Speaker 1 00:00:08 What's up, everyone. Welcome to the finance for physicians podcast. I'm your host, Daniel Raimi. Join me as we dig into what it looks like for physicians to begin using their finances as a tool to live better lives. You can learn more about our
[email protected] let's. Jump into today's episode. What's up guys. Hope you're having a great day. So we're going to be talking digital gold. Have you ever heard of digital gold? That's kind of a new term. People are using to describe cryptocurrency and Bitcoin in particular. We're going to talk about today. So we're going to be talking with a buddy of mine, chase Brandon. He currently works for a, um, a big, big player in the Bitcoin industry, uh, cracking it's KRA K E N cracking there a, um, a company where you can hold, buy and sell and trade cryptocurrencies. And so he's actually been in the industry for a really long time relative to the industry.
Speaker 1 00:01:09 The industry I would say is, uh, you know, a relatively new industry, I guess the idea has not even really been around that long. And so chase has been in for quite a while and I would definitely, I would confidently say he knows more about cryptocurrency than anyone. I know. So we're going to be talking about the basics of kind of how it works, uh, how it came about, and then talk about some, uh, things to be thinking about if you're potentially considering investing in, uh, in Bitcoin. So it should be a fun conversation. Bitcoin is definitely exciting and cryptocurrencies are exciting. They're extremely exciting. I mean, to the point where it's, um, potentially dangerous. So, uh, before we jump into it, I wanted to kind of throw out some, um, you know, like disclaimers. Just be careful if you're going to, uh, invest in stuff like this, it's extremely volatile.
Speaker 1 00:02:04 So you'll hear us talk about some of the experiences Jason's had. I think he talks about like a day he lost 50% of the value. So that's not even close to is it's like so much more volatile than your typical investment that most people will encounter in like their everyday say, like work retirement plans. So that's exponentially more value, uh, volatile. So you have to be careful with those types of investments. I think I would go in assuming you could lose all your money. So I guess proceed with caution. If you're going to be investing in something like this, definitely be you don't want to be putting your entire, um, nest egg in there, especially when you don't understand exactly how it works. Uh, so you have to be careful, um, proceed with caution, caution, um, understand the volatility before you invest in something like this.
Speaker 1 00:02:51 Definitely talk to your advisor before you put money into something like this. It's a very new and unproven thing, but it's definitely an exciting thing and it has, you know, potential, um, um, cure. Very curious about it and curious to hear how it shakes out in the future. Um, we'll talk a little bit about what chase thinks about, uh, the future of Bitcoin as well. So just wanted to throw that out there before we get started. So let's, uh, let's jump into the conversation, chase. What's up, man. It's going well. So, uh, we're, we're going to be talking, uh, talking about some, uh, cryptocurrency and I'm excited about our conversation before we get into that. Tell us a little bit about you.
Speaker 2 00:03:29 Well, I, uh, coincidentally used to work with Daniel and not a financial planning role back in the good old days back in the good old days. So, you know, I guess about three years ago, I guess we worked together a couple of years at room financial planning. I caught the Bitcoin bug left to go full time back in 2018, three years ago.
Speaker 1 00:03:50 What was the company you left?
Speaker 2 00:03:52 So I work for a company called cracking. Cracking is a exchange where people can buy and sell different cryptocurrencies. A lot of people were probably familiar with Coinbase, Coinbase and public recently for high profile direct listing. So we are probably their biggest competitor here in the United States, but we do have like global operations can operate all over the place. Okay.
Speaker 1 00:04:14 So y'all are like a Coinbase type company. Exactly. Gotcha. What is your role there these days?
Speaker 2 00:04:21 So I'm fine facing kind of do a lot of different things, actually, you know, I was hired to kind of work with some of our biggest clients on exchange, like different hedge funds, trading firms, things of that nature. Uh huh.
Speaker 1 00:04:32 Gotcha. Cool. So how in the world, I know, I think I know the answer to this, but for those that don't, how, how did you get into this and what I mean you were well, when I think is important too. So when did you get interested in cryptocurrency and then what prompted it
Speaker 2 00:04:47 At least aware of Bitcoin? Back when I was in college, uh, graduated in 2013. Uh, but it was really unfair to me, like the concept itself made sense, but I was lacking some like key pieces. I think I was first sent a little bit of Bitcoin, uh, like in 2014 and just only passively, like interested until I don't know, had some sort of magic moment, 2016, 2017, uh, that big run-up and kind of have been hooked ever since
Speaker 1 00:05:19 In 2016 and 2017.
Speaker 2 00:05:20 Yeah. That's when I like really kind of dove in learned like what is going on here? You know, I think a lot of people get interested by the price swings. I don't think I was any different than that. Like what is going on here? Why are, why is the price going up? Then it collapses and you, you kind of forget about it and then it comes roaring back and like, why is that happening? And so that happened a couple of times and I'm like, okay, like, I've got to figure out what's going on here and went down the rabbit hole and I've been there ever since. So yeah. Yeah. So I was there, you know, once it kind of reclaimed that high in 2016, or I'm sorry, early 2017, it was just like, this is, uh, to be, I think pretty big.
