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TILP #05: FIRE with Bitcoin w/ Trey Sellers
90 Plays1 year ago
In this episode Jim is joined with/by Trey Sellers of Unchained Capital. Theydiscuss using Bitcon as a tool to achieve FIRE (Financial Independence Retire Early), as well as how to secure the Bitcoin you own.
Trey's Twitter: @ts_hodl
Trey's website with article's and info: treysellers.com
To check out Unchained and see what they provide: Unchained.com
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Transcript
Introduction to Intentional Living and Bitcoin
00:00:01
Speaker
Hi, I'm Jim Kreider and this is the Intentional Living Podcast where we have conversations about how to use your resources, your time, your money, your talents for what's important to you in life in an efficient and effective manner. I'm glad you're joining with us today and I look forward to this journey with you.
Bitcoin and Financial Independence
00:00:24
Speaker
Hey, in today's conversation, Trey Sellers joins me. Trey and I are going to talk through using Bitcoin as a means of pursuing financial independence retire early or fire. We talked through the implications of having Bitcoin on your balance sheet during retirement. And then lastly, we talk about how to safely and securely store your Bitcoin over prolonged periods of time.
00:00:47
Speaker
Now that's a concern that's often brought up is I know somebody or I've heard this story about this guy who lost Bitcoin in an encrypted wallet or threw it away years ago. And that makes me concerned with buying this asset. So we talked through that.
FIRE Movement and Bitcoin Compatibility
00:01:04
Speaker
How do you, once you've purchased Bitcoin, how do you make sure that you keep it safe from others and safe from our own forgetfulness? Let's get started. Trey Solers, thanks for being here.
00:01:17
Speaker
Glad to have you join me today. Thanks for having me, Jim. Looking forward to the conversation. Yeah, man. Well, uh, I guess prior to recording, we caught up a little bit, but it's been a couple months since we hung out in Colorado and, uh, appreciated and enjoyed our conversations there. So certainly happy to have you in to continue that conversation today. Well, uh, looking forward to chatting about, you know, my journey, um, what we do at Unchained.
00:01:45
Speaker
and how that could apply to you and your clients and anybody else out there who's listening.
Security and Custody of Bitcoin
00:01:53
Speaker
Let's frame the conversation. I want to talk just about Bitcoin in general, how you see things, how you arrived at where you're at. You wrote an article about
00:02:07
Speaker
The fire movement, financial independence, retire early in Bitcoin and how they work together. So I certainly want to talk through that. And then we can also go through and specifically talk about keeping your Bitcoin safe, custodying it, obviously working with Unchain.
Philosophy of FIRE Movement
00:02:23
Speaker
You're at a place that does a great job with that. So would would be remiss if we didn't touch on that point as well. Yeah, before I guess before we go into the the drill conversation of just keeping your Bitcoin safe. Let's talk about Bitcoin itself. So I guess I'll make that interesting too. Okay. Well, I'll say that. Well, hey, yeah, you wrote this article. It's a Bitcoin
00:02:46
Speaker
is fire friendly. Let's talk through that. So I guess first off, for anyone who doesn't know what's fire, what's fire friendly mean? Yeah. So my personal financial journey was kind of haphazard, not really well thought out for a long time. And then
00:03:08
Speaker
I got to a point in my career, I was in banking and financial services, consulting, pretty broad and diverse experience, all good jobs, large companies, but it's like one of those things where you go in and you're not like,
00:03:24
Speaker
fully enjoying what you're doing and kind of just like looking for a way out. It's like, oh, this whole retirement
Bitcoin vs. Traditional Investments
00:03:30
Speaker
thing sounds great. Uh, I really don't want to wait until I'm 65 to do that. So like, how can I accelerate this? Um, and in trying to figure all that out, I found this, uh, approach to financial management for personal finances called the fire movement stands for fire. Um, uh, financial independence retire early.
00:03:54
Speaker
And it's an approach to managing your personal finances that advocates for intentionality in the way that you spend money and really having a good handle on that, making sure that you're not wasting money on frivolous things or things that don't add value to your life. And then saving and investing as much money as possible, as quickly as possible, and as early in your life and career as possible
00:04:24
Speaker
so that you can take advantage of the compounding effects of the investment landscape, the stock market, real estate is very popular there. But the primary tool that people use in the fire community is a stock market index. And one of the things that
00:04:45
Speaker
that I found in that journey as I was going through this process of saving as much money as possible and buying a stock index fund at any price. Whenever you have excess money, you just put it into the market. You're working backwards from retirement and trying to bring that retirement day closer and closer
00:05:07
Speaker
to the present day so that you can be in a place where you don't have to rely on having a job and be dependent on a paycheck for your everyday living. Around the same time I was starting to go down the Bitcoin rabbit hole and I started to see the similarities between what I'm doing in terms of
00:05:37
Speaker
pushing money into the stock market and the way that Bitcoin
00:05:42
Speaker
came to be perceived in my mind's eye as the ultimate savings vehicle. And so I started shifting my capital allocation away from stocks and into Bitcoin. And the more I learned, the more I grew in
Bitcoin in Financial Strategies for FIRE
00:05:56
Speaker
my conviction with Bitcoin, the more dawned on me that I actually wasn't doing any investing at all when I was buying the stock market index, right? I wasn't going in and looking at a specific investment opportunity, a particular company and reading through their balance sheet and
00:06:12
Speaker
checking on their PE ratio and their debt to equity and any of the other things that a fundamental or value investor might be looking at to try to pick a specific point in time that an investment would make sense and then track that through time. No, I'm not doing that, right? I'm just taking my money and
00:06:34
Speaker
putting it without any kind of regard for any of that stuff into every company that's out there, the broad stock market index. That's not investing, that's saving.
00:06:44
Speaker
And so when that resonated with me, I started to realize that like, well, why am I saving in this subpar vehicle when I could be saving more in Bitcoin? And so that's kind of what led me to write this article that you mentioned, Bitcoin is fire friendly, because I wanted to convey to the fire community that really helped me a lot in thinking through my personal finance journey,
00:07:14
Speaker
Bitcoin actually is a superior vehicle for you to achieve the goals that you are trying to achieve.
Balancing Present Enjoyment with Future Goals
00:07:20
Speaker
And so you probably should take a second look at it and give it a fair shake in terms of analyzing how that can fit into the way that you approach your personal finances.
