TLIP #8: Bitcoin is not a financial plan, but it should be a part of one w/ Jim Crider

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ilm

Over the last several weeks I've had a lot of conversations with really smart people talking about bitcoin in particular areas. So from the current macroeconomic environment and bitcoin's involvement the debt spiral and bitcoin's involvement. How do you buy bitcoin. How do you store it. The intersection of bitcoin and financial financial independence um bitcoin itself and the technological side of things and bitcoin on the monetary side of things we've had all these conversations. The future implications of bitcoin and I encourage you go listen to those conversations. There's a lot of great nuggets in those. Um, through my wonderful guests and I just want to sort of finish up this series about bitcoin um addressing a few particular areas. Ah that that I'm confronted with regularly as a financial planner and ah not that many people are. Overly interested in my specific viewpoints on bitcoin. Um, but that's what we'll be talking about today is how I've how I view bitcoin and financial planning the questions I'm most most regularly asked how I approach bitcoin in financial planning and ah. Yeah, how we're going to utilize this moving forward and rebuttals to common questions those sorts of things so it'll probably be brief conversation and I appreciate you joining me here. So ah, we're going to start off I wrote an article a few months back ah titled bitcoin is not a financial plan but it should be part of it.

01:33.65

ilm

And the opening statement of that article is ah I'll just read it so living in the seemingly dichotomous worlds of financial planning and bitcoin maximalism I hear a good deal of impassioned takes and see many of stones thrown from camp to camp bitcoin is just tulips yells the tradify community. Bitcoin is my financial plan retorts the laser eyede maxie yet here I sit observing two groups group at just parts of an elephant while misunderstanding the full picture blinded by their inability to set aside their familiarity bias and see the whole for what it is what in the world I just say. Again I live in this strange world of very traditional relatively conservative financial planning through cfp certification and studies and working at large firms those sorts of things and they view bitcoin primarily through this lens of. It doesn't make sense. It does not fit into a portfolio. Um, it's foolish to own so have have one foot deep in that that area. Um meanwhile also living in this world of bitcoin maximalism. I engage with a bunch of crazies on Twitter and in real life talking about bitcoin and many of these people think that bitcoin itself will be the saving Grace of humanity will be the saving grace of an entire financial plan and a financial plan is not necessary beyond bitcoin itself and ah.

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ilm

It's It's an odd place to live because I love both of those places and I try to approach both of those conversations. Ah in ah in a dualistic way One I try to approach it gracefully and to help show here's what you're not seeing. And why the ah the other person's viewpoint can make sentence to an extent but then also I try to be somewhat ah of a so of a a thorn in their side to force them to pay attention to the other things that they might be missing.

03:45.51

ilm

So I just want to take a few minutes today and talk through those. Um, what I think financial planners are primarily missing then also what I think ah the bitcoin community a lot of a lot of those I talked to are missing and to really bridge the gap between those 2 things to really help someone's financial life. Um throughout this conversation i'll. Ah, we've in ah lots of questions I'm asked regularly about bitcoin and planning. Ah how it works with financial planning. We'll also talk through some historical references of allocating to bitcoin. So ah yeah. Let's let's dive in so when we talk about bitcoin it's important that we first lead off with what is bitcoin itself again the problem ah that I see many people have when they say that you shouldn't own bitcoin. Because it doesn't make sense or you should own bitcoin plus these other crypto assets usually those conclusions are arrived to because the the wrong question was being asked so again in order to answer the question properly. You must first be asking the the correct question. And Satoshi did that when Satoshi created bitcoin the question being asked was how do you create this decentralized form of money that can't be manipulated by any ah particular group. Be it a government or a company or an individual organization. How? How do we remove? Centralized control.

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ilm

And create a form of money that is truly peer-to-peer and ah, that's what bitcoin's done and that's not something that was created overnight again. Bitcoin is by the financial planning community oftentime is related to beanie babies or Tulip Mania but I think that comes from a. Ah, misunderstanding of the history of not just bitcoin but cryptographic ah assets and the actual history of money. My last statement there is. What I've the conclusion I've come to over the last couple of years is many financial planners are really really smart and I have so much respect for a lot of people in this community and most financial planners or mini financial planners are great at managing pieces of people's financial lives. It's reducing their taxes or managing stock compensation or ah, interweaving their personal and and business finances or budgeting or so many things a lot of smart people with actually addressing particular areas of money in people's lives. But what I've come to recognize in my opinion is that most financial planners while they're good at managing money have not stopped to actually ask what is money and that question when it's actually pondered and thought through fully.

06:53.30

ilm

Should lead you to realize that our current money system in the us and globally is not is not what we think it is and the problem is stopping to ask what is money itself is. Sort of like a fish asking what is water. It's something we're so used to being around that it seems foolish to even take time to ask that question and especially when you're taught that money is a certain thing. Um and the definition of money is is sort of changed and is loose and it's sort of up for interpretation. Asking that question again can be foolish. The good news is um I personally sort of enjoy people thinking I'm a little bit stupid. So I like asking the questions that most people are maybe ah intimidated to ask because they don't want to look foolish and I enjoy that. Um, I'll be the first one to raise my hand and ask the question that I know that most people most other people are are wondering in their head but too afraid to raise their hand and ask so I'll ask those questions. Um I'm okay to look foolish I want to learn not here to protect an ego and ironically that's 1 big thing I've recognized with adopting bitcoin is. 1 thing you have to do to actually understand and adopt bitcoin is to first say this is almost the the vast majority of people almost the full amount of people I've ever met with bitcoin is step 1 to actually accepting bitcoin.

08:23.71

ilm

To say I was wrong about bitcoin in my initial interpretation of it. It's a humbling experience say I was wrong and this is actually important and I'm willing to learn and move forward. From a proper mindset proper heart. So it's a humbling experience so that's ah I think it's also another barrier that is up is you're forced to confront the fact that you were wrong admit it to yourself and maybe admit it to others. Okay, so let's talk through this when when people. Clients friends strangers when people ask me about bitcoin. Um I'm not going give you the full spiel right now you've heard some of this through conversations over the last several weeks but when people ask me like what is bitcoin it is emphatic that we begin with discussing what is money and. What is a store of value. We take that through a historical lens. So I'll do a brief summary of money and and stores of value through history. So we'll talk through again things that were used initially as collectibles and then built the way up into actually being means of. Ah, ah of transactions that being glass beads or ryestones or seashells will talk through precious metals. Well talk through Rome and the deri and ah the devaluing their currency and how you know war is funded through um.

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ilm

The debasement of their currency. We'll talk through those things then we'll we'll sort of skip head through history after laying several examples of here's different forms of money and here's how all these different forms of money have been hijacked. Um in some manner or another ah through um erosion. Be it some so some form of manipulation from an outside party or internal party um taking some control so we'll talk through that. But then we'll we'll sort of fast forward through history and we'll get we'll land back again in the nineteen hundreds and ah, we'll go to post world war two Germany. Um. Next right? Wherever you're next to me I have a picture of some children building a tower using german marks and they're playing with it and I'm sure you've probably seen pictures of maybe that picture people with wheelbarrowels of money. Um or burning money or wallpapering their house with their money. We'll talk to how that happened and the war reparations and the money printing. Um and the the troubles that caused and how's that come about and we'll talk through and the 1930 s when it became illegal to actually own gold in the us outside of ornamental pieces and jewelry. We'll talk through the.

