Craft Advice Podcast

Hosted ByJack Csenge & Sean Moneypenny

Personal finance often gets stuck in the minutia. How much you spend on coffee or dinner are small details in the grand scheme of things. Craft Advice is focusing on large financial decisions. From investing in real estate to choosing a financial advisor, we want to highlight the large financial decisions investors make and how to work through them effectively

WTF is Bitcoin (EP.8)

What is Bitcoin? Everyone is going nuts and it seems like nobody has a great idea what exactly it is. Join Jack & Sean as they talk through everything Bitcoin.

Discussed in this episode:

  • How Bitcoin was created
  • What Bitcoin is used for
  • Risks
  • How to Make Money

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Transcript:

Please disregard typo’s, spelling, and grammatical issues.

Jack Csenge 0:00
Imagine if you lost

Jack Csenge 0:04
every so often, your bank account just went to zero. That’s kind of the same thing you just you lost your bank of america password. Well, you just don’t have any more money. But that’s kind of what’s happening here.

Jack Csenge 0:21
Welcome to craft advice, a podcast to help investors tackle the more complex area of their personal and business finances. Join jack and Sean as we discuss everything from investing to retirement and everything in between.

Jack Csenge 0:45
Alright, so we’re live here live. I have no idea but there is a way we can push just stream it out live. So we’ll figure that out.

Sean Moneypenny 0:55
What are you drinking jack? What are you drinking?

Jack Csenge 0:57
Oh, so I’m going with a Dinesen through today. So I have control freak who from Seventh Son to Pale Ale. Crushed her a couple of these nice in. These are good beer to sip during the Bucs game last night. It was a hell of a game.

Sean Moneypenny 1:19
The Bucs look incredible. I mean, Tom Tom hasn’t skipped a beat. He might be literally having like version unicorn blood flowing through his veins at all times. I mean, it’s a crip and he icon over there two touchdowns. I

Jack Csenge 1:36
mean, it’s in what is up with these guys, they just they’re angels. You know, during the, during the game last night, they had Al Michaels doing commentary. And he said something along the lines of like they went back and studied every year like how fast it was before he found the receiver and through the past. And his like, quarterback stats, I guess have been improving each year every year. I think he looks better than when he started. I would oh he’s

Sean Moneypenny 2:03
100% looks better than when he started because when he started he was a game manager now he just —- —-, the NFL it’s a grown up. Yeah. Don’t worry about so. But yeah, so I brought on a little it’s a little bit of a boring ones pretty it’s mass market at this point. But uh Hi, highlight little cigar city, little

Jack Csenge 2:29
with my back, a little tap of beer. my backyard,

Sean Moneypenny 2:33
lovely little IPA. But I’ve always been a fan I’ve been drinking this stuff for. I mean, God, it feels like 10 years now.

Jack Csenge 2:40
I don’t know. Dude, that’s a great beer. The problem with it is if you have one too many of them your next day needs to get a raise. It gets you. it’ll, it’ll get you. It’ll get you root. Good. So what are we talking about today, Shawn introduced everyone what we’re going to jump into. Well, welcome

Sean Moneypenny 2:55
back, everyone to craft advice. Again, jack said Sean Moneypenny here, we’re going to be going over Bitcoin. Specifically. I know we teased it a little bit last episode, but we’re going to be getting into the crypto space here. And I figured it would be best to obviously start with the king, king coin. and go from there, the Whopper Whopper, we’ll go for, we’ll go from the king. And then we’ll bounce out. I think what we’re going to do now just to tease this out a little bit more, we’re going to be doing a multi part series. So we’ll have other coins as featured in featured episodes going forward. But this is where we’re going to begin

Jack Csenge 3:35
on something else with the structure the so we’re kind of going to break down diving into the different areas of the crypto market over the next couple of weeks. And we’ll start with just an overview of what it is. high level, what’s the coin? What’s the idea? What’s the protocol? We’ll get into what the use cases are? We’ll talk about some of the risks. And then most importantly, can you make any money in this and how we’ll talk through some of those. And then we’ll wrap it up with buy, sell or hold. So let’s let’s jump in Sean to the overview, the history or at least a quick history of Bitcoin How the hell did this thing

Sean Moneypenny 4:13
come about? Fair enough? Yeah, not to get too far down the rabbit hole here because we could spend quite a bit of time but essentially spores

Jack Csenge 4:20
coming out. Let’s take a blue pill. The red section pellets down there. The blue pill keeps you in. Oh does it sorry. red pill, red pill. Damn it Come on

Sean Moneypenny 4:32
now. What it what it is essentially, this was a rebuke of the of the, you know, the financial system that we’re in it was born out of the financial crisis. Oh 809. You know, the famous pseudonymous creator Satoshi Nakamoto. Could be a real person could be a group of developers. There’s a lot of different theories out there. There’s some people that have tried to take credit for him. But really, nobody knows it’s still a still a myth, an urban legend. if you will. It could be the

Jack Csenge 5:01
CIA, it could be Ilan musk could be nobody knows,

Sean Moneypenny 5:06
who knows, there’s a lot of options. But essentially what it is, is, again, it’s, it’s built around the concept of scarcity, a fixed money supply, because obviously, what we saw out of the financial crisis was loose monetary policy, a lot of money printing, a lot of fed intervention, which is honestly what we’re seeing now in today’s day. So it’s a really good.