Speaker 1 00:05:57 So since then it's up like 4,000 plus percent or something crazy, right?
Speaker 2 00:06:05 Yeah. 38. I think it got up to 64, a couple of weeks ago. I'm 64,000. So yeah, like 60 guys. Yeah.
Speaker 1 00:06:14 Yeah. So you were just interested in the concept of it and decided to kind of learn more about it and that's kind of where it all started for you and you've, um, I would kind of describe you as a, a kind of a long on Bitcoin, all in, on Bitcoin sort of a person, which I think is, you know, a healthier approach. Right. So is that correct? Or what is your kind of take
Speaker 2 00:06:38 On to the broader like cryptocurrency space? I mean, I think 99% of what's out there, or what people talk about is a distraction from like, what is actually going on. There is sort of like some fascinating things, you know? So I'm like, I wouldn't say I'm, it only care about big, uh, it is definitely like my primary concern. So yeah, like you hear a lot about like the doge wine and everything going crazy, but that's like, I think it's like generally a distraction from
Speaker 1 00:07:03 The longterm perspectives. So like, is it something that you think, well, let's get into the basic, so can you explain for those that are not familiar? Like what actually is, is Bitcoin, maybe we'll just use Bitcoin because that's the most well-known I know there's multiple, but can you give us like the high level? Like what is it, how does it work? What's the,
Speaker 2 00:07:24 Yeah. So Bitcoin into existence in 2008, it was just the anonymous white paper. Nobody knows who created it, released it down to the world. And what that eight page paper ultimately described was this computer network that we now know as the blockchain, uh, which enables us to transfer digital goods money in this case here to peer, without a central authority. That is, you know, there are certain mechanisms underlying the blockchain that makes that possible, but ultimately that's the big idea. It's like we now fundamentally as a 2008, have the ability to send money globally the same way that you would hand a hundred dollar bill to someone sitting next to you. It doesn't have to be someone anybody sitting in between, you know, that transaction, there's no bank, there's no payment process. There's nothing else we can now send any infinite sums of money globally, near instant and almost refer to it. So that is what the blockchain is. Right? Yeah.
Speaker 1 00:08:16 And so then crypto currency or Bitcoin was, was born around that time. And so Bitcoin, my understanding is it's, it's got a, a limited supply and, you know, I think of pricing of, of, of, of investments is driven by supply and demand. So maybe talk a little bit about what's up with all this pricing craziness and what drives Bitcoin's price, you know, is it, is it, um, you know, as simple as supply
Speaker 2 00:08:46 And demand, it is very much supply and demand. Uh, there is a 21 million cap on the existence or on the, uh, amount of big ones that will ever exist. They are released programmatically over time. So every 10 minutes, new Bitcoins come into world and until there's 21 million and then there will never be anymore. So it draws a lot of gold comparisons for that reason. Like it's seen as like this finite supply digital version of gold reason, people like gold, you know, for its scarcity. Uh, they also sort of like pick one for the same reasons. Um, so as far as like the price, like what drives it or yes, it ultimately is supply and demand. There's sort of a two parts to the price. And my perspective is like the value in use. Like what are people actually using it for its intended use cases?
Speaker 2 00:09:33 Like what are the real world applications of this technology? And then, you know, it's a big idea. A lot of people like are buying into like its future value on you. So they're speculating on it. So there's like the value and use. And there's like this speculative premium on top of when you look at these price gyrations what's ultimately happening is, you know, people get excited for whatever reason they drive up the price because there's only a fixed amount. This brings in more speculators and creates this sort of like cyclical loop. Eventually we run out of marginal buyers. You know, there might be some news that comes out like it's going to, and it just washes out versus the speculators speculators, take their profits. People start to capitulate down, down, sell, sell. And then, but what you find is like with each run-up and each subsequent crash, there's an ever increasing base of users that have stayed around each new cycle.
Speaker 2 00:10:18 New people come in, it brings in speculators, but some of those speculators turn into like users of the asset and go back and look at our historical price chart, a Bitcoin, you're going to see a big, run-up a big crash, but the crash has never to this point gone below the prior sort of cycles, you know, average level or, you know, even the peak to this point. So, you know, the prior cycle, Altima of 2016, kind of what we talked about, I think like the drought $1,200, uh, subsequently crashed about $150 and then slowly regained over a few years. And then in 2016, it reclaimed reclaimed that $1,200 price point ran the $20,000 came back and crashed at $3,200. So it was almost three X it's prior price highs where it settled in at, and a couple more years, just slow grind up. And there've been say, reclaims, those highs.
Speaker 2 00:11:12 And then it's off to the races again. So that's kind of where we're at today. You know, we, we broke the all time, the prior all-time high back in December at $20,000. And then it, uh, has since three X that, and now we're kind of coming down a little bit. I don't know if the bubbles or whatever you wanna call it. The, I don't know if the top is in, I'm not here to make those calls, but, uh, we are in this sort of price discovery mode of, um, nobody really knows like how much of the existing prices like value and use and how much speculation, you know, along the way we are going to have these like big major corrections where we'd wipe out some speculators, build a new base and then on to the next one,
Speaker 1 00:11:53 Intent is to be a currency. Correct? Like, is that what it's purposes? A currency?