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ilm

Ah, forced the confiscation of gold and how immediately following the confiscation. The ah ah the purchase price the value of gold was ah was changed ah for the government for the better of the government immediately after so um, i'm. I believe I might be off on the numbers. But I believe it was ah $20 per ounce is what you had to turn your gold into to the government and then basically meetly after it became illegal to own gold. Um in the us again outside of ornamental jewelry gold was repriced at about $30 $ 35 per ounce again. Don't quote me on those numbers. But it's that's the theme. Is. We'll give you a certain amount and then once you weren't able to hold anymore the gold became worth more and the funny thing is gold is not worth more. Your dollar is then worth less and ah, keep that in your mind of.

12:02.91

ilm

Assets being worth more versus your currency being worth less. We're going to revisit that in a bit. So after that we'll talk through the 1940 s there's a thing called breton woods so group of ah central bankers essentially gathering a gathering from around the world in the us on the East Coast to talk through. Um. The global financial system. Ah and the our gold backing our currencies. Essentially what happened there is um, the different banks around the world. It was agreed upon that they would.

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ilm

Ah, the us would hold gold in our balance sheet and we would back our Us dollar by that gold and then other currencies would back. Ah their their currency by the us dollar so they were peripherally backed by gold because they were backed by the us dollar. We took that bet we said hey well yeah, we'll accept those terms so we took those terms and ah worked out really well. There's a few decades of the us manipulating and abusing our ability to create money. Was supposedly backed by a hard asset that's much more difficult to create than the money itself and then of course in 1971 we came clean that hey the amount of gold versus the amount of dollars that we've created that are supposed to be backed by that gold. It's no longer at parody and we're going to default on that. So when we defaulted on our gold position in 71 because other currencies were essentially backed by our currency. Um, pretty much every currency became. It's called a fiat currency and that's no longer backed by gold or anything that actually takes ah resources or energy to procure. But rather backed by the enforcement of government so I was in the 70 s law funky things happened from after 1970 um, when when money is manipulated money itself in my in in my loose definition.

14:06.16

ilm

Ah, money is a means of communicating storing and ah transferring value across space and time. So. It's a means of communication and when that means of communication is hijacked and manipulated ah the messages themselves become distorted That's what happened starting in the 1970 s really it it happened before through other ah ah, hijacking of of money systems. But we see this massively in modern era starting in 1971 because again there became a massive distortion of of money itself and money is a means of communication. When the means of communication is hijacked then the messes themselves become distorted fast forward. We don't really get too far into you can go do your own reading on all these things but ah we have the petra dollar system. Anyways, we'll talk. We'll go through that a little bit then we'll talk through ah bitcoin. Now. It's important to recognize that bitcoin is not something that was arbitrarily created five years ago by some tech pros or a kid living in his basement. Maybe that's a Toshi who that's serious who she is but it wasn't just ah stumbled upon as ah as a way of making a quick buck as a ponzi scheme. This is something that a group a group of people have been trying to work on for a very long time. Ah, how do you use cryptography to create some sort of online ah money and there there was a few issues that these people kept running into ah for for decades and Satoshi um came on these chat forms essentially and said hey.

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ilm

Um I think I've I've solved these and um I think I have this payment network this money system that will actually work um by solving these these issues that have come about and you put his work out there. Others agreed in this 2008 in 2009 bitcoin actually began running so again, this is not something that just came out overnight. This is something that lots of people who are way smarter than I am were trying to create for for decades and Satoshi was able to crack the nut that had stumped many of people. Up to that point when he wrote the bitcoin white paper. He referenced those people who also contributed to the work of bitcoin. Um different parts of it. The coding itself. Um or was not just him. There are parts of a graph mother people and he referenced those people in his paper.

16:40.15

ilm

So bitcoin itself again. this is ah this is money um I was talking to my wife Kendra last night and about our our kids my my oldest he's 6 and his name's Atticus and Atticus is now starting to. Understand money to an extent and have a lot of questions. He's now carrying along a wallet with a few bucks in it and ah picking up change anywhere can find it and ah weird. We're been talking about. What all money can buy. He wants to go to the toy store with his $2 and buy a bunch of things that not he wanted to buy dinner for our family and had to tell him that your money doesn't go as far as it used to and explaining inflation to a six year old is exciting um and rather difficult we talked to that we also talked through bitcoin he knows. He knows sort of what bitcoin is and after explaining it he recognized that okay bitcoin is money and he wants to trade his change his us dollars that he's been finding. He wants to trade that for bitcoin because it's a better form of money. So these are conversations we have in our household. Um. on ah on a regular basis. Probably not most family conversations. But it's fun to it's fun to go there with the kids. Um, so this leads us to again if bitcoin is money.

18:05.93

ilm

Money has a few properties and again I'm not going to go super into this. We've talked to this in other conversations. But some of those properties are scarcity money itself. There has to be a certain it needs to be scarce if it's too plentiful. Um, then it's it's we it uses its loses value over time.

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ilm

Now if it's exceptionally plentiful but we know there's a fixed amount and it's easy to count those amounts or relatively easy to account for the amount of units there are that can be okay, but ah we have to make sure that it's not overly puntable where you just have 0 record of how many exist. Um, and also we have to make sure the inflation rate is not. Too high. Um or ideally is is very low or nonexistent and so again it needs to be scarce needs to be portable when you be able to take it from 1 place to another. Um, again, if you're going to use this means of trade. Um, it's important to be able to move this thing from 1 place to another so portable. Um, it needs to be verifiable so you have to be able to verify that. Okay, this actually is a us dollar this is actually gold. This is actually a bitcoin. Um I'm not going go through all these properties but there's a few things that we have to have s be like we'll go to that sb divisible. Um. Ah, Mona leases are difficult to have ah as money or fine art because you can't take a a van gogh um or renoir and chop it up and use that as a means of trade. So we have to have something that's divisible. Um, again. So these these parts of money that. Or these attributes of money that make it good money and bitcoin is that so it's scarce. We know how many units will ever exist. So we know that there will only ever be 21000000 bitcoin in circulation. Um, right now. Ah about 19000000 of those 21000000 are already in.

19:58.84

ilm

Ah, in existence and the remaining couple of million will be mined and come into circulation over the next 12100 and ah 17 years we know that the rate that bitcoin gets issued. Um, through mining. Ah and we know how many bitcoin will ever exist. We know the last bitcoin will be mined roughly in the year of twenty one forty. So we know the quote unote inflation rate of bitcoin. We know the exact amount that will ever exist so it is it is scarce. It's divisible so you don't have to buy a full bitcoin. You can buy. Ah, a satoshi a Satoshi is obviously a reference to Satoshi Akamoto who created bitcoin but a Satoshi is one one hundred millionth of a bitcoin so you can buy multiple satoshis with a penny at this point so it's divisible. Um, it is certainly ah transferable and portable. So I can take my bitcoin and I can send it receive it basically instantaneously for a super low cost. Um, and it will settle within a few minutes um that's that's unlike our current payment rails. Um, that can be expensive and. Inefficient with time and we're trusting multiple layers of protocols to actually achieve those transfers. Um.