00:07:33
Speaker
I fell into the whole fire thing probably seven, eight years ago. There's a lot about that I like. I think there's some unhealthy mindsets as well. Basically, the advocate for really healthy basic principles of money. It coincides a lot with Dave Ramsey's principles as well.
00:07:56
Speaker
It's not thoughts like Dave Ramsey, do you like what he has to say? Is it trash? Is it great? Frankly, if all of America just stuck to Dave's general principles, the US would be at a better place financially. And I think that we could apply that same metric to the fire community. It's basically like live well below your means, save aggressively, invest or save the difference and let time work for you and just be patient versus
00:08:27
Speaker
You know, it's so many people like what the average person should say about 15% of their income towards retirement. The average person in reality saves like 3%. So versus the fire community, they're saving. Usually it's like 20 to 45% of income getting socked away.
00:08:46
Speaker
I'm more of a fat fire adherent. A lot of people in the fire community will just strip everything down. They're like, I can't have this cup of coffee. I'm going to live in this tiny house and completely give up all the luxuries of life for the whole next 10 years so that I can be in a position where I can retire.
00:09:10
Speaker
Look, man, those 10 years are very precious. You're giving up so much when you do that. And so my perspective has been, look, I want to replicate the lifestyle that I have now and improve on that. And if that means that I need to save more,
00:09:28
Speaker
or invest more in order to reach a higher goal that will allow me to do that, that's what I should be going for. Because you can retire, great, but how are you going to spend that time? You need to be thinking about what is the vision that you have for your future and the way that you want to be spending your time in the future, and then work toward that. Make your decisions based on that.
00:09:51
Speaker
don't sacrifice so much in the here and now such that you are
00:09:59
Speaker
really not getting the most out of the time that you've got. You might not make it to those 10 years, let's be honest, right? That does happen for some people. And so if you're living out of a cardboard box, essentially, trying to save for this mythical retirement that's somewhere in the future, you're really doing yourself a disservice. And in my opinion, wasting valuable time.
00:10:25
Speaker
Yeah, I think that's what concerns me about a lot of people in fire is again, the principles are fantastic. The end result can be fantastic, but
00:10:36
Speaker
I think a lot of time it can be misguided and you want to make sure you're not running from something, but rather pursuing something that you'd enjoy more and not running. So many people in fire are like, I hate my job. Therefore I'm going to double down and just burn myself. I'm already burned out. Might as well double down and burn myself out even more, but be done sooner. But then they stiff arm any sense of community or enjoyment.
00:11:00
Speaker
so they can one day experience these things. And what I'm concerned with is we're going to have this group of people who caught on the fire movement together. And like in 15 years, they're going to be like what mid 30s, like 38. And they're going to retire and go travel Southeast Asia and realize like, dang, I'm still empty. I guess I have a good amount of money. But like, I spent the last 15 years neglecting community and finding any means of passions and pursuing those. And now I have a lot of money. But like,
00:11:28
Speaker
I still don't have those things. And obviously that's a general blanket statement, but I think that's a big concern that I have with...
00:11:37
Speaker
getting to myopic on what you're trying to pursue. There's a difference, like this is really important to distinguish is goals and then the thing informing those underlying goals. And the problem I think with a lot of people in fire is you become so focused on the goal itself while neglecting the thing that is informing the goals. Like for instance, like my wife and I, I'm 33, we want financial independence and I would say like fat fire both now and later on by the time I'm 45.
00:12:02
Speaker
So, but when I, when I think to that, it's like, all right, we want financial freedom at 45, but why do I want that? Well, I want more time. Really the things that are most important to us, um, time with family and, uh, the ability to give generously are really the reasons we want to be able to do that. Now. Let's stick with the family thing. If I say, Hey, I want to retire at 45, so I can spend a lot of time with my wife and kids, but in the meantime, spend so much time working.
00:12:32
Speaker
that I'm neglecting my kids, like, dad, you're never here to read to us. It's like, shut up, son. I'm working so I can spend time with later on. You know, it's like when I'm 45, Atticus. I can't hang out with you now because I want to hang out with you in 15 years. That point will be 18. I'm like, all right, son, I can finally go play catch with you. He's like, dude, get out of here. Where were you when I was a kid? You know? Right. Exactly. That's a big risk is sacrificing
00:12:56
Speaker
my my kids in our relationship on the altar of future financial success and how foolish would that be to to pursue something in the end goal while neglecting the thing that's over that is the overarching theme that you're trying to pursue and that does present this
00:13:12
Speaker
It's a false dichotomy, but yet it does present a balancing act of pursuing future financial freedom or whatever gold is that seems like it's counterintuitive to making sure you're doing well in what you're pursuing today.
Impact of Inflation and Monetary System Critique
00:13:26
Speaker
And that's why you have to be intentional. Like, all right, how am I spending my time? It's not just about money, like my time, my money, my talents, these things to make sure it's aligned now and in the future. Like what I want is...
00:13:37
Speaker
hope to equip clients for is let's understand what's important to you. Let's articulate that. Let's make sure you're doing that today and also able to do that well in the future. And hopefully in the future, we can do that in an even more grand way because we've allowed for the resources we're setting aside now to compound and grow for the future. Yeah, it's what you're describing where people are. And again, like,
00:14:01
Speaker
You're right. This is a broad brush and the fire community is very diverse in their backgrounds and the way they approach this. There are some people who take this stuff to the extreme. There are some people like me who think about this in more of a fat fire type of standpoint where it's like you're
00:14:19
Speaker
you're okay working a little longer because you want to enjoy things now and actually live well and later in life but i think like this over correction that you're talking about is in this like.
00:14:34
Speaker
relentless pursuit of the later. It's almost like too low time preference. This is a Bitcoin related type of concept where you're so focused on the future that you're missing out on the present. I think it's kind of like an overcorrection from the fact that people recognize intuitively
00:15:00
Speaker
that they have to constantly do more, work harder, um, and, and beyond their toes, so to speak, to keep up with the ever rising cost of living with the fact that, that, you know, their kids' college education is going up at like 35% annually or something. You know, it's like, by the time my kids are going to go to college, it might cost them a half a million dollars or something for a four year degree. It's like,
00:15:30
Speaker
You're never gonna get that that value back, you know and and in order to do that because that's the expectation you have to Continually be focused on that and be very intentional about it, right? and so the reason that that's happened and part of what I lay out in this article is
00:15:53
Speaker
You know that that these fire proponents they intuitively understand a few things right they understand that the money is broken that life continually gets more expensive and that you have to continually save and invest in order to keep up with that and.