Sean Moneypenny 5:28
You know, they say they say history doesn’t repeat, but it often rhymes. And we’re seeing a lot of that today. So again, the concept is, there’s 21 million coins that can be minted in total, forever, that’s it, they’ll never be any more. And at its current pace, because again, these at the founding of it, there was a certain initial amount that were released. And then there’s a process of what’s called mining, where essentially, you’ve got programmers that will validate transactions, and they get rewarded for validating transactions. So it’s a self fulfilling prophecy or positive feedback loop, however you want to describe it with it, the network grows, and it’s rewarded for its growth. So it continues to grow, continues to get stronger, and then continues to reward itself. So again, at its current pace, the mining should exhaust that for 21 million, somewhere around 2140 is what current estimations are. But at the same time, then we can dig into it. There’s a million stories out there, but there has been a belief 3.4 billion there abouts that have been lost, or that are believed to be lost forever. And you know, some of those are pretty famous, like the the guy who lost it and in the landfill, I want to say it’s something along the lines of $180 million

Jack Csenge 6:52
in a little in a little bit on the podcast,

Sean Moneypenny 6:55
draft got thrown away. But yeah, so that’s, that’s, that’s a little bit of a quick summary. JACK, I don’t know if you want to jump into the difference between Big B, little B, you know, obviously, there’s the technology that the coin is based on. And then there’s obviously the coin itself.

Jack Csenge 7:14
Yes, if this shit wasn’t confusing enough, there’s two different ways to look at Bitcoin. There’s big B, which identifies some Bitcoin with a capital B means the blockchain it’s on. Bitcoin with a lowercase b is a little coin that everyone’s going nuts in their coin base account for. So again, the whole theory here is it in my mind, this whole concept of Bitcoin is kind of a play off of what you see in other even video games where there’s a currency for anyone using it. And the biggest thing here is you just need to get people transferring money transferring value, storing value, without having an intermediary. There’s not a bank involved. There’s not a technology company involved. The software was written the program is out there. In a way it kind of went so we’re gonna I think most of what we’re focusing on with today’s episode is the little B the coin itself, not the blockchain. I think the blockchain is kind of now being replicated with things like aetherium cardano salona. We’ll get into those in future episodes. But for today, we’re focusing more on the currency itself. How do we send money from place a to place B how do we hold money if you’re in a country like Zimbabwe that has a billion dollar bill because your inflation is out of whack? So let’s get into the use cases shot so what the hell am I using this thing for?

Sean Moneypenny 8:38
Yeah, no, so yeah, that’s what today’s episode is all about. It’s definitely got the the currency and Bitcoin itself How can you invest in it, but also what what can be used for the three main use cases or one you know, transfer of wealth, right? So remittance payments, remittance payments from your, for example of Salvador just pick it up as legal tender. So it will there was an estimate I was reading the other day, I think I sent you the article. But essentially, it’s expected to save them somewhere along the lines of $400 million in fees that they would normally pay to, you know, Western unions or any other these antiquated overprice money transfer systems. So they’ll be able to send money back and forth between the states and here so it’s a big way to transfer money from dollars to dollars very securely and very inexpensively right? So very cheap, and very fast and very, very securely The other way that go ahead.

Jack Csenge 9:37
I don’t know why it’s taken so long to disrupt like Amscot like if you go if you’re if you’re out having a bender of a night and you’re trying to go to Taco Bell at like one in the morning The only other thing open is like this sketchy Amscot somewhere.

Sean Moneypenny 9:55
Yeah, so when you all Amscot but the The other thing that I would add is that it’s also obviously, store of wealth. Right? So transfer of wealth store of wealth, which I believe is going to be its biggest and obviously seems to be its biggest, at least within the, within the developed world. So, remittance payments is like what’s going on in El Salvador? I think is what you’re going to see. Essentially, and I was, I was explaining this to you, or describing my theory behind it is that I think it’s going to eventually turn into a global currency for, you know, maybe the non top 15 currencies, right. So you take the US, Japan, China, the Euro, the eurozone, Canada, etc, etc, right, so you take the top, let’s call it 10, maybe 15, probably not even 15. But definitely the top 10 currencies in the world, they will survive, they will stay there, currencies are strong, their countries with strong sovereignty, etc, it’s unlikely to make too much of a dent in that, but I believe you’re gonna see a lot more Latin American, African and Asian countries really start to adopt this as a better means to store value and transfer wealth within their countries and from the developed world to those countries. So I think it will eventually morph into a global, other currency, if you will. So the developed country, the developed currencies, and then the global currency of other countries,

Jack Csenge 11:25
it’s kind of like, the Euro, I mean, the Euro is just a hodgepodge. And then if someone gets sick of it, and says, Now I’m done with this, then they do a Brexit, and absolutely leave and start their stuff over again. So that makes, it makes a lot of sense. But I think this whole concept of instant transfers from place a to place B, having a non government backed store value is huge. But this is where we get into what are some of the risks of this thing? I think the first one and, you know, with El Salvador be in the first place that’s like, yeah, everyone’s gonna get $30 worth of Bitcoin, you just have to download this app and where you go, I think we’re gonna run into a scenario where we have some confusion with most people, you know, especially in third world countries, most of their stuff is their wealth is tangible. It’s like a goat. Maybe some olive tree over here. Yes, something like that. And then, you know, there’s other countries where people tend to have maybe they’re used to a bank account. I know a lot of Asian countries are very cash heavy investors. But if you get into the concept of a passphrase, like, this is going to blow a lot of people’s minds when they for them to get access to their money they have to remember tuna, popcorn, shoo, shoe, Golden Ball, goldfish, Pat burrito. Hi, Mike Taylor, Michael sailor. I think you’re gonna have a lot of people just completely botched this and escaped dropped completely out of their bank, they have no access to it. So that’s, that’s one of the risks in my mind is it’s so secure and encrypted on one side, but you’re solely responsible for it. So if you lose that trust, I think this thing just unfolds. But that said, if you’re savvy, you can track this or write it on a napkin, and your house doesn’t burn on fire. And you’re fine. Yeah,