21:28.20

ilm

Let's go into some questions and I apologize this is tough for me I'm not having conversation I'm talking to I'm talking to myself right now and I don't do that often at least for this amount of time so be patient with me and I appreciate it. So I get let's go into questions that I'm asked. And this will jog up other things sort to continue the line of thought I was on so questions asked regularly by other financial planners clients people are curious. Let's see what if someone bans it what if someone bans bitcoin I think that's a legitimate question where you're first coming into this. 1 thing was Satoshi nakamoto when he created bitcoin that's really impressive is not just the depth of knowledge he had in a particular area but the depth of knowledge he has in multiple areas those areas being again cryptography um economics game theory. So these different areas all work together to make bitcoin a valuable asset on a technology side of things but also on a monetary side of things. Um, and ah, ah, individually and then globally so how? um, yeah, what happens if someone bans bitcoin. Funny enough. Bitcoin's banned a lot been banned a whole lot. So China sort of became a running joke a few years ago China ban bitcoin. It seemed every other week in some capacity they would they would ban. Ah the onrampps and offramps of bitcoin. They would ban the mining of bitcoin they'd ban bitcoin itself and a a common meme.

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ilm

Amongst bitcoiners is you can't you can't ban bitcoin. You can only ban yourself from bitcoin so banning bitcoin in your country would be sort of like North Korea banning the ah use of the internet by its citizens.

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ilm

Does that hurt the internet not at all internet will carry on it'll help those who have access to it and utilize it properly your help you're hurting the citizens of your country so when when you ban bitcoin you're not hurting. Bitcoin itself. You're not stopping bitcoin in order to stop bitcoin you'd have to go through and destroy every node out there every computer that's running ah bitcoin. You'll have to go and destroy those essentially at the same time because if 1 survives that will then that that information will then replicate. And continue to circulate globally so banning. It itself is ah ah, again, that's working in analogies banning bitcoin like banning the internet also sort of like ah I guess another question would be. What if someone creates a better bitcoin bitcoin 2.0 maybe a jimcoin. Um, that's doable I mean I could go create jimcoin um in a few hours I could build it pretty much I could build it just like bitcoin and it's just bitcoin 6.0 what if someone else does that. That's something I hear regularly is well someone could just build a new bitcoin and ah so why is bitcoin itself valuable. Um, well there's a few things there 1 ah you can do that if you want to try it, please go ahead and start your own coin.

24:49.58

ilm

That's fine, but you better be not just a little bit better but far superior to ah the existing bitcoin system because what we're working with here is not just technology but also is adoption and adoption by lots of different interested Parties. Who are interested for different purposes people who own bitcoin already. The people who are mining bitcoin. The people who are ah the the companies who have adopted bitcoin The people who are legislating for bitcoin these groups already have a vested interest in bitcoin itself. So if you go and create a new cryptocurrency that is similar to or slightly better than bitcoin. Um, that's it's probably not going to ah cause many people to flip over to your new thing Again. We also have to ask why is your cryptocurrency better than bitcoin and if if it's better because it has these features. It's better because you can. Ah. You can send pictures over it quickly. Well maybe that's a neat feature that you want but you're answering the question that bitcoin did not set out to solve Again. We wanted a Peer-to-peer Network That's decentralized and if you're creating a currency or a system that does something else. That's Superior. Superior and something different that'd be like ah having a world-class Distance Runner. Um, and then you say well what if I get someone who's faster say okay, well and then you bring in you bring in a sprinter and the sprinter is faster. The problem is you're running the wrong race.

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ilm

So bitcoin's not here to run a race that makes it better as everything we're looking for a better form of money. That's what we want. So I'm not concerned about other cryptocurrencies coming in and beating bitcoin at a race that bitcoin's not trying to run and it's super simple. Bitcoin itself. It's ingenious but the same time. It's very simple. It's. Its genius in its simplicity. Um the base layer technology of bitcoin is um, it's meant to be simple. Ah the simplicity it reduces the attack vectors and that's susceptible to and also reduces the amount of features that's trying to protect. Against being hijacked so keep that simple and then allow other layers to be built on that overtime if necessary. That's what bitcoin is done. Um, what if what if someone wants to change bitcoin or what a Satoshi comes back and wants to change bitcoin. Well again, that would be I'd be like if. The person who created the wheel came back and said hey guys I made the wheel I changed history. You know, sorry, that's a terrible analogy. Um, if so if the person who created the wheel came out and was able to prove that they actually created it. You know. get get a standing ovation. Good job you you really help civilization and then if they said you know what I thought long and hard about this and I think I like I would like to have square wheels instead of circle wheels the initial wheel I made was good and all but I'd like to change things up I think this one's going to be better.

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ilm

We might simply because they made the Wheel. We'd probably give them a moment to speak all right? We'll hear you out but he better be really convincing why this new wheel is better and ah eventually say that a square wheel will not be superior than the Circle Wheel. So Even the person created the wheel if they wanted to come in and change it. That change does not have to be adopted by those who use it. Some people could go and start using Square Wheels that me as a circle normal wheel User does not have to adopt that change. That's how bitcoin works people who come in and say hey I like this feature better. Let's tack this on if you want to go that route if you want to choose this fork of bitcoin or if you want to. Adopt this total new Cryptocurrency. You have the ah option to do so and your choosing to do so does not necessarily impact the existing wheel itself unless you're able to wield a large enough ah impact and a large enough change in adoption rate where actually wheels themselves are changed. But again it better be not just a little bit better but way better and Square wheels won't work. Um, so it doesn't matter who's making that change. It doesn't matter if the person who created the wheel or Satoshi who created bitcoin came in and said hey I'm making this change or if it was me Ah, ah, relatively. Ah.

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ilm

Neanderthal Ah when it comes to these. Ah, these things came in and said how making this change it doesn't matter. It doesn't matter if it's if it's blackrock or a government they said hey I'm making these changes to this. They have no authority or ability to make changes beyond any other person.

29:34.80

ilm

Again, that's not that's not something that you should use lose sleepover. What about the the use of bitcoin that's something you know when I was first introduced to bitcoin was back in 2012? Um, there's a guy I worked with who would regularly ask ask our bosses to pay us in bitcoin. And I didn't know what bitcoin was the first time I heard about it and all I knew was that guy seemed to be stoned the majority of time even at work. So I didn't have too much weight in his opinions. So when he mentioned bitcoin I brush it off. Um, and you know equated there was ah equated bitcoin with ah the silk road and the dark web and again wrote it off because it's used for nefarious cases and certainly did not understand it as money itself. Um I viewed it more as chuck e cheese tokens for buying drugs. Um I think that's where a lot of people still are they think that and bitcoin and this is this is propagated through media and through politicians who are running their own agenda who continue to say these things like bitcoin is used primarily for nefarious cases. Ironically. The vast majority I think it's about 90% I hate making this up. You know, think it's a 76% of statistics are made up on the spot. Um, that was a joke. Ah I feel like I make it up numbers here. But I believe it's about 90% of usdollars. Ah.