00:16:10
Speaker
They don't really get why that's happening. They don't understand the same things that I think the Bitcoin community has really focused in on in terms of the money being broken and being the cause of all those things. But they are acting like they understand that. Right. And so that was part of what I want to communicate in writing this is just that
00:16:32
Speaker
You get it, right? Like, you get it, Fire Community. You're there. You're like so close. You're just not quite addressing the root cause of the problem. You're just reacting to it. And in doing so, it can lead to this kind of over-correction where you're just focused so far in the future that you forget to live now. In the article, you break it up through... I mean, it's really easy to read. It marches through...
00:17:01
Speaker
Generally, what is fire houses generally accomplished through like 4% safe withdrawal rate the Trinity study those sorts of things Let's talk through a couple of those items in there. So I guess Let's start off with most people in fire tend to just use index funds and I understand the reasoning here like if we if we looked at
00:17:26
Speaker
most active funds net of fees and net of taxes underperform their, the index of their, their, their place against. So with that, I mean, it's just, let's go ahead and just place the index and allow it to allow to grow. But if we're just, as you mentioned earlier, if we're blindly throwing money at an index, it's odd because suddenly, is that still considered investing or is that simply savings? If we get to this place of,
00:17:53
Speaker
Well, if it's, in reality, it really is just more, you're using an investment tool.
00:18:00
Speaker
as a means of general savings without any thought. It's just, all right, this worked over a pulling period of time, so we'll continue to do so without any thought about where we are currently in the macroeconomic landscape, with our current fiscal and monetary policies, microeconomics, whatever, these specific companies inside of this index. We're gonna throw that out and just say that it's worked in the past and it'll continue to work. And it probably will work for a lot of, for over a very long period of time if we don't have some sort of strange event that happens.
00:18:29
Speaker
But then we have to bring in this other thing. The system is different now. I know everyone always says that. Things are different this time. That's a really dangerous thing to say as things are different this time. But we look at the outrageous prices that things cost. And I'm not talking about avocados, but PE ratios and everything of the average stock out there.
00:18:50
Speaker
I think that is indicative of the fact that these indexes are being propped up. And that's a term that we were talking about earlier. It's just what financialization of assets. And obviously that sounds sort of weird to say like index funds are being financialized. But what I mean by that it's not it's not.
00:19:06
Speaker
It's normally being used as a means of investment, but rather a means of general savings. You want to talk through that? I just talked a bit about it. Stocks are a great example, and that is probably the primary tool for a savings vehicle that the fire community is using. Real estate is also very popular and suffers from a lot of different types of trade-offs than does the stock market. But what you're describing here is that
00:19:36
Speaker
The money is broken. You can't just hold on to it because it's going to continually lose purchasing power, right? Everybody knows that. Whether you intuitively know that or whether you explicitly know, like, no, there is a direct mandate to at least have the purchasing power of your dollars.
00:19:53
Speaker
fall by 2% per year, right? Let's keep on that right quick because that is something that we're so used to. It's like bringing up water to a fish. It's like, well, I guess like, what do you, what do you, I only know what you're talking about. Yes, I guess I'm aware of this concept, but it's, it's normal. Why is that normal? Like, why do we have 2% inflation? Like you have this book behind you, uh, Price of Tomorrow. Um, it talks about
00:20:18
Speaker
how it sort of makes more sense to be in a deflationary economy. So why is 2% inflation normal?
00:20:30
Speaker
I don't know if normal is the right word for it, but it is the accepted standard for sure. And the reason is because our money is actually not really money. It's just credit. Every day when you go to a store and you swipe your credit card, you're spending what you think of as money
00:20:52
Speaker
But in reality, it's just credit, right? It's a ledger entry that is owed to somebody else. And that expands the monetary base essentially, because you are spending money that's not really in existence yet. And that has a cost to it. We typically think of this as an interest rate. Well, that interest rate on the total debt load needs to be paid back with
00:21:21
Speaker
other money, like other dollars, but those other dollars are not yet in the system. And so what needs to happen is that either somebody needs to lose money and go bankrupt in order to pay off the total debt that is in the system that our money is built off of, or the other option is
00:21:39
Speaker
you need to create new monetary units in order to satisfy the debt load that is out there. This is really accelerated in the past few years, especially since COVID as debt levels have just been screaming higher. And then interest rates rise and you start getting this exponential, people call it the debt spiral, where it's just like it feeds on itself and it's more and more. On a personal level, you can just think about this as,
00:22:05
Speaker
you're putting your living expenses on a credit card that has like a 20% interest rate and you're not able to keep up with the interest payments because it just keeps compounding at such a high rate. That is essentially what is happening here just at a much larger magnitude and a little bit slower pace than if you're using an actual credit card. But because everything is built on the credit and
00:22:28
Speaker
We talked about that spiral with James Laddish, episode two, a few weeks back, wouldn't that for about. Yeah. So perfect. Your listeners are well aware of exactly what that, no better person than James to be able to articulate exactly how that works.
Monetary Debasement and Financialization
00:22:45
Speaker
Right. And so.
00:22:48
Speaker
That 2% inflation rate that you were talking about, it's essentially required to expand the money supply in order to meet these debt obligations that are out there that our money is just built off of. If that doesn't happen,
00:23:07
Speaker
the bill comes due. And if the bill comes due, somebody has to lose money in order to make everything whole and make the math work. And people don't like to lose money, especially really powerful interests. And those people who are very powerful interests, who are loaning money into existence, like banks, governments are creating money, like all that, like, they don't like to lose money.
00:23:31
Speaker
But they also control the monetary system, so they don't have to lose money. They can just literally conjure it up out of thin air, pay their debts. The rest of us who don't have that luxury of being able to print our own money and then spend it into the economy, we pay the price for that. Our purchasing power is decreased by that 2% per year, if you believe that number.
