People ask me every hour of the day if we are at the bottom, is it time to buy and we’re not and the reason. I say that let’s just talk about crypto markets. I don’t care what asset class you’re in within crypto markets, what coin, what token, what asset, what project. I don’t care it doesn’t matter, we’re not at the bottom yet what defines a good bottom is a panic event now. We’ve had some good bankruptcies, but they’re all small. yesterday’s announcement of Voyager it’s irrelevant. It’s so small and so decentralized in the sense that the shareholders are all over the place. It’s not really going to hurt anything and so it doesn’t bring the Panic bottom that you need. What defines great bottoms is panic in the streets, massive capitulation, massive selling, massive volatility. Then you flush it out that big toilet in the sky has to flush. It’s coming soon. I feel it coming somebody’s offside somebody’s over-leveraged these small guys going to zero.
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Just never knew how to manage risk because they never experienced anything like this. Now the good news for them is they’ve learned that learn grasshopper don’t leverage yourself up like that with an asset that you can’t ever Peg the bottom line so they got wiped out. So, it’s a great learning experience for them. They’ll be much better managers going forward and the shareholders chalk it up to entertainment no difference in going to Las Vegas. You took that kind of chance of Leverage you got wiped out learning that’s the whole point. But, the big event hasn’t happened yet, it’s coming to a theater near you.
I don’t know who it’s going to be, somebody’s gnashing their teeth right now somebody’s way over-leveraged, somebody’s trying to borrow cash and tomorrow morning you might find out who it is. I’m looking forward to that one when you go back into the market. When it’s absolute panic in the streets, it will happen. We’re still not at the bottom there either because peas are still a little expensive. I anticipate if we could get down to 15 15.5 p on the S P. Then you can cherry pick the top 100 highest quality balance sheets in the S P 500 and that’d probably be a good place to put some money to work. You’d be layering in. Nobody knows about the recession. It’s pretty hard to have a recession of full unemployment for Full Employment. I mean we don’t have uh you know any if this is not your typical recession. I can tell you that I haven’t even seen any results yet of private companies. I’ve invested in slowing down at all yet we can’t even hire anybody.
So, we’re in a different kind of time right now. We’ll have to see where that goes but in crypto you get a lot more volatility utility and obviously the granddaddy asset is Bitcoin is holding its own at twenty thousand. But, if we saw that Spike down in a panic sell-off that somebody had to off their coin because they’re you know being margin called out and that thing dropped to 15 000 or something that would be a good place to start putting money to working again. I’m not saying it will or won’t happen. It’s just we’re not at the bottom yet of that. I’m sure and so you gotta you gotta you know hold your nose and wait and see what happens and in the meantime. If you have a position as I do you just ride it out. I don’t use any leverage in crypto zero leverage, so it can go to zero and it doesn’t wipe me out. Crypto is not leverageable yet. It needs to have policy and it needs to be regulated and then the volatility will go down. Then you can put on some leverage to boost Returns that put on.
The Leverage is wiped out and every day you hear another story wiped out to zero. A lot of these companies are going to face bankruptcy because they leverage their Bitcoin mining borrowed money to build more facilities. They’re offside 50 60 plus Leverage but the bigger problem prompt is this. Let’s say you want to raise New Capital because I’m in the mining business and I want to raise. Let’s say you’re going to do a 300-megawatt facility in a friendly State like North Dakota or Montana or South Carolina where you can get the power. You can get a plug-in for less than four cents a kilowatt hour which is what you need to be globally competitive. You have to find a power source behind the meter. In other words, where you can prove to someone that you are compliant from a carbon perspective and that really points to nuclear power and hydropower. So, all of a sudden places like Northern Norway where we have a facility being built by a company called Bit Zero. We’re behind the meter every electron comes from a giant Hydro Dam no need for a carbon audit.