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ilm

Ah, cash bills have traces of cocaine on them. So if we're talking about nefarious use cases then we need to address the Us dollar itself not to mention the ah the amount of wars that have been ah, ah, funded through. Us dollars and other fiat currencies if we're talking about. Ah you know, ah violence being propagated through money. Well we need to address that as well drug trade arms trade um human trafficking all kinds of stuff that's often used. Paper bills um or different. Yeah different means of fiat currencies. Um, and also using bitcoin for ill list. Activity is actually pretty foolish. Um, it is not fully anonymous. It is ah each address.

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ilm

Is a line of figures. But if you're able to understand who that person. Ah or who those figures belong to that address then you understand who's using that whose address that belongs to so um, if you're going to be buying a bunch of the I don't know. Ah. Rocket launchers online using bitcoin then ah, you're you're probably using the wrong thing you might want to go get a stack of hundreds and do that in a back alley? Um, and yeah, like this is something ah, just recently I believe is Hamas. Um. Jesse mentioned this in our podcast a few weeks ago I believe Hamas recently actually told people who are giving the money to stop using cryptocurrencies to to give to them because it's too traceable. Um, this is how a lot of people actually been stopped and found out who ah, who's using or who is funding. Ah. Ah, criminal activity is because they were using bitcoin or other cryptocurrencies again. That's that's say ah, ah that is a poor argument and but we're going to argue against this. We have to argue against everything else. That's also being utilized. Um for for illicit activities.

33:19.27

ilm

But about the volatility I saw this one I see this all the time I actually saw this again yesterday. Bitcoin's too. Volatile there's a few thoughts there when we had to start with understanding that volatility and risk are not synonymous. Volatility is just the means the the amount. That the purchasing power itself of an asset moves ah throughout a duration of time risk is your an inability to achieve a stated goal now Volatility and risk become more and more coolate correlated as your time Horizon gets compressed and.

33:56.86

ilm

Generally speaking ah become less correlated as time moves out. That's why if you're going to own if you're going to use money tomorrow for something that's super important. You have a hundred bucks today and you're going to need $100 on the dot tomorrow. You're going to keep that hundred dollars as dollars. It would be foolish to take that hundred dollars put it in the market I don't care what you're buying put in the market and hope that tomorrow. It's $101 because if it goes to 99 and you can't buy that thing that doesn't make any sense so with your time horizon that compressed risk and volatility ah become highly correlated. Um. Why we have yeah like typically when you're younger, most people are going to have a higher stock allocation when they're saving for retirement versus when you're actually approaching or in retirement you're going to reduce your stock allocation because in risk and volatility as we talk through distributions and suit sequence of return risks those become highly correlated. We need to reduce volatility because again volatility and risk then become almost synonymous um but risk and volatility are not synonymous in its totality. So yes, the purchasing power of bitcoin ah moves a lot. Daily weekly monthly over the last decade it does move a lot. Um, but to equate that the the the level of movement with risk and to turn a blind eye to the lack of high movement um of other assets.

35:29.35

ilm

Foolish. So for instance, ah in the us let's let's let's be generous and give cpi the benefit of the doubt. Let's say inflation historically us has averaged about 3%. We know that right now it's significantly higher I know for my family we go to the grocery store. Our inflation rate is way higher than 3 three and a half percent um over the last few years given we've had several more kids over the last few years but accounting for that. Um, our grocery bills minimally 25 if not 45% higher than it was just a few years back um so the us dollar again. Let's let's go back us dollar the the average inflation rate. Let's call it 2 to 3%. We'll say 3% in the us Annually and if that's a smooth transition down if it's a smooth 3% every year that is ah that's not volatile.

36:25.87

ilm

That feels safe but a safe lowering of yourself into a pool of acid where you're being eaten away or lowering yourself slowly to be to be drowned still leads to eventual death. Um, versus.

36:43.86

ilm

This this place I mean bitcoin has gone up over its long period of time. Um bitcoin has overall gone up and yes, it's gone up like up and down a lot for um, I'm moving my hands ah wildly for those who can't see me and. It's gone up and down a whole bunch but over its totality. It's it's worth more than it was initially um than it was fourteen years ago unlike the us dollar the purchasing power of bitcoin is greater than it was fourteen years ago the purchasing power of us dollar is less than it was fourteen years ago um the movement to get from here to there of bitcoin was. High gyrations the movement of the dollar to get from there to here was ah was smooth but again volatility and risk are not synonymous so we have to begin with that. What else it's too volatile my goodness you have to think through portfolio sizing.

37:38.48

ilm

Um, if you again if we're going to if if we're going to put volatility in risk even remotely in the same area. maybe maybe you're retired you're not just retirement. You're going to use that money soon in the next between now and the next few years at minimal then ah yeah, there's a high correlation of volatility in risks. And there's sequence of return risk and sequence of return risk is ah if if ah, the not just the total return I receive but the time of those returns intersecting with the need of distributions. Um, if a distribution is necessary when ah, your value. Your money. You're going to use for that distribution is down that has a poor impact on you. It doesn't matter if oh well over the you know the average 10 year this goes up 10% per year if you're 1 and 2 it goes down by 20% and you have to take out that year you know I can't sit in here and say like oh well, it would have smoothed out over the next decade the sequence of returns. What's going to impact you that's again, that's much more That's really important when you're actually taking distributions from an account less important. Ah, it's still very important but still but significantly less important. During times of just accumulation when you have a longer time time horizon okay back to it. Um, so volatility just think through your portfolio sizing if. Ah, if you're if you're afraid of the volatility of ah of a certain asset then you want to account for that of how much of your asset.

39:12.29

ilm

That asset do you own? um in your entire portfolio. Your portfolio can consist consists of a lot of things. It could be equities or fixed income or cash or cash instruments or real estate private businesses private equity I don't know whatever you want to own could do all these things. How does this one asset. Impact the rest of ah your portfolio and ah, we'll talk through that a few minutes um I'll come to some illustrations of portfolio waiting and and bitcoin's impact in that um over historical terms. Um. And speak to the bitcoin community for a second you know again I hear regularly from bitcoiners that they don't need a financial plan because they own bitcoin. Um I like bitcoin I own bitcoin I talk about bitcoin a lot I've probably said the word bitcoin a hundred times already in this conversation with myself and you and and I feel so. Ah, feel so silly saying bitcoin so much over and over again as I look at a giant bitcoin three feet from me bitcoin science not a real bitcoin. They don't actually exist in ah ah in a tangible way I don't have a wallet of bitcoins that. Could fall out of my pocket sorry terrible jokes. Um, yeah for those who say I have bitcoin I don't need a financial plan things I'd like you to consider just going to go through this real quick 1 bitcoin owning bitcoin is not tax planning.

40:44.46

ilm

There's a lot of opportunities with tax planning that can arise even if bitcoin's your only asset so consider that estate planning bitcoin's not a estate plan I have four young kids if I own all the bitcoin in the world but don't have an estate plan and I get hit by a bus I'm driving today I'm driving up to Dallas if I get in a car accident and pass away. Bitcoin itself will not help my family bitcoin won't tell my family. What's supposed to happen with my children. It won't tell the state. What's going to happen to my children that my wife and I pass away together. It won't tell doctors my wishes medically. Um if I if I'm on a respirator. Um. If ah, it's not going to tell. Um, it's not going to tell my family. What I want to have happen with my assets um with my house with my you know personal belongings bitcoin is not an estate plan. You need an estate plan. Bitcoin's not insurance. It's insurance against a lot of things in my opinion to get insurance against the fiat system. It's insurance against ah the demonnetitization of assets but it is not um, it is not life insurance I don't sell life insurance I don't have a life insurance license. Um. But bitcoin is not life insurance. There's this odd place though like right now if I went got a million dollar policy life insurance policy on myself. Um, for 20 years okay well let's just think this through if I if I kick the bucket next week bitcoin one bitcoin is not worth $1000000 next week.