00:23:54
Speaker
so that these other powerful interests who do control the monetary system are able to fly around in their private jets and lecture us about carbon emissions. Now I'm really getting after it. What it comes down to is monetary expansion leads to devaluation of
00:24:15
Speaker
money itself. So it's not a factor of like suddenly everything costs more, but rather the means of purchasing those things is worth less. So you have to have more of those units in order to acquire these things. And that's where you see this. So if you look at CPI or most metrics for inflation, you're going to have a basket of goods and services. And if you look at those basket, what's in those baskets,
00:24:42
Speaker
it shows going to be things that are going to be like really scarce or frankly more important for life are going to experience a higher average inflation rate versus the things that are easier to produce less scarce and not as important generally are going to be lower inflation rate or even deflationary. So things that are generally higher inflation may be healthcare, housing, education, food, energy, like pretty important things versus things that everybody knows like you, you all,
00:25:09
Speaker
everybody sees this every day in their life that college is way more expensive ridiculously hard to pay for college you basically have to take on student loans in order to pay for it which is just adding to the problem by the way right housing costs constantly going up and and.
00:25:28
Speaker
Is leverage to the health as well right like we're talking about these massive mortgages people coming out of out of college now they can't make enough money in order to save for a down payment to pay for a house because i don't payment is now like two hundred thousand dollars or whatever for just a median home i'm exaggerating a little bit but that is a massive problem.
00:25:49
Speaker
that continually compounds. And the reason it does that is because of all this debt that is built up and the fact that our money is just, it's credit-based. It's not based off of the productive capacity of the economy. It's pulling forward productive capacity from the future for the here and now, which just is gumming up the works in the way that you're describing.
00:26:18
Speaker
And there's, strangely enough, there's a lot of camps who don't recognize that the cause of debt is monetary debasement or monetary printing rather, but as other factors, if it's corporate greed or just suddenly things are getting more scarce and harder to produce, which doesn't make any sense, which again goes back to Jeff Booth, his book, Quest Tomorrow, talking about how in a lot of things, we should actually be experiencing a deflationary economy.
00:26:43
Speaker
If we have technology and our efficiencies picking up, then why shouldn't we be at a place where that person instead of working 40 to 60 hours a week is only working 20 to 30 hours a week and things still cost the same, if not less? That makes sense. But again, that takes a total paradigm shift of how we view things. I don't think most people even have allowed themselves to go there because we're so used to being fish inside of this water of inflation.
00:27:11
Speaker
Let's talk some stories. Everything is, everything is financialized and everything is funded with debt, right? All of the big things, all of the big important things. And because it's financialized and funded with debt, you have to continually chase after more and more monetary units in order to pay that ever growing debt compounding, right? And so that's where this like rat race wheel thing, you know, analogy comes into play. And that's where this overcorrection comes from.
00:27:38
Speaker
on from the fire community where they're just saying like i'm gonna get out ahead of this thing and i'm gonna do everything i can in order to get out of the rat race so speak right that that's where all of this leads from and and and that's that's that's the like key point that i want to make in writing this is the connection there between.
Bitcoin as a Solution to Monetary Issues
00:27:59
Speaker
the problem that the fire community is trying to solve for or address in their daily lives and the root cause of that problem that is monetary and that Bitcoin bridges the gap there. It is the solution for those things. So just a bit ago I saw that apparently the Bank of Japan is about to release a round of
00:28:30
Speaker
basically universal basic income payments to help with the impact of inflation, which is hilarious. If we're sitting here saying that monetary debasement through monetary printing is the cause of inflation, going through and saying, hey, I know everyone's struggling because things cost more. Here's some free money. It's like we're just kicking the can further down the road and not just kicking the existing can down the road, but we're making that thing larger whenever we have to face
00:28:59
Speaker
the repercussions of it. Let's say that that's kicked a few months down the road or a couple of years. Again, this happened in March of 20. Stimulus checks, all that fun stuff. At that point, people were blinded to seeing the inflationary impact of this. It took a while for it to catch up in normal people's lives, but it eventually came and we're experiencing the impacts of that right now. I would venture to say despite the fact that we're experiencing that now, I think the US will do something very similar in the next
00:29:29
Speaker
eight months. And to curtail the issues that were caused by this thing, we'll come in and we'll reprint and then we'll just keep putting Band-Aids on it.
00:29:38
Speaker
It's such an insidious form of taxation, really, and wealth transfer from the masses to the people who are closer to the monetary spigot. We can call this the Cantillon Effect. The people who get the money first when all of this happens, they benefit because they're able to go out and purchase goods and services with that newly created money.
00:30:00
Speaker
before it has time to work its way through the system and increase those prices. Now, if you just splash the entire economy with thousands of dollars into their bank account, similar to the way that happened with COVID, you're going to get inflation in a much quicker way, and it's going to be much stickier. That's essentially what happened. And then prior to COVID and all of those happenings, I think there was
00:30:29
Speaker
a little bit of complacency from economists out there and the Fed and the government that, look, we're doing all of this stuff that we've been doing since the great financial crisis to try to get inflation and we're not getting it.
00:30:44
Speaker
Right? Like we're really pulling out all the stops. We've got QE 1, 2, 3, 4. We're just like spending more than ever. Helicopter money, remember that phrase, helicopter money in 2016 or so? Yeah. Oh, I remember getting a $600 check from George Bush back in the middle of the
00:31:08
Speaker
a great financial crisis back in like 08 or 09 or something like that. Cash for clunkers and all kinds of things. Where's that money coming from actually? It's coming through. They're taking out one of your pockets and putting it to another one. Really what was happening is like, okay, well, inflation didn't skyrocket the way that it did in 2020 and 2021.
00:31:29
Speaker
But the reason for that is because we were just coming out of this massive de-financialization, so to speak, or this collapse in credit around the world. And that was such a strong deflationary force that all of the inflation that was being created to combat it was able to kind of stop it and maybe like reverse it a little bit to that
00:31:53
Speaker
to the tune of half a percent, 1%, 2%, whatever their target was. They couldn't quite get it up to 2% because there was so much weight coming down from the collapse of this credit bubble. And then layer in all of the productive capacity that we've created with the expansion of the internet and iPhones and all this stuff. You've got to remember the iPhone was released back in 2008. The world looks totally different now than it did back then.