Sean Moneypenny 13:22
yeah, no, I mean, at the end of the day, dealing within the the pure coin itself is, you know, there are some growing pains and some, some newness to it that you have to become comfortable with. And there’s some technological literacy that that is required, if you will. Yeah, it’s not that it’s difficult. It’s just new and something different. So there are a lot of countries out there that may not be as familiar with it. But I think you’re gonna see, as these countries continue to adopt it, I think you’re gonna see entire ecosystems and companies or businesses spread around, fixing that problem, right, making it easier, making it more simple, making it more streamlined, making it more comfortable for people to get online and use this and maybe what it is, is someone

Jack Csenge 14:09
it’s kinda like the coin base model is you have to centralize it first, because it’s so damn confusing. And then if someone really wants to go off the grid, they can come off that and pull their coins on their own wallet do their own security, but yeah, I think you’re gonna have to have I think El Salvador is offering like their own wallet, their own branded wallet, and everyone just underneath them. So centralizing a decentralized asset, which, again, to each their own degree, you were telling a story about. Someone losing a wallet.

Sean Moneypenny 14:42
Yeah. So I mean, obviously, there’s the famous individual in England, right? He had he was an early developer had a kid I mean, honestly, the amount of Bitcoin off the top of my head escapes my mind, but I mean, it was in the hundreds of millions of dollars. current prices. And years ago, he threw it away on accident or his room got cleaned. And it got thrown away on accident. And he didn’t realize it and the trash got taken out. And this is like days later, and now he’s been in like a lawsuit with the city, trying to get them to basically turn over the dump and try to like sort this thing out. Which reality is there’s no way that that thing is even. Like, there’s no way he’ll be able to get that back, no matter if they found it or not the amount of rain I’m sure some contractor just smashed, it’s 100% God. But there is there’s just been hundreds and hundreds of these cases that pop up. Now some obviously you lose a little bit, and some lose hundreds of millions of dollars. But there is a tremendous amount of Bitcoin that’s been lost to the market.

Jack Csenge 15:51
Imagine if you lost every so often, your bank account just went to zero, that’s kind of the same thing. You just you lost your bank of america password, well, you just don’t have any more money. But that’s kind of what’s happening here. But that is I think that is a risk to this whole space. And some some big platform is going to figure this out how to really scale to sufficiently where it sticks to the true nature of being decentralized. But it gives you some protections on the back end.

Sean Moneypenny 16:19
But yeah, I mean, it’s clearly it’s something along the lines of a believe it’s about three and a half to $3.7 million, I’m sorry, three and a half to 3.7 million Bitcoins are lost forever. That’s the that I mean, that’s the most up to date, to my knowledge, the most up to date estimate on what’s actually do you think

Jack Csenge 16:43
technology and say like 2030 can go back and salvage them. If the AI gets so good. It can just say, Oh, this is stupid. I’ll just steal everyone’s wallet. I hope I hope for those people say that somebody figures something out. But at the current state of the fingers, they’re all screwed. Yeah, they aren’t doing anything else.

Sean Moneypenny 17:08
But at the same time, I will say that also does a little bit more to add to scarcity, right. I mean, that’s that’s part of what makes Bitcoin valuable is that there’s only so much of it. And you know, if you take 21 million, and then take almost 4 million of that out of circulation instantly, just because some knuckleheads lost it, then I mean, it already makes it that much more valuable.

Jack Csenge 17:33
Sucks to suck sucks to suck. I mean, it’s like the bank was at the bank see one that when they put it on display to sell at Sotheby’s, it just lit itself on fire?

Jack Csenge 17:46
Yes, it had like something in it to just burn the painting. Right? Yeah, if it got resolved, he would hit the button.

Jack Csenge 17:55
So last two risks that I want to hit on. And then we’ll get into how do you make some money in this space. The first, I think is volatility. You know, for most of us that are listening to this and and been invested in this space, you get it, you understand this as volatile. But there’s a lot of people I think about even my wife, I said, Hey, we’re gonna bank in this and your checking accounts at 30,000, then down to 5000, then up to 70,000, then down to 30. You know, people are gonna start losing their minds pretty quick. Yeah. So I think part of it to really be this global payment system and another stable coins, we can talk about that in another episode. But the volatility aspect, I think is going to be something hard for these to handle, especially in maybe communities or countries, where everything’s very, like a barter system, you know, I’ll trade you my coffee for you know, your gas and whatever it might be. But the other aspect is going to be regulation. So I’m wary certain big countries us would be one of them. I would think China would be another maybe Japan, a lot of these don’t want to lose their kind of government standing and have their you know, they have a sweet spot with owning the rails the payment system. Yeah. So I think that’s the last aspect of it is if regulation really pushes hard in this space, what does it do for the incumbents in the players?

Sean Moneypenny 19:22
I mean, I would say that it’s, it’s really, it’s nearly impossible to put the genie in the bottle, right? I mean, so there’s only so much they can do. They can pinch choke points, as far as you know, you taking Fiat putting it into the system, buying Bitcoin at growing it doing whatever and then you wanting to transfer that back out into Fiat. So those choke points can be monitored and can be controlled, but if you leave it on there, and then if enough of the ecosystem grows, to where you there’s really no need for you to take your money and turn it into dollars or turn it into you on or turn it into a euro. There’s nothing Not much they can do. I mean, it’s kind of like trying to fight the internet.