42:17.80

ilm

Most likely if it is I will be very happy and will gladly eat these words. Um, so I'm glad I had that policy now. Let's fast forward 20 years from now. Let's say we experienced hyperinflation. Um between now and then well then yeah, the.

42:33.25

ilm

The value the purchasing power of that million dollar dollar life insurance policy has eroded. That's why we know we want to own other assets and heck owning bitcoin I think is ah is a good ah insurance against the erosion of that insurance itself not life insurance policy. Um. So that is interesting think through long term life insurance with inflation and especially hyper inflation. We have to consider though that if you're paying monthly premiums or annual premiums on this and we're experiencing high or hyper inflation. Yes, the death benefit. Of that policy is where is ah is reducing over time. Ah, but also the ah the value of the dollars that you're using to pay your premium is also reducing. So want to consider that. But anyways, bitcoin's not It's not tax planning. It's not a state planning. It's it's not insurance. But I just talked about life insurance. There's other types of insurance. There's key man policies. There's health insurance. There's there's lots of insurance. You know what I'm saying so it's not insurance. Um bitcoin itself is not ah. Ah, it's not um, a savings rate. So I've talked with a lot of people who are super smart and maybe they've invested really well. But if you have not saved enough of your income if you do not have enough savings then the equation for ah compound interest still won't work for you.

44:05.55

ilm

You can have all the time in the world and have the best rate of return. But if there's nothing there that's experiencing time and returns you're still not going to have anything at the end of the day so you need to make sure you have a good savings. Plan is your are you optimizing?? um your your savings rate Bitcoin does not necessarily solve for that I think it helps it. It. It helps your view on time Horizons and priorities financially but is not a savings rate or savings plan. Um, there's lots of other things. Bitcoin itself is not a financial plan is what I'm getting at but man it I think it should be part of it. Um, okay.

44:44.15

ilm

Had this conversation a few days ago and I had this regularly is how much you think bitcoin is going to be worth I don't know. Um, how do I think it will get to a certain price I think it'll be eventually worth a lot more than is today I can't guarantee that all right, it's time for disclosures to satisfy everybody. This is not investment advice. It's not tax advice. It's not legal advice state planning advice I'm not giving advice. We're having a conversation here. Don't take it as advice if you're looking for advice talk to an advisor of said sector you're looking for. Um this is not a guarantee of performance past performance nondicative of future results. To state otherwise is against the law. So don't take it as any of those having conversation here. Okay I personally think that bitcoin ah in the future we were be worth substantially more as today and I'm personally positioned in a way that reflects that viewpoint in my life. Okay. Um, now. Why? Why do I think that is where will the value of bitcoin come from the adoption rate. Okay if it's being adopted by more people. Those people are adopting bitcoin in lieu of something else. That's how it's going to go again. Yeah I guess we could have more. We can have more monetary units more dollars being printed and those new dollars. Ah prorata going to different assets and one of those assets could be bitcoin. But if it continues to grow. Ah at just a normal pro rata basis in line with inflation and new money printing.

46:17.90

ilm

Then Bitcoin's ah ah, nominal value would go up but it's real value would stay the same I'm not talking about I'm not talking about nominal value I'm talking about real value. So again, if we're talking about more people doing the same thing then yeah number might go up a little bit but in real terms. Not substantially so we had to think through then how will the price of bitcoin go up itself that can be answered. There are a few ways. But I think the easiest place to bring that in is the demonetization of other Assets. So What in the world does that mean? Well, there's lots of other assets out there that don't make sense. From a price standpoint right now and I think they will make more sense in the future because I think the the inflated values of those will reduce or go away and that inflated value. That's currently in those assets will move over to bitcoin those existing assets. We go back to a more normalized place and things will be to health their spot Again. So For instance I mean stock valuations are compared to historical norms very high um and especially Index funds where you. Most people utilize Index funds not as a means of actually investing and you know doing scrupulous work of analyzing companies and cash flows and risks and all these things to think should I use this Index versus another one. Um, we're just buying an index.. That's what most people do.

47:45.83

ilm

Um, you're buying a fund that's correlated to an index. Um, and that's led to these things being propped up and it's not investing. They are used as a savings mechanism like index funds are almost just long-term bank accounts and because of that we have a large monetary premium. In the stock market overall in my opinion. Um, a side note right? quick again one. So 1 thing I hear a lot from financial planners is if you're trying to be tactical and you're investing if you're buying bitcoin because you're trying to. Do whatever time the market buy beanie babies follow a fad. Whatever you want to call or whatever people accusations people make um one thing I ask is how they choose their portfolio allocation and a lot of times they'll tell me that they just buy index funds and call a day so they're not being tactical at all again, it's something they're not thinking through what they're sayinging. If you're buying if you're buying anything you're making a decision either consciously or subconsciously about what you're purchasing. There's opportunity costs and decisions being made if you're buying primarily us large cap you're making decision to buy more us large cap than midcap or small cap or international being it being it.

48:57.34

ilm

Ah, ah, a small percent or a large percent of your portfolio if you're buying ah mostly bonds or stocks um or money market instruments you're choosing that if you're going for a sixty forty portfolio if your clients you're making a decision. If your decision is based off of that's what most people do just admit, it. But that is a decision you're making so there's no money manager out there or even person who's managing their money who is not making some sort of decision so to say that you know if you're you're buying something you're trying to be active in some capacity. Please do recognize your level of activity in any decision that you're making because you are making a decision in anything you do um, recognize that some decisions are more involved than others. But at least recognize you are making a decision. Okay, back at it. Sorry for that I get that a lot doesn't make sense. Again I'm not the smartest guy so I have to take everything to its most base level begin there which sort of helps out because a lot of people don't go to the base when you go to the foundational level. It actually makes things simpler and ah when things are simplified. They're also become clarified to view and that's where I like to begin and sort of stay. Okay, I'll even know where I'm at ah bitcoin and planning. Let's see I told you it's gonna be rough I'm sorry gosh I wish there was someone here I could tell me where I'm at um.

50:36.85

ilm

Ah, yeah, Okay, portfolio sizing making decision if or how to put it into your account. Um, monetary premiums that was it. That's where I was. Okay, so we're talking about monetary Premiums. So montary premiums again I think there's there's a large monetary premium or Monetization Premium in equities would also ah say that's in the the debt markets. Um, heck I mean I would I would account for that in our current money system I think you'll grab some value from our current money system. Um I would attribute that to ah real estate as well. I mean heck I feel really bad for a lot of people when it comes real estate I don't feel too sorry for myself. Um I won't allow that I feel bad for people when it comes to to homes because what's happened is we've seen a hijacking of homes.