00:32:20
Speaker
And there's so much more productive capacity in a lot of areas of the economy, and all of that drives down prices. So they're really just like pissing into the wind, so to speak, right? They're fighting against this massive deflationary force. Well, when you come to 2020 and 2021, and you shut down the entire global economy, like literally shut it down, and then you print all that money,
00:32:49
Speaker
there's no deflationary force to counteract all of that money printing. And so that's really the reason that we saw this runaway spike in inflation that everybody's dealing with now. So you can't get away from the fact that inflation is caused from the monetary base expanding
00:33:09
Speaker
It's just so far removed from our everyday experience because money is built on credit and we just don't see it and it takes time to play through.
00:33:20
Speaker
Let's pull that thread a little bit more then about inflation. So in that article, you mentioned the Trinity study, which basically is came to, it was a study that led to this 4% rule, this 4% state withdrawal rate, which is basically, I think that went back to 1926, which Bill Banion, I believe is his name, he actually redid the study in 2019, going back with more data in more diverse markets. And it came actually out to a higher distribution rate of somewhere in the fives, 5% state withdrawal rate.
00:33:49
Speaker
The initial was, again, 4.2, I believe. They rounded it down to 4% and said, hey, you can distribute from your portfolio an initial 4% of your total invested assets and then adjust that number for inflation annually in over a 30-year timeframe out of all the market data we have available, at no point would you have run out of money in that 30 years. Actually, I believe it was about 98% of the time you would have... Yeah, it's almost 100%.
00:34:15
Speaker
Yeah, you would actually have a vast majority of the time you'd actually ended up with more money than you start out with by multitudes. The problem is,
00:34:24
Speaker
Again, we're trying to outpace and it's an inflation adjusted number. So there's a lot of unknowns here. Now, if we imagine a world where there was no inflation, then we're just like, all right, I plan, I think I'm going to live for about 30 years. I just need to have 30 years of living expenses set aside. I mean, that's really broad and oversimplified, but the impact of inflation makes us. It's not even that though, Jim, right?
00:34:52
Speaker
all this productive capacity that we were just talking about, the improvements in society, all of that, it increases people's purchasing power over time if you're measuring it in something that can't be printed. So here we're harkening back to Bitcoin, right? But like you would expect that if we are three, four, five, 6% more productive on a
Challenges of Mainstream Bitcoin Adoption
00:35:14
Speaker
yearly basis, if you are just holding money that can't be printed, then you're getting, you know,
00:35:20
Speaker
three, four, five, 6% more wealthy over time. So you don't actually have to have 30 years worth of expenses saved at the beginning. Maybe you only need 15 or 20 years worth of savings. And then that compounding effect that you get from your purchasing power increasing through just general productive capacity growing over the global economy, that takes care of the rest. And all the same rules in terms of a safe withdrawal rate apply here.
00:35:48
Speaker
in that same regime, it's just that you're not having to go out the risk curve and invest in the stock market or bonds or real estate or art or classic cars or whatever else that you're trying to get your hands on so that you don't have to hold on to cash. If you can hold on to money that can't be printed, you can hold on to the base layer of savings. That's what Bitcoin represents. That's what Bitcoin is. A big issue here is that
00:36:17
Speaker
By money itself is meant to be a store value and then a means of transferring that value that you're able to store. The problem is when you have a money, I would argue that the US dollar and pretty much any fiat money out there is not actually money, it's simply currency. But when you have a currency or money that does not actually store value over a prolonged period of time, it just transfers that in a diminished capacity over time, then people are forced to invest or speculate
00:36:46
Speaker
in different things, which introduces volatility and unknowns and the necessity to go higher financial planner. It's going to increase your taxes. If you had a money that kept its value over a prolonged period of time and
00:37:02
Speaker
You have a dollar that's worth a dollar today, and in 30 years, it's still worth a dollar, and you go and use that dollar to purchase something, there's no capital gains impact. Versus if you want to have a dollar of purchasing power in 30 years, well, during that time, you're going to actually have to invest that money. And then when you finally sell that investment, you're going to realize a taxable event. So you're getting stolen from in multiple ways.
00:37:25
Speaker
One of them is through inflation. The other one is the, it's caused by inflation. That's the capital gains that you were forced to utilize in order to keep up with inflation itself. And yeah, it's frustrating. Now let's take us to Bitcoin. So you had this 4% safe withdrawal rate. We have to think through what's called, you mentioned in the article again, it's sequence of return risk. That's why where this came out was in the 90s. The market just went up a whole bunch and all these goofy talking heads on financial
00:37:53
Speaker
TV, we're saying like, hey, the market's up 12% again this year. You can pull out 12% of your portfolio and you won't run out of money, which sounds fantastic. I wish that was the case, but the issue is if you do that in a time like in the 70s or the 40s or the nows, what would happen with your portfolio when the market drops? So that's when Bill went back and tested over prolonged periods of time over different markets and came out with this 4%.
00:38:18
Speaker
So, sequence of return is, again, it's basically, it's not just the return you receive, but the sequence, the order in which you experience those returns. So, if you have a high return at the front of your retirement and then low returns to the end, that's not as negative of having a very low return in the first few years and then having higher returns later on.
00:38:38
Speaker
So yeah, if you retire and then March 2020 happens the next month, and maybe that's a bad example because they came in and printed a whole bunch of money. Well, it's not that bad of an example, actually, because the purchasing power actually really did fall off a cliff, right? Let's take just to make it a little more plain, right? If you retire in,
00:39:06
Speaker
in late 2007. You're at the top of the market there. You've just hit your financial independence number, which is 25 times your annual expenses that you expect to have over the course of your retirement. That equates to that 4% rule. You just hit your number, you retire day one on that, and then the market
00:39:29
Speaker
and the economy enters into recession and your portfolio gets cut in half over the next course of the next year. Well, now you're selling way more than 4% of that original value and you haven't had time for compounding to help that value of that grow so that you can keep up with inflation and fund your lifestyle there. So now all of a sudden, if that happens in year one,
00:39:55
Speaker
your chances of getting through your entire retirement just on that portfolio and selling it down have lessened drastically. If you make it through the first five years or so, I think is what the Trinity study is showing, you make it through the first three to five years.