Speaker 2 00:11:58 Yeah. It's certainly like a currency. Like, I guess you have to define currency if you want to, like, if you want to classify it as such or not, um, it doesn't really act like a currency from the standpoint of like all the tool. Um, but that's like true of a lot of currencies, right? Like, I mean, there's one on the Boulevard, Argentinian peso, like there's a lot of like volatile currencies against dollar. This is one of them that, that draws a lot of people away. Like it's too volatile to be a currency. That's where they sort of disqualify it. But like we've never really seen a monetary asset go from worth zero to work like many trillions of dollars ever before. Like we have real-time pricing of that progression. Um, so like there's expected volatility at what, like along the way, like we, if it is going to achieve what people think it can, it's inevitable, but we're going to have some upwards and downwards volatility. Will it be used for everyday payments? Like, is it going to replace the dollar or, uh, any other like become the one global currency? Like probably not, uh, it's much more likely in my opinion that it acts alongside of it as like a sort of like a gold equivalent. You can kind of store your wealth in the big point. And then when you're ready to transact, you just move over to like the currency of your like local and wherever you reside.
Speaker 1 00:13:08 Yeah. I think the, the number one, uh, question people have at least that I talked to is, you know, should I invest in Bitcoin? And I think they're saying the word invest. And so they're thinking of like, can I get, can I do better with my money in Bitcoin? Like their mentality is like, I invest in my whatever investments I invest in now. And should I move those investments to Bitcoin because they're going to do better. That's kind of the number one question people have. And I think they're seeing their buddies, you know, everybody talks about their wins and not their losses. Uh, so people are talking about all their Bitcoin winnings, uh, at the dinner table and all that stuff. So what are your thoughts on,
Speaker 2 00:13:52 Yeah, so like the investment case for Bitcoin, I guess is the question. Um, I think it's a compelling investment case. You know, everybody kind of looks at the price, uh, and you know, what is worth $40,000 or $37,000, whatever it is. Like that seems like ridiculous, like no stock, like the compared to a stock or something it's so far from us so far from stock. You're exactly right. But that's like, everybody's sort of anchored to that. Like they, when they think investing, they're comparing it to a share of apple or two, you know, a dollar for even like, if you are thinking currency, like we'll compare it to a dollar. Like, why is this where we're 37,000 of what I use everyday? Like, you know, that's the normal objection. Like it's a currency, you can buy anything. You can't do anything. Why is it worth anything?
Speaker 2 00:14:31 So like the investment case is like, you have to sort of step back and actually compare it to what it could be. So like once again, like the number one thing that people are comparing it to is gold. Uh, it's finite supply, it's non sovereign, meaning it's not controlled by any government, just like gold. Like that is, that is the, the comparison. I, you know, the people that are really convicted by it, like think it's a lot bigger idea than gold. Uh, you can't really transport gold. It's hard to sort of verify it's sort of hard to audit the supply. We don't really know what the supply is out there or what the, what could be uncovered mining. Like there's a lot of like things about gold that people, the Bitcoin is way better. But just to like contextualize the price of Bitcoin across like gold, if you were to equalize their market caps against each other one, Bitcoin would be roughly like $350,000. Uh, so Bitcoin, the people who like Bitcoin think that it is a much bigger idea and a much has a much higher ceiling than gold and it has a fraction of its market cap. So we still see it as like very nascent, very young, very with a ton of room for growth. There's still like, you know, it's still very difficult to get your hands on it. You gotta go through a lot of hoops. There's a learning curve, you know, the barriers there,
Speaker 1 00:15:47 What do you mean? Get your hands on it like to literally transact is not as easy as it.
Speaker 2 00:15:52 Well, you have to set up an account with like crackin. Uh, you have to go in and give them some, like I say, it's like sort of opening up each ad account, but like it's a little bit more difficult. There's like all these passwords that like, people are intimidated. There's like all this, uh, you know, negative press all the time about why, like, you know, it's, um, you know, people are stealing it, like robbing me, you know, like there's a lot of financial advisors hate it. Yeah. Financial stuff. Yes. They really do, uh, Bravo eating. They don't talk. Yeah. So there's like all this like negative attention on it. There's all these like, uh, obstacles to sort of like getting it. And, and as a result, like you have to put in work to like actually understand it and then go figure out how to hone it. And so I see that as like an investment case, like half the people don't know how to do it or unwilling to learn about it. And if this becomes like, like sort of like a bigger thing and I'm more in it is like every day we see it. Um, if someone can make this easy to buy and hold and send it, it's only going to lead to more appreciation, more ownership across the 21 million big ones.
Speaker 1 00:16:53 Yeah. It's so different than everything else. It's difficult to compare to things you think of like a company like apple stock. I think that's what most people, like you said, compare it to, but that's like a business, an entity and it, the profits are what drive the value, uh, you know, of the underlying stock, but Bitcoin is, people have a hard time wrapping their heads around. Like, what am I actually getting for my, my dollars that I put into my Bitcoin.