Jack Csenge 20:03
Yep. Well, that’s the, I think that’s the, like, if you were to think of the ideal scenario of how does Bitcoin become like the ultimate thing where its price goes to 500,000 or a million that people are saying, it has to get to that point where there’s no reason to convert your money back to dollars. You have to be able to fully operate I you know, I get paid in Bitcoin, I buy groceries in Bitcoin, I go to the bar with my friends and use Bitcoin. I go to sports better ever use Bitcoin I travel in, it doesn’t matter where I’m going, I, you know, go to El Salvador or go to Europe, if it gets to that point, this thing has a lot more room to run, it’s just a matter of how many people try to step in the way of it, does it lose trust before it gets to that spot?

Sean Moneypenny 20:50
Yeah, I mean, I would say I’d say essentially, for right now, in larger, more developed nations, obviously, the entire European Union, the US, Canada, Japan, I mean, even China, there’s no major reason for you to use Bitcoin for transactions, because it is viewed as such a store of value. And it’s such a fastly evolving market, that you’re holding on to it. And it’s, I mean, its growth rate is exponential. And it’s extremely, extremely, even though it’s extremely volatile, it’s extremely valuable, and something that you’re going to want to continue to hold on to. Whereas you take these third world nations that do have currency issues, that’s where you’re gonna see individuals more so use it as transaction airy base. Yep.

Jack Csenge 21:46
Very hard. There’s a lot of countries I was trying to find a list of, of currencies, what as far as the, the central bank currencies? No, no, like, so I’m, I’m looking up online, I just pulled up a random economics website, there’s like hundreds of currency, so many layers, they all have their own currency. Everyone remembers the picture that went viral of Zimbabwe printed like a trillion dollar bill, like, you don’t want to get to that place, because then your money’s just becoming mean, you’re those countries have to pull in if they import almost everything to survive. I mean, they’ve set hips, just pillage the entire land where there’s nothing left, they have to bring it in from other places, if your currency just keeps getting lower and lower, just keeps getting more expensive to do that. So this is looked at as a way for them to make money. Keep it in something that’s not the government. Yeah, hopefully, that that moves over. But so what I would say to this job, Shawn, and then

Sean Moneypenny 22:42
before we move on, I just wanted to circle back to your point, though, because obviously we’re here to provide advice, even though it’s not personalized. When it comes to being comfortable with Bitcoin, it’s something where you really have to be able to stomach a tremendous amount of volatility. And that’s why if you’re new to this area, I mean, so I’ve been in this particular space as an investor, personally, and with some clients since 2017, late 2016. And if you are not comfortable seeing massive, massive amounts of volatility, for this bucket of your money, then it’s not something that you really want to touch. But at the same time, it’s it’s if you are comfortable with the volatility, or if you become if you can become comfortable with it, right, maybe at first, you’re not, but once you realize it’s long term future potential, you can somehow you know, become comfortable with it over time. It’s going to in our eyes, and my eyes absolutely is pay off. Because it’s I mean, again, the growth has been exponential, but it’s something where you have to be comfortable seeing that possibility of a 70 to 80% drop in a six to 12 week period. Very short time. Yeah,

Jack Csenge 24:03
I think there was a good post that was going on Twitter that said, you know, if you’re looking to get 101,000x returns, that has to come with 80 to 90% wipe out so along the way, they say the stock market might do 5678 10% a year, you know, that’s coming with, you know, you’re not gonna see Home Depot’s price cut in half and then triple and then cut in half again and then triple. But some of this new technology, it’s swinging for the fences and trying to take over the global payment system and trying to take over all of the cash in the world. That’s a pretty tall Hairy Audacious Goal tall order. yet very tall order we’ll get into some of the other coins that are trying to really basically just destroy the entire contract and smart contracts. But so let’s let’s hop, Shawn to how you make money in the space so obviously, everybody knows I just wrote a post on again crafted craft dash Advice comm if you want to read it, talking about my thoughts on this space, as far as opening a Coinbase account and buying Bitcoin, I think you get free Bitcoin for just opening it up. But most of these wallets, that’s like the low hanging fruit, easy way to get it. You know, most people if you’re going to be doing this, I think this is one space where you could clearly dollar cost average into this. So you don’t have to throw a ton of money at this, you could throw, you know, 510 20 $50 on a regular basis, just let it buy in. The flipside, though, is maybe if your money is tight, your budget, you want to get this somewhere else, can I buy this in a retirement account? Can I buy this through my investment account? So let’s talk a little bit about maybe some of the ways to access this. So if I’m invested at Schwab, if I’m invested at fidelity, Robin Hood, what are maybe some of the ways we want to look at getting into this space?