00:40:12
Speaker
After that point, there's almost no scenario, historically speaking, where you need to worry about a great financial crisis, like one that we saw that would force you to go back to work. But that sequence of returns, that is what that's illustrating, is that the volatility that's associated with holding your savings in an investment vehicle like the stock market
00:40:38
Speaker
can adversely impact what your retirement looks like if it just so happens to be affected at the wrong time. Let's bring Bitcoin in the conversation then. So obviously a lot of the issues that we've highlighted with inflation and money printing and central control and all those things like Bitcoin was created as a means of correcting that and removing those
00:41:04
Speaker
the people who introduce those problems. But we're not in a place yet where Bitcoin uses the money and is a stable store of value in short durations, which is important. If you're 100% in Bitcoin and you retire in 2021, and then the purchasing power of that Bitcoin drops by 80%,
00:41:29
Speaker
you're in a lot of trouble. Unless we experience an immediate K correction, you're sort of hosed, which I've seen people do this, unfortunately. Years back, when I was working at another firm, I had a few people who reached out wanting to do these types of things. And you have to, which Bitcoin maximalist out there will maybe throw rocks at me saying that everyone should own all their assets in Bitcoin. But I think by introducing unnecessary risk, which unnecessary risk comes through incorrect portfolio sizing,
00:41:57
Speaker
And by not having the right portfolio allocation, portfolio size, and having unnecessary risks, you actually put your overall Bitcoin allocation at risk as well. Again, through poor sequence of return risks and distribution times. But anyways, I think the people who don't like Bitcoin or don't understand Bitcoin, if we're sitting here talking about sequence of return risk and poor returns and stuff, I think they're probably snickering right now saying like, well, heck, Bitcoin is so volatile. How would this outrageously volatile asset
00:42:27
Speaker
help during this case with Secrets of Returns. Can you speak to that? Yeah, that Secrets of Return risk is certainly applicable to Bitcoin in the short term. We are not advocating for Bitcoin as something that immediately
00:42:52
Speaker
One day it's not, the next day it is like full global money and can protect against all of these things because you're holding the base layer savings mechanism. That's not going to happen. There's an order of operations here.
Bitcoin as a Stable Measure of Value
00:43:04
Speaker
It takes time for people to actually understand its value and put a material amount of their net worth into it and create a liquidity profile for the asset such that the volatility continues to drop.
00:43:22
Speaker
At the point in time in the far future where you and I think Bitcoin is going, we're denominating goods and services and our investments in Bitcoin. We're using this 21 million hard cap supply as a true measuring stick for all of economic value.
00:43:43
Speaker
And when you do that, there's no volatility at all. You don't have to introduce this noise into the calculation mechanism of your day to day life of having the purchasing power of the measuring stick moving. The purchasing power is going to vary regardless of what money you use. It's just that you get a clearer signal as to what that purchasing power actually is. And it's reflecting in a purer sense what is actually going on in the economy.
00:44:13
Speaker
as opposed to having all this extra noise introduced into your assessment of what's going on in the economy because your measuring stick is also changing in shape and size. That's what's happening when money is printed, and then something busts, and there's this cascading liquidation effect of all this debt collapsing in on itself, and then we get these massive deflationary forces.
00:44:38
Speaker
You're seeing that measuring stick widen and crunch, widen and crunch. It's really difficult to make economic decisions when you're using that as the way that you account for value. In the Bitcoin world,
00:44:53
Speaker
What we're trying to do here is help people understand that by adopting Bitcoin, by the world adopting Bitcoin, we can move away from that really crazy measuring stick. We can just say an inch is an inch. An inch doesn't move back and forth, widen and narrow. If you try to build a house with that kind of a measuring stick, you're going to have a bad time. And the same thing goes for when you're measuring economic value as well.
00:45:22
Speaker
That's what we're going for. And when we get there, all of a sudden, you don't have to worry about secrets of returns risk when you're holding Bitcoin because it is the world's money. It is the denominator. When I talk about Bitcoin and its value or price or whatever, obviously, there's the exchange rate between Bitcoin and whatever fiat currency we're exchanging it for.
00:45:47
Speaker
But over a prolonged period of time, I deliberately don't use the word, like, how many dollars you're going to get. I use the word purchasing power, which trades you just mentioned purchasing power will move. That's expected. There will be deflationary inflationary forces in the world for for, you know, for a house. Maybe you live in a spot that is just really nice and a lot of people want to move there.
00:46:05
Speaker
You would expect natural inflationary forces on the homes of that area versus if you live in a dump and people decide like, wow, they just found out that there's a rule on a fault line. Well, we expect the value of that house to go down. I deliberately use that word of purchasing power, so we understand exactly what are we benchmarking things against. When it comes to benchmarking,
00:46:32
Speaker
When you have a system of measurement that is fluid and doesn't work, I can't remember who mentioned this, but it talks about like, if you have a ruler that adjusts in its length and you're trying to measure a table with it, the question is, are you using the ruler to measure the table or are you using the table to measure the ruler itself?
00:46:51
Speaker
and that's where we are. My house a couple of years ago appreciated supposedly by 33%, but did my house become 33% more valuable? Yeah, right. Dude, I've got four kids. There's no way my house is worth 30% more with their fine works of art all over the walls. My house didn't appreciate by 33%. Our town grew by some, so maybe it grew by 8%, but the remaining
00:47:15
Speaker
appreciation of my house, that remaining 25% was actually devaluation of the thing that you're denominating it in by that 25%. So we're using this goofy ruler. So I work in, my brain works in terrible analogies. So that'd be like Adeline, she's my seven month old. So let's say we're trying to measure Adeline against our dining room table. Okay. And she's growing. The reason I use that, it's like,
00:47:39
Speaker
Bitcoin is this place of infancy, and I expect it to grow and become the size of the table eventually. Adeline, Bitcoin, right now is small, but she's growing in a regular cadence. Now, let's say I wanted to send updates regularly to grandparents about how big Adeline is. And I had this ruler to say it. So Adeline on this ruler against this table.
00:48:05
Speaker
Well, we can see that she's growing against the overall fixed thing. But if I'm trying to measure her against a ruler that's pegged against this table, but then we throw in this ruler that switches, well, I can say, hey, Adeline right now is three feet tall. But then we, in a month, we want to send an update of how tall Adeline is.