Speaker 2 00:17:26 Right. There's no cashflows. There's no, um, there's no earnings. There's nothing like that. So like, once again, I'll like, say like to view it through the lens of like your equity portfolio is like the wrong way to do so. And that's the most common mistake I see people say like, they really want to compare it to like apple or something like it's, but it's not that at all. It's, it's much more kinda gold, like a, a commodity of sorts in the reasons that people like build or the reasons that people like they're going, like, you know, when you talk about like a non sovereign currency or a non sovereign asset, the, you know, w when, when you're in the U S like to talk about like, removing your money from government control or something like that, that's not that compelling. You're like, like we're pretty stable.
Speaker 2 00:18:05 We were pretty stable economy, pretty stable government. But like, when you, when you think of like other parts of the world, that's not the case. And in fact, I see it every day. Like people in like Nigeria are trying to, like, as soon as they get paid in their local currency, they're trying to get out of there. Um, and the preference is dollar. There's not a lot of dollars government, the us, government's the only people that can supply dollar. So they look at the next best thing, you know, Bitcoin offers a way to like exit your local government, like currency with nothing more than an internet connection. So ultimately the reason people, the reason people are wanting to just because they do have skepticism towards governments, and like, you may not have skepticism towards the United States to be able to exit it is it's the same way as gold, like posing like gold historically throughout like many millennia has been used as a money and uses an asset.
Speaker 2 00:18:54 And only recently, have we gone away from like this gold standard or this callback standard to this more Fiat based economy and people are now saying, well, we, we, we may not want to do that. We want optionality. If we don't like our local jurisdiction, we don't like what our governments stands for and what they're like, submit us to like capital controls or what have you. We want to weigh out. And Vic one offers that. So it's not a company it's not to view it within the context of apple stock is missing the markets more. So it's a much bigger idea than that. Apple is a single company within the United States. This is like global, like asset that is available to anybody and everybody. And yes, it generates no cash flows, but like, you can take ownership of your financial life. Yeah.
Speaker 1 00:19:40 So what drives, like if we're looking five years from now or something like that, like taking a little longer term approach instead of like, so Bitcoin is so volatile in day by day, even, you know, week by week, it's like very, very vulnerable still. So, um, if we take kind of a little bit of a longer-term view, like what happens that drives the price up in the next, like five years from now, let's say the price goes up a ton. Is it just simply more people are interested in it and wanting it in essentially, you know, demand is higher. Is that what what's going to drive it up? Is that kind of a soul
Speaker 2 00:20:13 People see, like Bitcoin's eventual dominance? Like, so when you're the way you're describing it, it's like a higher price. Uh, that's kind of how we measure its dominance. Like its acceptance in society. Like you think about that value in use, how many people are using it. Like you can kind of approximate that from this price. So for it to go much higher means more people are adopting it. And you're like, what is going to drive that? So you can sort of like view what might happen in the future by kind of looking at what's happened over the past 12 to 15 months, like March of last year we were trading at $4,000. COVID crash. I think it was 50% in a single day. And then it's cross 68 out of 59 person
Speaker 1 00:20:50 In a day. So everybody that had investments lost 50% max at the bottom. And that was over the entire drop Bitcoin lost 50% in a day.
Speaker 2 00:21:01 I mean last week, last week it lost 30% of that. Yeah, yeah. Yeah. So it's, uh, that is like just to be expected. That's not without precedent. It's not, it's not fun when it happens, but like painful. Yeah. But for everybody that held on, like you've been rewarded with like a 15 X from peak to trough trough the peak, whatever. So, you know, what's going to, what is driven. That is the question. And then like what might be similar drivers of future appreciation? You know, moving forward is number one, like talk about like exiting your government or like x-raying your local government led like Fiat economy, like governments printed a ton of money, right? They flooded the system. People are fearful of inflation when people are fearful of inflation, they look for like gold. Remember Bitcoin is like a parallel to gold. A lot of people seem to similar ones, way smaller ones make way more nascent.
Speaker 2 00:21:56 It's riskier as well. Gold doesn't drop 50% a day. But, uh, but the reason a lot of people are flooding. And then like there are people who are coming out important people with a lot of money behind them that are coming out in support of it, you know, many hedge fund billionaires, some of the best like macro investors of all time are coming out and saying, I'm betting on Bitcoin, Stan Druckenmiller, Paul Tudor Jones. There's a, it seems almost like every couple of months, there's someone big like that who is saying I'm coming behind Bitcoin and the reasons they are sort of,
Speaker 1 00:22:31 And that drives the price up because that's more demand. And even on most puts Bitcoin and Tesla and all that.
Speaker 2 00:22:38 Yeah. So like it started with like these big, like hedge fund billionaires coming in support of it. And then, you know, the next big wave is like this corporate sort of adoption, you know? So the first big, the first like publicly traded company put money or to put Bitcoin on their balance sheet was Michael Saylor of micro strategy. He did that back in the fall. I think Dick mustering around $12,000. And he put 100% of micro strategies, balance sheet into big horn, 100%
Speaker 1 00:23:04 Of their balance sheet in the big one. Yeah.