Sean Moneypenny 25:53
Yeah, so if you’re a retail brokerage investor, there’s not a ton of options out there for you. Right, unless you are

Jack Csenge 26:03
sorry,

Sean Moneypenny 26:04
sorry. So the reason why I point that out is because so if you if you’re going to be a purist, right, if you’re going to have a wallet, if you’re going to go on, you know, a by Nance or Coinbase, or etc, etc, right? If you’re going to go on a crack in E, there are some I don’t want to say technological hurdles, but there’s just certain things that you’re going to be required to do that you may not be comfortable doing. And there’s nothing wrong with that. But that signup process is new, it’s different than just opening up a brokerage account at Fidelity Investments, it’s a little more invasive. Part of that is because they’re trying to cut down on money laundering, and they’re trying to clean up the industry. So again, I put all that out there. There’s also things that you could potentially do that. screw yourself, right? If you’re not you, you go on there, you you dump 100 grand, you don’t secure your wallet, or you don’t put it in cold storage, you don’t. And then you’re bounced around on other websites, and you get hacked your money. I mean, it’s if you’re not overly technology, if you’re not very technologically savvy, it’s not something I encourage the average person to do.

Jack Csenge 27:17
Yes, CNBC had someone on the other day that they you know, they showed the the couple of husband and wife and their two kids started investing money into their cryptocurrency and it went up like 150 grand, and then they lost their passphrase. Yeah, and somebody hacked their phone, through their email, got their passphrase. And just wired it right out of Coinbase is like, we can’t do anything for you all, you’ve

Sean Moneypenny 27:39
lost your password. That’s it, it’s gone. So that’s why, again, I point I emphasize that to say that the average person, unless you are very comfortable with technology, and very comfortable, the internet and just just setting stuff up of that nature, I would probably steer clear that there are not a lot of options on the security side. But there are options. And that would be the way that I would encourage most people to invest. Right? So when you look at it again, jack and I we’re not telling you to go out and buy this ETF or this, you know, this trust so to speak. But what I would say is that these are probably the most practical ways to get exposure in your portfolio, right as if you’ve got a $200,000 300 or $500 million IRA or savings or brokerage account, right? And you want to get some exposure to crypto to Bitcoin. gbtc right. So grayscale is probably the the leader in that front. And they don’t just have Bitcoin vehicles, they’ve got other other coin vehicles, they’ve got other diversified vehicles that are that are very good options to look at as well. But those would definitely give you something that you’re more comfortable with akin to a you know, hey, I’m going to go online and buy some Home Depot stock or I’m going to go on to my my Schwab account and buy some, you know, some apple, right, so this is something where you’re going to punch in a ticker, you’re going to pull it up, you’re going to see it’s quoted, you’ll feel very comfortable, you’ll be able to easily by that versus you being more of a purist setting up a brokerage with Coinbase or cracking or whoever getting a wallet and going through those steps that may not be in your best interest.

Jack Csenge 29:27
Yeah, I would encourage everyone especially at a minimum like Coinbase has Coinbase earn to free platform. You literally just take a picture of a driver’s license and open the account send it to them and they give you 30 or $43 worth of stuff in a wallet. So if you really want to try moving money from one wallet to another or just mean day trade 30 or $40 in a crypto wallet and have fun and see what happens at least you’ll you know either you’re burning a hole in coin bases pocket because their money they’re giving you but You need to realize there’s two different ways you can buy this, you can get it direct, like Sean said through one of the wallet, you’re gonna need one of those to buy it, you’re gonna have to be on a krakken, or a Gemini or Coinbase, or by Nance, or you’re going to go to an IRA provider, and you’re going to find something close of fun that’s kind of wrapped to track some of these, these digital assets. And there’s a lot of them that tracked Bitcoin, I think the grayscale as the Bitcoin trust was, which is like the largest provider. So

Sean Moneypenny 30:28
grayscales gbtc is the largest ospreay. I believe they launched earlier this year. ospreay is another company obtc is that symbol. So very similar to what gbtc is, again, just a different provider doing the same thing for actually a lower cost. But two very good outfits. outside of the US we haven’t, we haven’t the SEC has not approved yet. an ETF option. But there is I believe something in the range of 20 to 25 in the in the queue for approval. So they’re looking at ETF options just to give us more options to choose from as as retail investors. Outside of that, I mean, there’s a few in Canada that have been lost and have been wildly successful. So I believe it’s just a matter of when not if. But yeah, those would be the way that I would encourage the average retail person, average retail investor to invest or get exposed house

Jack Csenge 31:28
if, if you’re maybe in a different circumstance. So we talked on a prior episode about the $5 billion Roth, how Peter teal basically took his Roth IRA and just exploded it by buying every private company on the planet sounds like, but there are ways if you are a more hands on investor, it’s called a self directed IRA. You can use your IRA to fund startups by investment, real estate. And there are a few platforms that will let you connect your IRA directly to something like Coinbase. Auto IRA is one of the company’s rocket dollars, another company, again, do your own due diligence with these but you do have the ability to basically connect your IRA directly to a wallet and have the raw currency, or coin or whatever you want to have handles you if you want to really put Bitcoin in your wallet. That’s the way to do it. And especially this is probably a good idea for people that some people that work for a corporate company, the majority of your benefits are 401k match profit sharing. And you might match the 401k out where a lot of people have the majority of their wealth in their retirement accounts. You can use platforms like Aalto and rocket dollar, to expand your investment options. You don’t have to just have mutual funds, you don’t have to do to just have ETFs and stocks. Just keep in mind, you’re stuck doing your own research, they don’t help you figure out what to buy or when to buy, you are swimming in the deep end by yourself. So just kind of do your research.

Sean Moneypenny 33:03
Absolutely. I mean, research is key, you want to make sure you’re you’re comfortable with the firm you’re using. But to Jack’s point, they’re not advisors, they’re more so facilitators, right? They’re there to tell you what the rules are, in terms of you doing this legally within the IRS guidelines and helping facilitate that transaction outside of that. It’s your it’s up to you to make sure that transaction is something that’s in your best interest.

