose the timing. They don't get to
wait for better entry, right. They unwind until their mandates complete. That's it. And when you have a seller like this, someone selling at the exact same time every single day through thin liquidity into damage markets without reacting to price, the end is determined by the inventory they hold. The think is is that once they run out of bitcoin,
the pressure disappears instantly. Now we've seen this before March twenty twenty, May twenty twenty one, the FTX aftermath, even all the way back to Mount Cox in twenty fourteen. When it stops, you get these violent snapbacks. They seem to make no sense to almost anybody who wasn't paying attention to the un line structure. And there's a second piece to all of this. Liquidity turns fast. The same way liquidity was drained over the last six eight weeks,
it comes back just as quickly. The government shut down, it's over, the TGA's full, it's finally ready to start spending again. The Fed ends QT on December first, bank reserve stabilized as soon as that flow stops. So the question is then when does it It ends when two things converge, seller exhaustion and liquidity returning, and we're getting close to both. Okay, So now that we've walked through the actual cause this move, right, next question is what
should you be doing about now? The answer it depends. It depends on your time frame, because how I think about bitcoin personally very different of how I manage positions inside my fund. Now. For me as an individual, bitcoin's a long term asset, right, so I don't care what it does in a week. I don't care what it does in a quarter. I don't even care what it does over a year. I buy it because I understand
the network. I understand the adoption curve, I understand the monetary structure, I understand the long arc of where this is going on that timeline. A move like this doesn't change anything, right, These are liquidity pockets. None of it touches the actual fundamentals. If anything, this is the kind of opportunity that long term investors like me wait for. But on the other hand, I also manage capital for investors who don't have that luxury right. They care about quarters,
They look at things on an annual basis. They want to see annual returns, they care about draw downs. So inside the Bitcoin Opportunity Fund, we hedge, we use options, We take tactical positions to manage volatility, because that's part of the mandate. We're not trying to trade in and out of it. We stay long, but we manage liquidity on the downside. So you're managing short term liquidity. If you have bills, if you have obligations, you have redemption windows,
then you have to think differently. You can't ride out every structural shock, and for some people that means diversifying into assets outside of bitcoin that produce shield things with more stable cash flows, fixed income opportunities. Now there's nothing wrong with that. It just depends on what you're optimizing for. So if you're thinking long term, nothing's changed. If you need short term liquidity, had you diversify, and if you fall somewhere in the middle, well you probably already know
which side you lean toward. The key is matching your strategy, your time frame, not to the headlines. Okay, so to wrap all this up, bring it back to where we started. Let's go back to Buffett, right, He always said that again, the market is a voting machine in the short term
and a wane machine in the long term. So when you strip out all the noise, pick out the liquidations, the broken market structure, the liquidity vacuum, what we're left with is still the same asset, same adoption curve, same fundamentals, the same long term story. And if you look at it through that lens, this move isn't the market wane bitcoin. It's the market voting under pressure, reflexive mechanical by flows, not fundamentals. The weighing machine hasn't even stepped on the
scale yet. So if you're long term like me, stay long term, nor the voting machine, ignore the noise, use these opportunities to buy bitcoin at a discount. And if you're more short term like we are inside the fund, then manage your risk the way short term investors have to. But don't confuse a broken seller in a broken market with a broken asset, because that's not what the data shows us. Buffett would look at it like this and
say the same thing he always says. If the long term economics are getting stronger while the price is falling, then you're looking at opportunity wearing a disguise. That's exactly where bitcoin is right now. Now, if you want to see the actual data behind all of this, I put together a free report with the top nine charts I'm watching right now. These are the same charts I use inside my research, the same ones I rely on to
separate noise from signal. Then, if you want it, I'm going to leave a link down below, so grab it. Study it compared to what we walk through today. It's completely free. It's my gift to you. It's gonna give you more clarity than scrolling through Twitter. That's what I got to your success.