Speaker 2 00:23:05 100% of their cash reserves, corporate treasury. Yeah.
Speaker 1 00:23:09 So he essentially replaced their dollars in the bank with Bitcoin, right.
Speaker 2 00:23:17 A hundred percent. And he still continued to it. He actually went and took on, I think like a billion dollars. He's actually taken on two separate debt offerings since then with the explicit purpose to buy more Bitcoins
Speaker 1 00:23:27 Where that, that confuses me a little, like, is he investing for a, uh, liquidity reserve function or is he investing for the speculation? Like what's,
Speaker 2 00:23:39 He sees it as like a liquidity reserve. You know, when you look at the government printing money, like I'm not taking a particular stance on this, but like, in his words, like in his point of view, he sees the dollars depreciation as an inevitability at 100% chance that holding cash on your balance sheet is going to lead to like massive depreciation. The purchasing power is going to go down. And so he's taken a very extreme stance to put up, to go to a hundred percent opposite. And he's thinking very long-term he thinks, you know, this, he sees this as an ability, like if you can stand or withstand like the market cycles, you know, three on a three to four to 10 year time horizon, uh, you know, corporations are intended to last forever, right? So he's thinking from the, from the perspective of 10, 20 forever down the line, if he wants to sustain. So to like keep it into appreciation at a depreciating asset, it doesn't make a whole lot of sense to him.
Speaker 1 00:24:33 That's not his entire net worth. That's a slice of his pie. Basically. I think that's what a lot of these billionaires are doing. Or some of them all in, on their entire net worth.
Speaker 2 00:24:42 I could say there's a little bit out there. He played she's think about a hundred percent everybody else. Uh, you know, they're probably just like, yeah, allocating some portion to it. But you know, the importance of Michael Saylor doing that with a publicly traded company has all these reporting requirements. Uh, you know, he has to defend to his shareholders that he's acting in their best interest. I have fiduciary responsibility to do so. And he felt that he was able to, and you know, every other publicly traded company would have had to make the same Defence and we'll still have to make the same defense, but by one person doing it and now it becomes increasingly likely that someone else can do it. The defensibility of it, all of it, they can point to these other people. Like I'm not the only crazy person out there this way. And so the next big one was Elon Musk and yes, he did not put all of it, but he put some, and he put $1.5 billion worth for what a lot of people consider the greatest entrepreneur of all time. That's a pretty big statement. And so Elon Musk feels like it isn't his shareholder's best interest. If you hold big point on its corporate balance, instead
Speaker 1 00:25:48 Of is he, do you kind of similar thing you replaced his cash reserves kind of yep.
Speaker 2 00:25:52 They're just moving out of, out of a hundred percent cash position and into a more like, you know, hybrid sort of allocation. It's just like a diversifying play more so than anything and any other there's other companies too, like mass mutual, like one of the big insurance companies, historically one of the most conservative industries out there is insurance companies and maybe put a hundred million dollars on the balance sheet. So, you know, eventually the enough companies do this, that drug's price up. Oh, it's certainly something that happens. But it becomes like almost self-reinforcing where, you know, if you have to defend your shareholders, you know, this fiduciary standard, eventually you, you, if everybody else is doing it, you have to make the compelling argument why it's not in their best interest to put at least some sticks, some exposure. So like the idea like where's this, where's the next price appreciation going to come from? It seems likely that if that does come, it'll be from like more corporation or institutional adoption yet what
Speaker 1 00:26:56 Causes it to go down? Like if that's, I mean, I get the whole, it goes up like people put in more money, big, big boys. When the big dogs start putting in the money, that's going to really drive it up. And the more that happens, that's going to make it even happen faster. And especially if like we turn over currency to it and all these things are leading to price, increases with a supply and demand set up. But like what kind of scenario causes the price to go down? Not day-to-day, but long-term like five, 10 years from now.
Speaker 2 00:27:22 I got a lot of unsolved questions out there. A lot of unanswered questions, I should say, you know, this is still experimental. Like we're dealing with software. If anybody that's ever interacted with software technology, like it gets buggy. Like there's like unforeseen issues that are out there. So like perhaps we run into something like ridiculous within the protocol that causes it to, you know, become obsolete. Secondly, you know, there's a lot of like regulatory uncertainty. If the us government decided they wanted to like outlaw it's transferred ownership, it makes companies like mine where people are buying and selling it. Uh, like we couldn't operate here. Like a lot of people will be scared off and like sell there's a lot of assumptions built into like the network itself. Like what makes it work? It's ultimately an alignment of all these incentives. And you know, one of those incentives is like the new issuance of big one. Like that's a reward for people performing a very valuable service, which is to secure the network. And once those Bitcoins that new a, of Bitcoin runs out, like, is there going to be a sufficient reward to encourage people to continue to secure the network? So there's all these assumptions built in that haven't yet been completely stress tested. And so there's, it's possible that down the line, we realized that one of those assumptions was not robust enough. And, you know, we, we had, we would have to iterate at that point. What about
Speaker 1 00:28:48 Competing currencies? Cryptocurrencies? Does that have a negative effect on pricing? Say for Bitcoin, like if there was no competitors, would Bitcoin's price be higher and then if there, because now there's a ton,
Speaker 2 00:28:58 Right? I mean, as, for as long as it's like attracting some capital that would otherwise go to Bitcoin, I guess it impacts it. Um, I don't think that's like a super compelling reason to be skeptical of Bitcoin. You know, when you think about like monetary goods or like really any good with it relies on a network effect, the relevant you, you, it takes a, it's really difficult to replace like the homes the first week when it was the largest pointed is, uh, has been around the longest. The reason it has achieved sort of the significance that it has is because it is like an order of magnitude or many orders of magnitude better than like its predecessors to try to supplant Bitcoin. You're not going to be able to do so by competing, like with features, like, you know, there's all these people coming in, this one's a little faster, this one's a little, little cheaper fees, something like that.