Jack Csenge 33:29
Now, what if, what if I don’t want to buy the coins? Maybe I maybe I’m out there and I think this is a hoax, and the CIA is actually behind this whole thing. And they’re trying to take down the world? How Shawn, would you look at investing in this space but not buying? I don’t want to buy bitcoin because I think Kim Jong moon or someone that is behind it. Or it’s Elan Musk, crazy ploy to go to Mars?

Sean Moneypenny 33:51
Yeah. So I mean, I would say that. I don’t know about those particular scenarios, those sound a little interesting. But let’s say you me, let’s say you don’t really have researched ideas. Let’s say you don’t believe that Bitcoin is going to go to the moon, it’s just going to stick up there in the stratosphere, right. So it’s not going 150 250 500,000 a coin. Let’s say you don’t believe that. But it’s currently floating around 45 to 50,000. And maybe it just stays here for a long time. It gets saturated, it gets adopted, but this is where it stays for whatever reason. The picks and shovels are really where you can continue to make money because again, these are companies that are mining Bitcoin. These are companies that are part of that Bitcoin ecosystem. And so as the industry itself continues to grow, they’re growing alongside with it right so even if for whatever reason, Bitcoin is volatile, or it’s stale, these guys can continue to make money. right alongside me again, there’s there’s several out there to the largest here in the States. have done it. exceptional job is scaling. They’re adding new rigs, as you know, as they’re called, they’re adding new rigs on a daily basis. And between now and I believe it’s q1 of next year, they’re going to have reduced their expenses. So the last year I believe it was q2 last year, their average expense was around 9800 a coin 19 $100 to mine a bit might have Bitcoin and by q one of next year 2022. So from 2020 to 2022, they will have reduced that to around 2800. So again, I mean, you’re looking at about a 70% drop in cost, while at the same time the cost of the you know, the price of bitcoin is going up. So I mean, you’ve got an exponential growth and what they’re able to sell the coin for, and then you’ve got a dramatic reduction and what their costs is going to be. So again, I think those are very interesting and in my eyes, the best way to invest it as a traditional investor, if you’re a traditional investor that doesn’t want to get into the hairy side of proof of stake proof of work Bitcoin theory of soul etc. I mean, if you don’t really want to get into the the dodgy tricky side of you know, traditional crypto, this is a very interesting way that still has a lot of upside and a lot of really unique investment characteristics.

Jack Csenge 36:22
I think this is another reason you saw stocks like AMD and Nvidia explode is because I mean, I I play computer games, I build my home computers, I cannot get any parts to upgrade the damn thing because what should cost me 11 1500 bucks cost like three grand because the whole world is mining cryptocurrency. Yeah, there’s a lot of ways you can approach this if you like the space, but maybe you’re hesitant on the coins themselves. If you think Bitcoin is going to be the best thing since sliced bread is going to be the dollar that covers the entire globe, then maybe you try to find some avenue to either get exposure through an IRA or set up a wallet and start buying into it. If you think that’s a load of crap and Shawn are blowing smoke up your ass, then you go the other out and you buy the picks and shovels you buy the people mining it you bind the people that are the chips facilitating it. The component manufacturers there’s there’s a lot of ways to invest with this space without having to invest in this space.

Sean Moneypenny 37:25
Yeah, I mean, a video I think it was a q1 of this year and a video made something along the lines of $170 million in, you know, in revenue just from ships associated with crypto with with with Bitcoin and crypto rigs. Or you can just buy Coinbase and Robin Hood and just let everyone else trade their money away. Exactly. But that’s the thing, right? So you don’t have to own Bitcoin to make money off of this space. As the industry grows. I mean, again, Coinbase is making money off transactions, right? So people are buying and selling it, whether the price is up or down, doesn’t matter if they’re buying or selling it, there’s transactions, and they’re making money, right? So you’re investing in that facilitator. So again, like we said, there’s picks and shovels, there’s, there’s these surrounding tertiary businesses, I would absolutely at a very minimum, look into something like that, just to give your, your portfolio some exposure. Yep.

Jack Csenge 38:26
So I’m gonna summarize this, then we’ll get into buy, sell or hold. So again, if you’re thinking of Bitcoin, you’re thinking of this as a global, decentralized way to send money and store money outside of the traditional banking sector. It’s the first mover, it’s the one that kind of started this whole thing. Again, there are a lot of risks, do your due diligence, figure out how to write down your wallet passphrase? I can’t I hear anyone that lost their wallet passphrase I have no sympathy for you, you This is part of what you’re doing. But from an investment standpoint, most people need to start looking at this in some capacity and just say, How do I get access to this? You don’t have to go load your entire net worth up with only crypto but you need to start looking at where should I be investing all of the brainpower. In the post I wrote this week. I think it’s 70% of all Ivy League schools now have Bitcoin education, as well as blockchain engineering and kryptos. two terabytes. Yeah, Ready Player Two was written and so it’ll be a books movie soon and that’ll further push this long but you really have to look at this as an actual space. So we’re going to get into buy sell or hold. This is our closing section, Shawn Archer throw some topics at each other and see if we buy sell or hold them. I’m going to start with this Shawn just because it’s on CNBC right now. But peloton is up about 18% in two days, on the fact that they announced a private label closed company so you’re going to buy sell or hold that I’m going to give one caveat. Just so we need to verify the actual value of this but Lulu lemon. You know what their market cap is? 200,000,050 5 billion very close. I don’t know shit about those apparel companies. Yeah, I’m wearing the pants are fantastic ABC ball crushers great but ABCs baby buy sell or hold peloton getting into the apparel game? I mean, I absolutely buy them getting into it. I don’t necessarily buy a pallet profitability out of it.