00:48:23
Speaker
And since then, the ruler got shorter. It's like, hey, Adeline is only two feet tall. Well, does she shrink? No, the measuring stick itself is being adjusted. And suddenly Adeline is seven feet tall. It's like, well, that's bigger than the rule you said a few minutes ago. How that happened? Well, that happened because suddenly we have this multiple above. That's where we're at right now. We have
00:48:41
Speaker
The total monetary supply in the world is just outrageously large compared to things that we're supposed to be keeping in account of. So like the length, suppose the length of this table is greater than the table's length itself because we're manipulating the means of measurement versus if I just had my child, this thing, this Bitcoin, the purchasing power of it is growing and expanding to eventually we know exactly how much
00:49:06
Speaker
Table she is we've removed this third party that brings so much noise in that ruler that's that's changing That's simply noise. We have to Remove that from the system itself and allow just one thing to be kept pegged against another That's a terrible analogy. That's how my brain works is through these these bad things. But uh Yeah, I mean when you go through life when you go through life, you're you're you're constantly solving problems, right? it's really hard to solve a math problem, let's say when
00:49:36
Speaker
every, every integer or variable there is a variable, like you need a constant, you need a constant in order to be able to solve a math equation. And that constant needs to be the money. If you don't have a constant money, you've got variable money, it's gonna be really hard to pinpoint.
00:49:53
Speaker
what the answer is to the question that you're trying to ask. And that question for most people is, how do I just live a good life and plan for my future and be able to give my kids the things that I want to give them so that they have a good life, so that they've got food on the table, so they can enjoy the sports and games that they want to play, so that they can grow up and be
00:50:19
Speaker
you know intellectually stimulated and have all the other opportunities that you would want them to have that constant needs to be there otherwise it becomes really hard to solve that equation that you're trying to solve. Can you imagine if we had algebra and it was like.
00:50:38
Speaker
you know, a plus seven equals solve for x, equals x, solve for x. And you realize through going through multiple problems that a equals
00:50:50
Speaker
So it's like, oh, one plus seven equals, so the answer's eight. And suddenly it's like, wrong, A in this equation is actually worth 17. It's like, why? It's like, doesn't matter, figure it out. It's like, how do you actually guess what A is supposed to equal or what X is supposed to equal when this other number, this variable is supposed to remain constant, but as you have some goofball behind the scenes, it's like, sorry, it changed this time. It's like, no, in order for me to solve for this future thing, I have to know what the variables that we're adding up are going to equal.
00:51:19
Speaker
I'm doing a guessing game, which honestly is where we're at. We're at a guessing
Global Advantages and Custody Solutions for Bitcoin
00:51:22
Speaker
game. How do I invest? How would I save for these things? Well, based off our best guesses of what A is in this equation, we should probably do these things, but who knows? There is a necessary place of investing. Investing is not a guaranteed thing. There's a place of necessary place of investing.
00:51:38
Speaker
but we made it way more complicated than it needs to be. Another way that you can solve for this volatility, this 4% save withdrawal rate is by having what we call guardrails. For our retirees, what we do is we actually have about a 5.5% distribution rate in their portfolio, but then we introduce guardrails. If in year one, your portfolio grows a bunch,
00:51:59
Speaker
And instead of having an effective five and a half percent distribution rate, now you're at a three and a half, well, we can give yourself a raise that year. Or if the market does poorly that year, and suddenly seven and a five and a half percent distribution rate, you're at a seven percent distribution rate, well, we're just not gonna give you a cost of living adjustment that year, maybe you have to rein things in. And that helps.
00:52:20
Speaker
smooth overall volatility and actually inject some more insurance into your cash flow over a prolonged period of time, which I think is really important when having Bitcoin as it's growing right now. That'll help you
00:52:34
Speaker
whether those ebbs and flows of purchasing power. There's another thing to recognize and maybe this is like too far past people who are new to Bitcoin and they're trying to understand it and trying to understand its value. But you and I can definitely agree because we've been around for a long time and fully have conviction in Bitcoin as like a long term savings vehicle is that
00:53:01
Speaker
There's so much asymmetry and upside in terms of its purchasing power because it's so young and not understood. And because there's so much store of value, value out there that can be pulled away from subpar assets and into Bitcoin once people recognize that it is superior, that
00:53:25
Speaker
That Trinity study was based off of the total market going up by 8% to 10% per year and you adjusted for inflation. Maybe you're getting like 5% to 7% in purchasing power growth or whatever to compound.
00:53:44
Speaker
Bitcoin has all this upside because it's becoming more and more adopted. Now, all of a sudden, even though it's more volatile, it's still growing way faster than that stock market investment or savings vehicle that you're using. And so that has to also play into account when you're thinking about a safe withdrawal rate and all that. That can be scary for sure, right? But that definitely does play into this equation.
00:54:10
Speaker
I think it was in 2020 this fund statistic came out and who knows what Bitcoin will do moving forward. But I believe it was from the genesis of Bitcoin in 2009 until sometime in 2020. If you had your portfolio 1% in Bitcoin, the remaining 99% sitting in cash, you would have outperformed the S&P 500 index with substantially less volatility in your portfolio.
00:54:40
Speaker
Yeah, obviously the adoption rate at that point massively skyrocketed. Who knows what we'll do moving forward from a percentage growth of price. But yeah, I think that to speak again, it comes to portfolio sizing. Not saying you have to have 100% of your portfolio in this thing, but if Bitcoin becomes this global store of value and settlement layer, we would expect that to take up a lot of the existing
00:55:08
Speaker
financialization of other assets. I think that would... Why would you hold your store of value in something that can't be moved and is taxed every year and has constant maintenance costs and things that you have to fix?
00:55:29
Speaker
which i'm referring to your house or other real estate assets gotta deal with tenants if you got real estate investments you know like those can be good investments and there are some good tax benefits there but there are a whole hell of a lot of work.
00:55:45
Speaker
And are you really outperforming just holding the stock market if you're doing real estate there? Well, why would you hold the stock market if you've got to trust that this counterparty that's holding on to that is going to be there? And let's not forget, we're taking a very
00:56:04
Speaker
We're taking a very US-centric view here in a very US-centric conversation. The rest of the world does not have the same type of privilege that the US does in terms of access to the stock market. You might not have access to the right stock market. You might not have access to any stock market at all. A large portion of the world
00:56:27
Speaker
their only option for saving any type of value at all is the cash or the currency or the money that they are forced to use on a day-to-day basis.
00:56:39
Speaker
across the world in places like Argentina and Venezuela and Lebanon and Turkey and various other places around the world, like the opportunity for people to take this very US-centric approach that we've been talking about for the whole last hour, it's just not there. So they need an alternative. They need something that they can access, that they can control, that can't be taken away from them by their government and that cannot be printed into oblivion.