Speaker 2 00:29:48 Those like, you're, you're, you're trying to compete with. Like Facebook is a good example of like something that relies on the network effect or its relevance. Like reason people are on Facebook is because all their friends are on Facebook. Someone can just come up with a new idea tomorrow that like, is Facebook with a slightly better feature set. Basically we'll just adopt it. If it's actually that important, like competing monies is like Bitcoin has like features that prior to this existence, like were not possible. You know, now that it's possible any newcomer that tries to supplant it with like an incremental sort of improvement is like, it's, it's a sort of fool's errand. It's just not feasible.
Speaker 1 00:30:27 So Facebook is, I like that example then, cause you know, a network Facebook, if for any of you all that were in the early days of Facebook, it was super fast growth. Um, I remember I was in college when there was like, they were doing it like selective colleges only and everything. And you're like, oh yeah, you got in your colleges on Facebook. Um, and then it grew extremely fast, but now Facebook is in this kind of phase of like, I don't know, is it still growing? Um, I'm getting out. I mean our age group is like getting off of it. Like they're kind of like trying to phase out of it and you know, I haven't been on an, in, you know, quite a long time. And so with Bitcoin, I'm curious when they hit like, uh, they kind of get their market presence or whatever, when they hit their stride and have full market exposure. I don't know what you call it. But at that point, like what happens to pricing? Does it stagnate? I mean, because then there's no new supplier new a demand. I mean,
Speaker 2 00:31:25 Like that's probably the expectation is that like the volatility that body's sort of scared of now will get you to overtime. There's just a saturation of like, people want to interact with it. And those people are like in it more sore. They're not like you, you you've turned all of the speculators and users, right? So at that point, like there's not much to wash out and you know, the beauty of like the technology and like what it aims to solve. Like if you're thinking from a, you know, inflation edge perspective is it is disinflation or there's a fixed unit. So for every incremental dollar that people which turn into it, it's just gonna lead to a small appreciation and its overall price. So it becomes like this perfect sort of a preservation of purchasing power. You just kind of stick in it. And you know, a lot of people in your world when you're talking to your clients about investing a big part of that conversation is I want to put my money to work, right?
Speaker 2 00:32:17 The reason people want to put the money to work is because they fear that it's not gonna be worth as much or they can't buy as much a year or two down the line, like, like the housing market or something like that. Uh, you know, people want to be able to buy the same things a year from now two years, five years from now that they can't that historically the way people have combated that is through investing, investing comes with all these sorts of risks. Um, at some point the idea is that Bitcoin becomes mature asset. That is not necessarily an investment. You're not trying to get outsize returns. You're just simply trying to preserve purchasing power. It becomes like a, it's a savings technology, not an investment, that analogy, but like it is so young, like it's an investment and you're definitely assuming a bunch of risks, but people what people see like the end state of this is like this much more muted price action. It's like, it becomes way less interesting for me when, you know, watching the chart every day. Right?
Speaker 1 00:33:08 Well, there's now there's so much volatility in speculation. People are making bets on and essentially even some in the short
Speaker 2 00:33:16 Term, oh no. The short term is like, where is the almost like sole reason for the price rise and crash? It's like people will buy, especially on leverage. No people are borrowing money to put into this thing
Speaker 1 00:33:30 And you see data on like the long-term buyers versus the short like short term. I mean, do you know an idea of like, who's the short term traders versus like the long-term buy and hold people.
Speaker 2 00:33:41 So yes, you can, you can kind of look at where the Bitcoins are coming from and going to, and how long it was since they last moved. So there's like all these metrics that people check, like there's actual companies like many like billions of dollars that have been spun up whose sole purpose is to track the blockchain and like gather all this data and like aggregate it. So one of those like is like, it's kind of like a metric that tracks when the coin was last and that gives you a composition of like how, like how many people are long-term holders versus how many people are just like, I've just acquired a or they're there. This wallet particularly is like really, uh, you know, historically has been like a net seller. Like they're, they're not holding positions for very long. You can gather all this data just by looking at the blockchain.
Speaker 1 00:34:27 Well, there's a base though. My point is there's a pretty substantial base of long-term buy and hold type people.