Sean Moneypenny 40:44
No, I do. I think the reality is, is you have a market that’s very there’s not a lot of competition, right? I mean, it’s Nike. It’s Adidas. And Adidas is old, lame, Nike for their own reasons. A lot of people are kind of shunning them, but there’s not a ton of options out there. I mean, Lulu lemans obviously blown up Under Armour. I mean, Under Armour is great. I think Under Armour is phenomenal. They’ve got a great stock I’ve owned them for many years. Very very

Jack Csenge 41:12
hate Under Armour colors. I don’t know what

Jack Csenge 41:16
they fucking just like pop up I hate them. It’s called structure get the bacon color structure. I’m where jack Nicklaus you see that it’s cozy that get the bears go structure. But yeah,

Sean Moneypenny 41:27
I mean, so I would say there’s just there’s not a lot of big players in this space. So if you can take a a healthy, you know, especially a company like peloton who’s seem to have built a very strong brand, a very strong following. And you take a rabid rabid fan base like that and say like Hey, now we’re gonna have clothing. I think all those people that have got all that disposable income because if you look at the average demographic for the people who are buying a peloton, they’re high income earners, they’re wealthy, they’ve got a lot of cash to burn, and if they’re going to come out with new clothes, I mean, you’re you’re going to be the nerd on the block without the new peloton pants if you don’t buy so

Jack Csenge 42:05
I buy it. I do have a peloton job so I kind of think I need telecon pants you definitely need peloton pants, we’ll call you We’ll call you Captain peloton pants Oh, fancy.

Sean Moneypenny 42:17
Alright, so what i have i’ve got a a related topic to the the discussion of the day do you buy sell or hold Bitcoin eventually surpassing or supplanting gold as a an alternative as as the largest alternative asset.

Jack Csenge 42:42
So this is gonna take, oh, we’re gonna have to bookmark this and come back in like five years. I’m gonna sell that idea. And my main thing is, so I think this, if you said a digital, whatever being like the replacement for gold, the digital store value. I just think the way technology cycles are so fast. In 10 years, there’s going to be something new that replaces Bitcoin. I think the dollars are going to keep flowing into the crypto economy. But I don’t think I think Bitcoin is going to slow itself down because technology around it is going to overdo it. So it’s kind of like, you know, think of Blackberry. Okay, you know, that was the gold standard until touchscreen phones came out and then it’s like, it’s a joke if you have a Blackberry. Yep, that’s fair kind of thing. Same things gonna happen. The money will stay in the crypto space because the crypto people are nuts, but I think it’s gonna roll to

Sean Moneypenny 43:37
something. Okay, fair enough. No, I would. I would buy that because I think it will supplant gold. But you know, again, we’ll table that for another day.

Jack Csenge 43:47
Yep. Next, what do you got? Alright. Are you buy sell or holding some major custodian Schwab, fidelity, TD, whatever, launching their own wallet to allow their own customers to buy whatever they want. Right through them.

Sean Moneypenny 44:05
I buy it all the I buy that all day at the end of the day. It’s a it’s a foods first mover advantage type of market. So whoever it is that comes out with it first, whether it’s fidelity, Schwab, etc. Merrill Lynch, I mean, who knows, right? Whoever comes out with it first, they’re going to snatch up a tremendous amount of, of the market. And once people are ingrained, they’ve got it set up. This is the process. They know, it’s very hard to take that away as a competitor. So I think I think it’s absolutely going to happen. And frankly, I think Fidelity Investments is going to be the one to do it. So I agree with you.

Jack Csenge 44:42
I think I think Abby Johnson’s go nuts with fidelity digital, and I kind of think what’s going to happen. I kind of think it’s gonna be a complete blindside of how it comes out. No one’s going to expect it and then boom, it’s there. Yeah, no, I think It’s definitely a foregone conclusion. All right, what do you got?

Sean Moneypenny 45:04
Alright, so, buy, sell or hold? Do you think that investing in European stocks is going to be?

Sean Moneypenny 45:13
I don’t know, a

Sean Moneypenny 45:16
going to continue to fade into obscurity, because it seems like that’s an area of the market that is really lacking in value. I mean, obviously, we can pinpoint individualized names but as advisors name, one European stock, Nestle. IKEA Nestle, I mean, my point is, oh, Logitech. Actually, Logitech is a great company.

Jack Csenge 45:41
But

Sean Moneypenny 45:42
But again, my point is, I digress. But my point is, is that like, the broader European equity markets, they seem to be fading into obscurity, they really aren’t performing. They’re not, they don’t seem to be adding a lot of value. They they’re as volatile as most other areas of the market, and they don’t seem to be adding a lot more benefit. So I guess my buy sell or hold is, do you think this is going to be a particular asset class that continues to shrink? In the average portfolio,

Jack Csenge 46:12
I’m gonna take a deep value swing at this and think it’s a buy in. And the main reason there’s, so there is a company called adient, which is basically the stripe of Europe and they’re doing something very similar. So it’s like a combination of like square and stripe. I, I think one of the best things and I’m not smart enough to do it, but I feel like if you can go bottom feeding and markets like this, this is where you can, this is where you find that huge return on investments and go to the market No one likes and invest in that market. I think I mean, we’ve been talking about this since literally like, 2013 I feel like back in the old days. Yeah, call center days. Yeah. But everyone you say, oh, there’s gonna be the great rotation from US stocks overseas, and it just has not done anything. Yeah, had you made that move and said, I’m gonna go invest in Europe or I mean, there’s been maybe one or two stocks in every economy like most of Latin and Central America has just been a complete way to lose money as a challenge. And then but a company like Mercado Libre is up like four or five fold. Go to a lot of Asian countries, same thing. And then you have C limited mean, you had a lot of the Chinese stocks had exploded, and now they’re all back where they were so I don’t think I’m gonna call Europe out. I would like to see. I don’t know. I don’t have any evidence or facts behind it, but I’m not gonna sell it. Maybe I’ll do a hold.