51:26.98

ilm

Become ah as a place for refuge and safety and creating memories and moments and to live and spin life for yourself and a family and being a use asset and that's been hijacked as. Being a store of value for people homes are now just houses. They're assets to be acquired to preserve your purchasing power over a prolong period of time which is sad see lots of institutions who are doing this massive hedge funds and private equity companies. Um, real estate investors they're going out. They're scooping up properties to preserve their purchasing power over time and that's my house we live. Ah we live in Texas and yeah, there's a lot of people who move into Texas a lot of people who move into our town but a few years back um the the the stated value of our house went up by 31% in a single year did my house become 31% better. No way, there's like there's sheet rock holes in our inside of our house from our kids running into the walls. It's not 31% better I guarantee you that and did 31 did our population increase by 31%. It didn't our town's growing a lot that did not increase by 31% if we count for those the factors. Maybe I did some work on the house I didn't but if I did and if our population and town increase so the supply demand.

53:02.87

ilm

Ah, communication system was impacted causing prices to go up. You have to account for that. But that's not the full amount so where's this other signal coming from it's from new dollars hitting the market. We're flooding it that goes back way back. West earlier. So I tug this one away we're going to reference this later. The value of my house did not go up by 31 the value of your avocados and meat and milk at the grocery store did not go up by 31% the value of the money that you're using to procure these things went down by a substantial amount. Maybe there there is some intersection again. There are people moving to my town. Maybe the population increase by 8%. Okay, well, there's still a 25% this is an example, there's still a 25% premium coming in that I I can only explain by the insertion. Of monetary units and also people purchasing houses because they're trying to protect against the deep devaluing the deep basement of their currency so they're purchasing homes or purchasing people's houses um to protect against inflation. So what happens if we have a better form of money. Um, that would remove the need of purchasing houses if you think about it a house real estate real estate historically is really just basically kept up with inflation over a prolonged period of time if we stretch this inflation or ah, if we stretch.

54:35.70

ilm

Real estate out over a very long period of time. It's basically kept pace with inflation people historically those who have done well with inflation generally do so for a couple of reasons. Maybe they're really good at finding deals or flipping things but a lot of times real estate does pretty well because it's it's compared to a lot of other forms of leverage. Real estate is a ah safer use of leverage compared to other types so you can utilize leverage in a quasi-safe way. Um through real estate. Okay, also there are some tax benefits of own real estate but the value of real estate going up overs. Over time is is not been anything to write home about really? Um, I'm sure I'll get a lot of flak from this. Um, not that anyone listens will listen to this conversation or many people will. But if anyone knows who is super in real estate I'm sure I'll take a beating from you I'm sorry you have a conversation. Um, so real estate itself I think that's where some of the on terror prim will come as well. Again, my house went up by 31% a couple of years ago maybe it should have gone up by 8% that 25% or that sorry that 23% difference. Um, where does that come from. Well I think when we have a better form of money people will realize that that my goodness I'm paying acquisition fees and sales fees and I'm paying property taxes and capital ah cap x and and I have vacancies in this thing. Um I have repairs all these costs.

56:06.23

ilm

If I just had an asset that held its value or kept pace with inflation or maybe do a little bit better I'd rather own the other thing that was easier to own and I think that's that will be that's bitcoin. So I think we'll see a ah demonetization of real estate heavily in the bitcoin. So I think these are all different places that bitcoin will start going up again. Not just in nominal terms. But in real value is by taking ah people owning these other assets and assigning some of those asset allocations towards this other asset. So again. We have the money printing that's going on inflation. Um, but then we also have the adjusting of total allocation from certain things to another depending on how much you think will be ah reallocated from from historical like traditional assets over to bitcoin that will massively impact where you think bitcoin will arrive as far as ah. Value or purchasing price. We also have to put it in terms of what are we valuing bitcoin against if we're va if we're valuing an asset against a currency that that becomes worthless then then that asset against that currency becomes infinite in value. Um, so again next to me I over here. My desk I have a $50000000000000 zimbabwean note. So yeah, if you owned a cruddy piece of land in zimbabwe maybe you own like just the worst house said hey in a few years this will be worth trillions of dollars you think you're nuts.

57:38.16

ilm

Because that house itself did not become that much more valuable. But again you have to ask? What is the measuring stick we're using and the measuring stick that we should be using in that scenario would be Zimbabwean dollars and yeah it became worth trillions of those so when you hear people say that bitcoin will be worth a million ten million infinite Dollars we have to put that to 2 places we're putting that in actually purchasing power um value and we have to assign that with are we are we referencing that against the us dollar. You think the us dollar is going to be continued to be be debased then then we would say that. Yes, bitcoin could in theory go to infinity if the us dollars appears. Um, so that's where you hear these cases I'm not going to make a price claim I think it will go up. Um, but my my goal today is not to sit here and make price claims That's when you hear value claims and ah. Statements of bitcoin going to x amount. That's generally how those things are being arrived against is the demonetization of assets the adoption rate and then also the ah devaluing of the thing that's being priced in terms of in the intersection of all of those things. Is how people arrive at certain numbers typically or at least I do one last thing is adoption. Let's just talk about that right quick so bitcoin how I view where bitcoin is right now is sort of like the internet um in the 90 s maybe in like the mid 90 s except for bitcoin is being adopted at a faster rate and a more distributed rate.

59:12.50

ilm

And the internet was during the 90 s um so I think that's going to be a massive contributor to again. The adoption rate the growth the scale and the appreciation of purchasing power in bitcoin as it's being adopted at a faster clip more diversely and more largely. Um, over time. Um, the internet itself again during the 90 s I love there's a video of it's like the morning show or today show one of those goofy talk shows in like the mid 90 s and they're trying to figure out the internet itself and email addresses and they talk through the at symbol they don't know what to call it. And even that just the concept of what the internet is was foreign and the way they talk about it is absolutely hilarious. Um, because it's it's second nature to us and that's sort of where bitcoin is right now like I'm sure that and I would think that in 30 years from now I'll look back on this conversation and think I sound like an. Idiot because I'll sign like those people talking about the internet in an email address in the 90 s the verbiage that we use the concept the way we conceptualize this is so then we'll be archaic and um.

01:00:27.16

ilm

Ah, yeah, ah, it's yeah is is. It's going to be so foreign at that point maybe I'll watch this in 30 years and and laugh um maybe I'll laugh not at that but just sell terribleless is um, yeah, the adoption rate mean I remember in ah 2009 I had a roommate in college who would buy his Doritos using Amazon I couldn't figure out what heck he was doing like Amazon to me again I'm sort of slow I didn't understand how Amazon worked. Was like's sort of like ebay and Walmart mixed and I could understand why you'd buy or how you would buy Doritos online how them shipped to you how that worked that's only that was 2009 you know, um that was over a decade after that video on the today show came out talking about the internet. So the adoption rate like where we think the internet is now just internet a few years ago looks totally different. So we have to again think through the adoption rate of bitcoin. Um I think it's just absolutely astonishing to watch. Um the conviction of people actually understand bitcoin is incredible. Um, we sort of seem like a brainwashed tribe. Is that because we've thrown our brains out I don't think so I think it's because we've done so much time of study to figure this thing out and to understand it and also to understand the the total monetary situation that we're in that's hard to look away. Um and we're seeing a higher and higher adoption rate and not just adoption rate. But.