We’re able to raise money because the institutions that provide the funding whether it be debt or Equity understand. There’s no risk to take any other public minor to ask them where their power comes from. They say it’s Blended they don’t know basically and that’s the problem the existing miners have in a way. They’re kind of screwed. But, I think a new generation of miners is emerging. I’m not the only guy doing this. There’s other funds out there that are basically finding hydro and nuclear power and regenerating this industry from scratch at a carbon zero footprint. It’s not just Bitcoin mining. It’s Ethereum. It’s any data center this is going to be the issue going forward so the older miners’ stocks are down 70 to 90 percent not coming back. There’s no question about it, what if there’s Excess power. There’s no better way to store the value than mining. There’s no better way and so the mining industry has taken such bad PR extremely bad PR in the last six months. It couldn’t be worse, it’s getting accused of every disease known to man; they’re actually doing something very important. They’re advancing technology and Mining technology and semiconductor doctor technology and heat technology every generation every 36 months. Later, there’s a new technology that’s more efficient in terms of mining which is a good thing for everybody else and also they’re taking Excess power. Let’s go back to Norway. In the 50s they built so much hydroelectricity that over half of it’s never used it goes over the dam.
It’s never used now with Bitcoin mining these miners can go into those communities and create jobs and data centers excess heat is doing hydroponic growth there because they’re in basically an Arctic climate and storing value by creating Bitcoin paying taxes in Norway. They don’t get thrown out of the country they’re embraced by the government there because they see the imputed value look at what happened in New York. All of that power going over Niagara Falls is being wasted because no Bitcoin miners can set up there the government’s gone berserk and chased all the capital out of there. In fact that Norway projects started in Upstate New York and after the government went wonky on policy in that state moved all of the Mining facilities to Norway where they were accepted. So, there’s a lot of differences between policy in different states. You’ve got to go find the ones that are willing to embrace the concept of mining for the reasons that it has Merit which is basically to store value in unused power unfortunately for Biden and the administration.
There were some policy mistakes made early in the Mandate over two years ago, particularly around energy. There are two pressure points that are causing all of this political activity. One is inflation on energy ow five to seven dollars gasoline per gallon is just a killer. When it comes to midterm elections there’s no getting around that problem because people see that every time they fill up their truck or car. Then, of course, protein in the food supply chain in the U.S from Chicken on down is up between 30 and 48 percent so food and energy G is very political in nature because you’re forcing families to spend so much more of what they make on things that they never have to worry about now they do heating their homes and just feeding their families. So, it’s very difficult to reverse the mistakes made in energy. Let’s start there canceling the Excel pipeline canceling leaseholds on Federal Land shutting down offshore development canceling the activity that was going on in Alaska which was very prolific in terms of providing gas and oil really making it hard to figure out carbon costs.
If you’re using any kind of fracking service and so all of a sudden, of course, we are no longer energy independent. We’re in a perverse situation that even before the Ukraine war we had Russian tankers coming into Boston Harbor so that’s policy mistakes and takes time to fix that when Biden goes over to Saudi Arabia to get more oil from them. It won’t matter to Energy prices in the U.S because we don’t have enough refinery capacity. We just canceled another Refinery we need three more again bad policy. Now where this is going to manifest itself in a very ugly way is at any midterm election the incumbent loses seats in the House. I fear for Biden Administration a complete Slaughter Fest in the midterm election everything’s going to turn it’s going to be brutal. I think what do you do what can you do if you want balance. You’re not going to get it here. There’s going to be a lot of seats lost to the Democratic party and in a way, they did that to themselves on bad policy. Of course, they’re scrambling and anything can happen between now and the fourth quarter but I’m not optimistic for him. He was given the mandate to solve the pandemic he did a reasonably good job there. but this energy policy and what happened in inflation caught him off guard. I’m not sure what can be done to fix it because it’s not getting better anytime soon foreign.
This article is a transcription of a video made by Jamie Tree
Original video: https://youtu.be/hfbR289BSLc