Speaker 2 00:34:33 Sure. And that number, it's really hard to tell though, because like the only way to know if someone's buying and hold for a longer, at a time, they would have had to have bought a long time ago. Right. So, you know, every day, presumably if there's like people, there's new people coming in with the intent to buy and hold for a very long time, but that won't reveal it. So for many years, like you can definitely, it's hard to tell, I guess it's more difficult to know who's a longterm older than it is to know who is a short term holder because their wallets or addresses might have a long history of really frequent or like short term transit.
Speaker 1 00:35:09 So everybody, a lot of people were interested in it, like at what do you think is a responsible way to start investing in it? Um, for someone just, you know, maybe you have interest in that and you're like, uh, sounds like a good kind of alternative,
Speaker 2 00:35:26 Uh, well you can create a cramp and account cracking. Uh it's it's you know, ways to do it as like, just to, I think put a little bit of money at like, there's a lot of really easy use solutions. Crackings one. How do you spell that? K R it's just like the sea monster. Yeah. Where the cash app, like, something like that, like there's a number of ways where you can just like buy it, but you know, start small, get familiar with like how to like what it is, like get, get your own tolerance for like its volatility. Like how do you feel when like it goes up in percent, a day or down 20% a day, like 50%, one day drop. Yeah. Like you definitely need to like run through the scenarios. Cause anything is possible. Like very well numbers are fast. So like one is just like to get exposure, uh, create an account by a little bit transact a little bit, like move it to your cell phone. Like just send it from an exchange to like a self custodial. Like
Speaker 1 00:36:25 What does that mean? You've lost me there.
Speaker 2 00:36:27 Yeah. So the beauty of Bitcoin is like, you know, in your space, like you're always mindful of like custodial relationship. Like who's your facility. And like who's overseeing like the assets of your clients. There's never a sort of live in a possible way for someone to be like, I want to be my own. I want to hold it the same way I hold my a hundred dollar bill in my wallet. Um, you have to keep it with someone else. You have to keep it to the bank to keep it with a TD Ameritrade. You know, with Bitcoin, you can tip, retain self custody. You can keep just like you have a wallet in your back pocket. You can have a digital wallet that exists like your cell phone on a USB drive. And you can like withdraw your assets and hold it yourself. Nobody else oversees it like this. This is self custodial, like technology. That is the, uh, sort of breakthrough you can now do that.
Speaker 1 00:37:16 That's interesting. So start small. So I think I'll throw out some ideas for small. You've got around because I'm, this is my financial planners to put it in coming on. And I would say this about any like highly volatile speculative asset, um, you know, just, I think percentages of assets or percentage of net worth kind of maybe so that you can kind of define small for you. So like maybe, I don't know, uh, 5% of your investment assets is like a kind of a 5%, 5% or less is kind of a small, you know, or reasonable, I guess is a better word, uh, way to start. And maybe even like 1% or whatever, if you have a substantial amount of assets, like that's not gonna make a big deal in your long-term goals. And it's kind of a way to dip your toe in the water.
Speaker 1 00:38:08 But I think some people seem to have with, with Bitcoin, people have been, I've seen people do it pretty reasonably, but I think most people when they really, the average person starts to kind of get a taste for it. Like say they buy some right now they start small. They put 1% in their, uh, their assets and it's what is it now? What is it? 30,000 or something. What's the value of it? 40,000. So like in two weeks it'll be $80,000, for example, it'll double. And then what happens to a, uh, early investor I've had this happen to me before, you know, a beginner investor is you attribute that doubling a value to your own skill. And so then your natural result is to put more money into it. Is that the healthy way to put more money into it? I know you're not going to say yes, but what's the healthy way to put more money,
Speaker 2 00:38:59 Just dollar cost average into it. Like for me, I have a little bit of like, I get paid like a little bit, every pay period just sits there. Um, you know, the job is a hundred percent of your paycheck now. Um, uh, you know, the saying, it's kind of like when the price is going up, like you didn't, you never have enough exposure, but when the price is going down, like you always have too much exposure. So like it's yeah. It's like really tough, like psychologically to like manage expectations. So, you know, I think it's wise to like put a little bit away every so often it, and then like just reevaluate, take
Speaker 1 00:39:38 The volatility, emotion out of it and yeah.
Speaker 2 00:39:40 Yeah. Just like don't even think about it. Like, I would never encourage anybody to get involved in this, like on a non multi-year time horizon. Like if you're expecting like average levels within the next six to eight months, like that's entirely possible, I guess. I don't know, but like probably not likely. And it's certainly not like, uh, reasonable to like go into that with, uh, as, uh, as the baseline, like expectation there's a market can like humble you like really fast. So it's certainly a better plan to ease into it. Just set like rules, rules based investing a hundred dollars a month or a week, whatever you want to do. I don't know. Yeah.
Speaker 1 00:40:20 Start small. Are people putting their, uh, qualified assets in Bitcoins?