01:02:03.00

ilm

Ah, long term adopters of this thing and I think that will continue to progress over time all right? Let's talk through a couple things here. This can be tough. You can't see it. Um I can do my best to give you some numbers again. This is all past performance nondicative future results. These are loose numbers. I ran. Ah thanks ah thanks to ah Swan bitcoin. They have a tool you can go poke around yourself on here. It's the ah nacommoto portfolio institute so or nacommoto portfolio go to nacommotoportfolio.com I'm not endorsing it I'm not whatever. Not making legal statements about it. But it's fun spot to go check out. There's a lot of great tools on there where you can look at like the implications and impacts of ah of dollar cost averaging versus lump sums during different periods of time you can look at ah the demonetization of bitcoin if if if bitcoin takes x amount of premium. Of certain assets. How would that impact the the current and future price of bitcoin in theory. There's a tool that you can look at ah utilizing bitcoin as different percentages of portfolios in historical terms. What would happen there. So fun little spot. So let's I'm actually going to walk through some examples of that last one I just mentioned so I ah I grabbed a couple different portfolios and here's the criteria. So I First this first portfolio I looked at is all right for the last five years

01:03:34.62

ilm

So we're looking at the end of 2018 till ah till I believe it was yesterday I used I believe I used ah November ah or December eleventh of 2018? Ah yeah, December Eleventh Twenty eighteen to December Twelve of 2023 so for that 5 year period what different portfolios look like so this first portfolio looked at and again anyone who's out there. Don't take this is investment vice. This is historical. These are loose numbers. Get what I'm saying all the ah ah. All the disclosures. Um, so if we use a portfolio ah generally widely used in a sense quote unquote like growth portfolio. Um would we're using a. 65% allocation. This model is 65% allocation to vti. That's vanguard total stock market fund and vx us at 35% so 65% us 35% international all stock portfolio over the last five years that portfolio. Um, over that period had a return of sixty six point one seven percent so that's his total return. Okay, it had a sharp ratio a sharp ratio of zero point four three percent sharp ratio um is essentially looking at risk adjusted returns.

01:05:02.95

ilm

You want to you want a high sharp ratio. Um, ideally the way you get a higher sharp ratio is by increasing returns and reducing ah volatility. So um I can again, you can go and run these numbers yourself not can give you every statistic that built this sport this. This model? Um, but yeah, so a a 65 vti 35 vx us over that 5 year period of time. Had a return of 60 66.17 with a sharp ratio of 0.43 bitcoin during that period of time had a one thousand one hundred and seventy eight percent return okay and that a sharp ratio of 0.96 so a little bit more than double the sharp ratio which again you want to you want a high sharp ratio. That's the goal. Okay, what if we just took what if we substitute part of your portfolio with bitcoin. So again, let's say we kept our portfolio 65 us 35 international hundred like toll stock allocation. But then we grabbed bitcoin and plug that in for 1% of that portfolio. So your original portfolio to return of 66% that new portfolio with 1 % allocation of bitcoin would experience a 73% return during that same period. So 73% return and the sharp ratio.

01:06:31.30

ilm

Went from 0.43 to 0.47 we can look at as we plug in different numbers. So again, original portfolio a 66% rate of return a 5 % allocation of bitcoin plugged into that would get us to a hundred percent rate of return during that same period a 10 % allocation of bitcoin would get us to a. One hundred and thirty eight percent of ah returned during that period 25% bitcoin would bring us to a to 72% return and 35% allocation would bring us to a three hundred and seventy nine percent rate of return with a sharp ratio on that last one landing at 1.11. Okay, so.

01:07:08.69

ilm

Think it's clear. This is all past performance. This is not indicative of future results to do or say so other ah to say that it is is a not right? It's against the law can't do that and I'm not doing that this is past past performance says owning some bitcoin in your portfolio makes sense. This is rebounce on a quarterly basis. Take note of that. Okay. Um, yeah, so I'm looking this if we rebance on a quarterly basis I thought okay well, that's that's fun. Um, what about what about people who maybe who like work with a financial planner typically and they're maybe about to retire already retired. Um, what would happen there. So I just grabbed a super generic so seventy thirty portfolio okay or sorry sixty forty portfolio so what I did here was a vanguard total vti. Um 40% ah Vx us of 20% so again, 40% UStocks 20% international stocks and then 40% of b and d which is vanguard's total bond market etf so we grabbed a sixty forty portfolio pretty darn generic same timef frame that 5 years What would happen that portfolio. A pretty traditional sixty forty portfolio over last five years had a thirty nine point six nine percent rate of return. We'll call it 40%. Okay so at a 40% rate of return over that total period. It's to six point Nine One percent annualized okay it had a sharp ratio of 0.3 8%

01:08:40.32

ilm

Okay, let's see what happens if we plug some bitcoin into that and I apologize I know I'm throwing numbers out here hop on that tool if you'd like and you can plug play with this as yourself. So just remind you that portfolio roughly that that sixty forty um had a 40% well call it rate of return during that 5 year timeframe bitcoin was a one thousand one hundred and seventy eight percent rate of return in that same timef frameme. So if we grab that sixty forty portfolio and just substitute 1% of it with bitcoin you would take your afraid of return from 40 to 46% sharp ratio increase as well from 30 up 0.38 to 0.45 we March along. We move to a 5 % allocation of bitcoin where a 70% rate of return. We move to a 10% allocation where at a hundred and five percent rate of return and again that's one hundred and five versus 40%. We move to a 25% allocation. We're now to two hundred and thirty percent rate of return in a 35% allocation. We're at a three hundred and twenty three percent rate of return landing that last sharp ratio of a 35% allocation would bring us to a sharp ratio of 1.09 compared to the ah 0.3 8 % sharp ratio of the initial portfolio. Okay, now I'm not telling everyone to go put one five 10 Twenty five thirty five any percent of your portfolio and bitcoin norma saying to go and keep your existing portfolio. Do we have saying that you should do some research and to say that owning zero bitcoin is foolish.

01:10:17.26

ilm

Think it's foolish to just say that blanket ah statement and not look at ah what it's done and again not just basing our we're not basing this off of just past performance. But also what is it itself. Someone mentioned me yesterday that they think that bitcoin is only going up because of the hype around it. It has nothing to do with technology. That doesn't make any sense because again, this technology is something that people spent decades trying to build so toshi nakamoto himself was able to finally build it and that's when bitcoin compared to other cryptocurrencies of past actually took off bitcoin would be useless without the technology. It's the technology itself. It is the removal of the double spin issue or the solving of the double spin issue. It's a decentralized ledger. It is ah digital scarcity. It is these technologies that are beyond me how I can figure out how you're supposed to do this like I couldn't have built these things. It is the technology itself that allows the. Value as a monetary asset to even be built on. Okay, so we're looking at this from a technology standpoint from a use case standpoint and then we're looking at what is the use case. What's the problem. It's ah ah, stating it's trying to solve then okay will. This be adopted. What's the adoption rate will continue to be adopted how so and then then you'll start arriving at should I own some why should own some where I think this is going. How should I value this. How should I position this my portfolio thinking about risk volatility portfolio sizing.