Sean Moneypenny 47:39
I’m selling Europe all day long, overregulation, lack of innovation, high taxes. I mean, that’s just a complete recipe for disaster. I’m selling it. Alright, what do you

Jack Csenge 47:55
buy, sell or hold? The SEC, continuing to put the balls of Coinbase in the vise grip. So they Coinbase announced the Len program can borrow money off your cryptocurrency. And the SEC came out and said we will sue you if you do this. So one you have Coinbase wants to do this to a company called block five is already doing this. Do you think the SEC is going to continue the vise grip on all of these crypto platforms?

Sean Moneypenny 48:25
I mean, I think they will at current state, unfortunately. So I guess I would have to buy this. I don’t like it. I don’t think it’s necessarily the right move for us. And I don’t think it’s good for investors. But I would say I guess I would have to buy this because I think the SEC will continue to squeeze them for various reasons. And I think a lot of it is lack of education, lack of understanding, and then just not really understanding the way that this works. And trying to apply 100 year old regulation to something that’s going on in 2021. Yeah,

Sean Moneypenny 49:03
I mean,

Jack Csenge 49:05
alright, what’s your last one?

Sean Moneypenny 49:06
Alright, so last one here. Do you buy sell or hold? crypto becoming again a staple asset class within the broader models, right? So stocks, bonds, cash, everything included? Is it going to be not necessarily Bitcoin because like you said earlier, you think somebody potentially will supplant Bitcoin but maybe just some type of diversified crypto basket becoming a staple in an asset in an asset allocation strategy? Whether that’s 135 10%

Jack Csenge 49:42
Yeah, nice diversified basket of the pet rock. crypto, kitty, kitty. Shout out to crypto kitties. So I’m gonna buy that I think, though, again, if anyone wants to go read so we set up a website for the podcast, craft dash advice. dot com, we don’t have the money to buy the other URL. So fortunately put a dash between them. But the point I was making if you if I look at the best thing going on with the crypto market, you have to follow where the capital is going. And not just the investable dollars, but the human capital. So right now, the average salary for a blockchain developer is 150,000, which dwarfs almost every other industry right out of school, when you’re having people that are coming out at like, medical professional, initial comps, this is right out of school where the average salary, I think zip recruiter across all their jobs is like 65,000. So when you take a bunch of the smartest people and throw them all, at the same problem, I know there’s a book on long-term capital management about having the ultimate brain power at an investment firm, and they end up imploding themselves. But someone is going to or some company is going to completely redefine mean, even now companies in this space aren’t issuing stock. They’re tokenizing the entire value of the company and then allocating that out to investors. So I think it’s gonna start to trickle into other industries. Yep. So I’m gonna buy that shot. Well, good.

Sean Moneypenny 51:17
I’m buying it as well. So I’m glad to hear we’re in the same side. But yeah, I mean, the thing that I would add to that is that if you look at some of the non traditional asset classes, real estate, gold, etc. Those do generally come with the costs. More specifically, gold precious metals come with a cost with zero yield, right? It’s only appreciation that you’re banking on. Real Estate obviously comes with a yield. I believe this gives another alternative to real estate, it’s a non it’s a, it’s an asset class that’s not correlated with the markets, that provides a yield, because of staking and the way that the market works. And again, we can touch on that in a later episode. But it does provide it can provide a yield. So if you’re an institutional investor, and you want to allocate 135 percent of this to your institutional portfolio, which will again eventually trickle down to how asset allocation models work at the big broker-dealers. That’s one thing you’re looking at is right is this thing going to be able to generate some income along the way while I wait for that appreciation? So that’s what I look for.

Jack Csenge 52:24
So do your research, everybody focus on it, take a look. Take a deep dive at a minimum, just go get some free dollars through Coinbase. We don’t get paid anything for that. It’s just free money. So go do it. But that’s going to wrap up this episode for us. We’re gonna try to do another one of these on a theory and we’ll get into more of the smart contract play and then we’ll get into DEFI the decentralized finance in a future episode. Again, don’t forget to subscribe on whatever podcast you’re in. Check out the website, craft dash advice, calm. We not only have all the blog or all the podcast episodes, but we have the blogs up there as well. If there’s more content, we will add it. But with that, Shawn, cheers, any final thoughts? closing thoughts? Cheers. Welcome to the community, everyone. That’s my final thought. There you have now been baptized in the in the world of crypto. Sean’s gonna send everyone his wallet. So please, please don’t charge him more. Yeah, even invoice for your time. Thank you all. Till next time. All right. Take care guys.

Jack Csenge 53:38
Jack and Sean work for Csenge Advisory Group, a registered investment advisory firm. All discussions between Jack and Sean or any podcast guests are solely their own opinions and do not reflect the opinions of Csenge Advisory Group. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Csenge Advisory Group may maintain positions and securities discussed in this podcast.

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