Speaker 2 00:40:25 Yeah. There's like, uh, like growing contingent of
Speaker 1 00:40:29 So qualified assets or like a Roth IRAs or
Speaker 2 00:40:33 While people are doing like the self-directed IRA route to actually the whole like point within actual big points in their, uh, qualified accounts. But, you know, there's like a closed end fund. That's pretty popular called GBTC, which is like, sort of like approximates, like big one. Like it's, it's backed by Bitcoin, but like, it doesn't perfectly track the price of it. It's like right now it's trading at a discount. Um, but like you can buy that. It's pretty expensive with fees, but people definitely put it in there. The easiest way to get exposure to the price. You won't actually own the asset, you get price exposure, and you can do it in a qualified manner. You know, the big, like exciting like thing that people are looking forward to is like an actual, like ETF, the tracks, it, you know, that actually is NASA like nav back to the Bitcoin. Does that exist? No, not yet. So like a lot of that's going to in theory, unlock like a huge capital base. It's
Speaker 1 00:41:24 Going to drive a Bitcoin price up, theoretically, because it opens up a lot of hours, a lot, lot more demand.
Speaker 2 00:41:30 So no, it doesn't exist yet. Uh there's like tons of proposals out there, like getting approval for that is like really difficult. So it like is heavily scrutinized. I gotta make sure like all these like investor protection type discussions that have to take place on your regulatory level. But yeah, like hopefully like, you know, a lot of people think it's like not so far away.
Speaker 1 00:41:49 Yeah. So it's not a get rich quick scheme. It's not, it's just, it's a very new still, uh, early in the game. Technology really is. It's really a technology for digital currency. Right. And I think having a, you know, you gotta look at it like any other investment, having a very objective, uh, unemotional view of it. And I remember we've talked about this before is educating yourself on it. If you don't understand it, we've talked about this, Jason, I have many times in the past, like you need to understand it to some level before I think you start investing, especially bigger dollar amounts. Um, I think there's a lot of people that have big money and then they don't exactly understand.
Speaker 2 00:42:35 And those are the, yeah, you're exactly right. Like it's a difficult learning curve. A lot of people get like jumped in two feet first and they are like the first sellers, when things go wrong, it's like, everybody thinks they're like convicted and they get to the teeth a couple of times and they're not so much anymore. And so like for sure, we definitely want to be responsible. Well,
Speaker 1 00:42:55 I know you don't make predictions, but our final, as we wrap up, I want you to make a prediction. Tell me what the Bitcoin landscape you don't have to like, I mean, I'm not looking for like prices. I'm just talking like generally, what do you envision the cryptocurrency landscape looking like, let's say, I don't know, five years, even as a long time, because five years ago was when it was really, really early. So like, let's say five years from now, what do you think it looks like?
Speaker 2 00:43:20 Uh, I think it becomes like way less sort of tattoo or I think it's going to be increasingly common to wear any and you may not even know you're interacting with it. Technologies are like growing. It's like a very, very rapid pace. It becomes less interesting. Like you're not going to have people on your podcast trying to explain it because like, people aren't even gonna be thinking about like the price will be like, I don't know, maybe maybe higher or lower in here. I don't know. But, uh, if it does get adopted, which I think it will, uh, or it's just going to be a fan, not dislike, crazy idea. It's going to be not looking forward to that day. Just, it's just another thing.
Speaker 1 00:43:54 Like it's like, um, kind of just like any other things,
Speaker 2 00:43:58 Just, it just exists and it is, it serves a purpose.
Speaker 1 00:44:01 Do you think that'll be five years from now where it's kind of like a mainstay
Speaker 2 00:44:04 That's probably like too soon. It'll certainly be more of a, maybe say like for every
Speaker 1 00:44:11 10, 15 years from now, like it's just a thing is that the people, the people that make price predictions on Bitcoin is that based on that future assumed price, when it's become a thing base basically, or you hear people throw out like crazy Bitcoin future price, they're like, yeah, it's going to get to 250,000 or something. Like, is that kind of what people are talking?
Speaker 2 00:44:31 I mean, yeah. Like people aren't going to stop, like talking about it. Like, it's this crazy thing until it reaches some mature state that was sort of referenced prior, like not 50% jobs in a day. Yeah. Like I hope I hope those are behind us. Yeah. Yeah. Like, but also not like 15 Xs appeared. Like there will be, you know, in, let's call it in 10 years, uh, in the 15 years. Like it it's much more muted like in its volatility. And when that happens, like, it's just, once again, it's just like another thing, like, you probably have some exposure to it don't really care. It's just within your broader portfolio. And it's used like, as a diversifying asset, it's
Speaker 1 00:45:12 Like people accept it for like, yeah. As soon as it becomes an ETF, it'll be, um, you know, kind of automatically built into all these people, passive portfolios, even if they aren't necessarily aware of it, because it's going to be a part of the index. Exactly. Well, good deal. Well, I appreciate you chatting with me on some, uh, crypto and, uh, as always good talking
Speaker 3 00:45:35 To you. Likewise. Thanks for having me on as
Speaker 1 00:45:38 Always. Thank you so much for joining us today. If you found this valuable, please give us a review on iTunes and share with a friend. Also check out our
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