01:11:53.46

ilm

And you think through these things. The last thing I want to talk through is ah just real quick historical numbers. Um with like lump sum purchases dollar cost staveraging another thing I hear regularly is like well you know, bitcoin's down a lot compared to its all-time high of roughly sixty nine thousand and now it's at 40 something thousand it's down a bunch. Have to look at our time frames we're using and also how we're purchasing this thing. Um I was hesitant to use a 5 year time horizon on my last illustration because some people come out of woodwork and say Jim. That's not fair. You're using your cherry picking data. That's favor for bitcoin. You should use different data I don't know what data you would want me to use you want me use tenure data that would skew it in favor of bitcoin more. Do you want me to use to your data that would make bitcoin that would put bitcoin in its worst ah position at the moment. Well then we're looking at a very short time horizon what data would you like us to use. So let's look at data from a few different places. So now we're going to look at all right as of yesterday. Okay, so what? I did here is what if we what if we purchased bitcoin lump sum versus dollar cost to averaging um, but how would that work out so just to run you through and get this is on the knock the nakamoto website. Ah so you can go and play with this yourself. But ah what I did was okay, let's say we started buying bitcoin on November Eighth of 2001 it's like right around when we hit the all time high so you started buying at the all time height date and you kept buying at the same external dollar amount. Um, til through yesterday.

01:13:26.32

ilm

Twelve twelve of 23 you bought daily. Okay, you start off with you had 10 grand you bought daily every day from November Eighth Twenty Twenty one basically all time high day to December twelve of 2023. What would that look like. Um.

01:13:52.16

ilm

Your portfolio is up significantly in doing that if you dollar cost average europe're up I multiple double double digits. Um, roughly you're in the 40% rate of return. Get better numbers here actually right quick for you. Um, where are we if you would have lump some well buying a lump sum as of yesterday versus the long all time high. You'd be down 38% thirty eight point one percent actually so ah yeah, that's that's not exciting so we had to think through. Portfolio sizing your time horizon am I going to use this money and next week next year next month am I going to use this money in a few years am might use this money in a few decades. Um, how much my portfolio should I have in this thing. How am I buying it am I buying this as a lump sum and be and setting it aside. My buying of this thing on a regular cadence and that regular cadence be it hourly daily weekly monthly. How are you starting to put money into this thing. Um, so we'll look it from that perspective. How do I own. It.

01:15:04.68

ilm

How have I acquired it.

01:15:09.94

ilm

Let's see.

01:15:14.85

ilm

I Want to run the same thing right? quick. What if we bought.

01:15:29.60

ilm

Okay I want double check these numbers. Don't take this as gospel. Um I'm running numbers right? quick so I'm looking again going back if we bought November Twenty Twenty one December of 23 what I mentioned earlier you're buying daily.

01:15:45.50

ilm

Um I believe your your rate of return. What I'm seeing your rate of return during that point would be 42.1 3 or sorry 42.8 3 if you bought daily starting at all time high up until yesterday. Okay, um, your. Ah, minimumal buy price. You'd bought you had have scooped up bitcoin and around 18000 you'd have ah, you'd have also skipped up scooped up some bitcoin at like 67000 and change. Um and you would have bought all throughout um ah hedged volatility and continue purchasing bitcoin along the way. But you did that starting in 2018 so I ran this as well looking at 5 years that knows number is and numbers I mentioned earlier but the 5 years Ah with if you subtued portions of your portfolio. So if we did the 5 year period what would happen um you you would have a rate of return. Ah. Several hundred percent again ah go double check my math on the nacommoto portfolio but looks like you'll be running like a five hundred and ninety three percent rate of return during that period by dollar cost averaging if you would bought it lump sum day one you would had a one thousand one hundred and twenty one point three seven percent rate of return

01:16:56.60

ilm

So lump summing at that point would have been superior. We would have known that it's all Bas Performance I couldn' have told you which one's gonna be better so you going to think through this again, don't take these numbers as gospel plan around the tool in real time while I'm trying to talk to you? Um, but it's evident just looking at simple charts that going back 2018 buying a lump sum. Versus dollar cost averaging would have worked out better versus buying an all time high of course buying an all time high lump sum versus dollar cost averaging the dollar cost average would have been superior. Um, so you want think that that if you're going to start buying bitcoin. How are you going to buy it are you going to buy it all up some are you going to buy in en tranches. Maybe you're going to establish a. Ah, sizable position upfront and then dollar costs you have average in over there. Maybe as a way of hedging both if bitcoin goes up a bunch you established a sizable position and you'll keep going up over time and acquiring more as it rises or you know if you put in a sizable position then bitcoin drops. Ah, in in value or purchasing power. You didn't put all of your seed in at once and you're able to continue to dollar cost average in as it goes down so you want to consider these things I know I just talked a lot. Um, if you're still listening to this I appreciate it. Um. I would love to have a conversation with you if you have any questions about about bitcoin planning again if you're a hardcore bitcoiner and you don't understand or you think that financial planning is foolish more than happy to have a conversation to see if or how.

01:18:30.63

ilm

Actual financial planning can work in with your bitcoin Bitcoin Holdings If You're a normal person. You don't own Bitcoin. You're just learning about it would love to have a conversation with you again. None of this is tax investant. Ah Legal advice. Um, but what I'm trying to do is encourage you to have a conversation with people. Um and to learn go do your own research if you need investment advice. Go talk to investment advisor if you need tax advice talk to a tax advisor if you need legal advice talk to a legal advisor. Um, but start doing some research, ask hard questions. Ask simple Questions. Don't be afraid to ask the questions of what is money or I don't know going back again like I don't make decisions you're being tactical and what you're buying Well am I being tactical in what I'm buying in my portfolio. Even if you're sitting at Index. How do you arrive at that. Ask the simple questions ask questions. Then ask the question that builds up from that that initial statement just keep pulling threads and I think what I found is when you pull the thread of of bitcoin. It's a thread that you keep pulling and eventually a lot of your worldviews on our current money and financial situation begins unraveling and it's rebuilt. Um off of a bitcoin standard. Um, and I think a lot of people who like bitcoin arrived at that because of that same situation. It was humbling um to know that that guy that I worked with who asked us our bosses to pay some bitcoin. It's humbling to think man I Wish you to listen that guy. Um I think we're all going to be humbled I Think that's fine.

01:20:03.31

ilm

Think it's good. You you be able to admit that you're wrong about certain things anything you're wrong on. You would admit that you're wrong. Um, so you can keep growing the goal here is to grow and better. Ah, not to be staunch in a position. Um, so yeah. Be open to growing learning becoming better seeking truth I'm excited for bitcoins I'm a Christian and I think that bitcoin also causes a lot of people to think through like well what is actually truth and ah yeah, like bitcoin but truth itself is certainly not bitcoin. Um I think. Bitcoin is good money but is not truth ultimately I believe Jesus is truth says the I'm the way the truth and the life I think truth is a person seems Jesus something so much deeper and I think a lot of bitcoiners starting to understand that or at least ask like wow I understand this what are things or misconceptions have I had um and. Sort of thinking through the worldview. So yeah I think it's great I want you to think through things you've been questioning and really search out truth from reliable sources I love to have conversation with you if I can answer anything with you if you think I'm an idiot. Still love to have conversation with you and talk through why and won't have a mind changed again. My goal is to learn and to grow not to be staunch in a position either and so I'd love to have a conversation with you. Thanks for listening to these ramblings hope it was helpful in some way and I'll see you in the next episode.