00:57:09
Speaker
They don't have access to dollars in a lot of cases, and they don't have access to the US stock market. Well, what other option do they have? Bitcoin can be that option. It can be something, even despite its volatility, that allows people to actually build up savings and follow the fire methodology, even though they don't have access to the same types of tools that you and I do. Do you have a few more minutes?
00:57:38
Speaker
I do, yeah. Cool. Let's take a second. So let's say someone's thought like, all right, I'll buy some of this. I think it makes some sense. I'll go ahead and get some. And I encounter this regularly. I'm sure you do with where you work. I saw this article. I have a friend who they had some Bitcoin early on and they lost it. And now it's in a landfill somewhere.
00:58:03
Speaker
whatever, they lost their seed phrase. Once you've bought Bitcoin or acquired it in some capacity, what are different ways? We can just talk through like simply from the simplest means of holding it through the more secure means of holding it. How do you make sure this thing is kept? Like we've talked about in other episodes, like how this is a bearer asset. So you're able to take custody of it itself. What does that mean? Or what are different ways of cussing it and what are the risks and trade-offs with those?
00:58:31
Speaker
Bitcoin can really help you in your personal finances and in the way that you manage saving for the long term, but only if you can actually hang on to it. And so there are different ways to do that, and everything has trade-offs. What I do in my role and what we do at Unchained is to help people to hold onto Bitcoin in the best possible way that eliminates or drastically reduces
00:59:00
Speaker
the ability for them to just make one mistake and lose a Bitcoin. So let's step back and talk a little bit about fundamentals here. As you said, Bitcoin is a bearer asset. It's akin to holding a bar of gold or a bag of cash in your hand. It's something that you can keep in your possession.
00:59:18
Speaker
And the way this works is that you are managing what is called private keys. It's essentially just secret information. You can kind of think of it like a secret password. And as long as you are the only person who knows and has access to that password, you are the only person on the planet who can spend this Bitcoin.
00:59:36
Speaker
Nobody can take it from you. You are not able to have the Bitcoin move from your possession into somebody else's without a cryptographic signature from these private keys.
00:59:51
Speaker
So when you start to understand that, there's some kind of power that is illuminated there, which is that, wow, I can hold onto this thing and literally nobody can take it from me without me somehow cooperating or them getting hands on this secret information.
01:00:07
Speaker
But the flip side of that is if they get access to that secret information, they can spend your Bitcoin regardless of where they are in the world. They don't have to come to your house and grab your vars of gold that you've buried in your backyard. So there's a little bit of a double-edged sword there. But those cryptographic keys, because we're just dealing in math and information here, you can actually manage Bitcoin where you don't have that single point of failure. And that's what we do at Unchained.
01:00:37
Speaker
We help people to hold Bitcoin that is protected behind multiple keys, three in fact, with a quorum of those keys needed to spend the Bitcoin out of the vault as we call it once it goes in. So our clients hold two keys, we hold one and that puts them in a position where they have full unilateral control over the asset.
01:00:59
Speaker
They have no single point of failure because they can keep those keys in geographically dispersed locations. And if something happens to them, we're in a position to help because we've got that third key and we can act in cooperation with one of those other keys in order to
01:01:17
Speaker
refresh the setup and get them into an uncompromised situation. If something happens to them and their Bitcoin needs to pass down to their family, we're in a position to help with that scenario as well.
01:01:32
Speaker
security and the act of actually holding on to it and making sure that you are securing it in a way that is resilient to your mistakes, that more Bitcoin can't just be taken from you.
Bitcoin Security and Risks of Centralized Exchanges
01:01:46
Speaker
It's come a long way over the last seven, eight years or so. And it probably has a long way to go, but we have the tools now
01:01:57
Speaker
that will allow people to actually take a material position in Bitcoin. Some people start dipping their toes in with like a 1% allocation. It's like, hey.
01:02:08
Speaker
If I buy 1% of this thing because I think it might go up or it could go to zero, well, that's great. It could have a very significant impact to your ability to save over a long period of time if you could hold on to it. And if it goes to zero, well, you've got the rest of your portfolio in the stock market and that goes up and down by 1% every single day. So you won't even feel that, right?
01:02:31
Speaker
When you start to develop conviction, people tend to want to allocate more to Bitcoin. And when you start doing that, you need to make sure that you are securing it appropriately. So we talked about how Bitcoin is a better asset and how you can actually control it yourself. Well, why would you want to do that? Because you don't want to trust somebody else with an asset that you don't have to do that, right? We've seen a lot of exchanges go bankrupt.
01:02:59
Speaker
You've seen banks go bankrupt and meet bailouts and that kind of thing.
01:03:04
Speaker
You don't have to be dependent on somebody else to manage your wealth for you in this new world of Bitcoin. You don't have to be reliant on a counterparty because Bitcoin is not based on debt, right? The reason that we have to, this kind of brings it full circle, the reason we have to have intermediaries and banks and other financial institutions involved in our transactions from day to day is because we need to be able to transact over
01:03:31
Speaker
large spaces and do that very quickly. And that requires those people moving money over electronic communication systems. And up until now, the most efficient way to do that is to create debt, right? To create credit. Bitcoin is not like that. You get all the benefits of that credit-based monetary system where you can zap value around
01:03:55
Speaker
without having all of the downside of the counterparty risk that comes with those financial intermediaries and those banks involved in all of your transactions, knowing everything that you're doing and taking a 2% to 3% slice of that transaction volume. So we can just leapfrog all of those financial intermediaries. You can hold
01:04:14
Speaker
your wealth in your own hands that's very difficult uh for you know governments or any other bad actor to call away from you and also if you set it up the right way very difficult for you to lose um and you can get all the benefits of that bearer asset without any of the downsides of
01:04:32
Speaker
holding cash or gold that you can't send over large spaces that is very difficult to essay and make sure that it's real and all that kind of thing. Bitcoin solves for so many problems. And you just have to recognize that, secure it in the best possible way, and then just sit back and watch as you take a better view than an index fund or real estate in terms of the savings vehicle that you've got.
01:05:01
Speaker
It's easy to get lost in so many of the other things about Bitcoin. Again, I generally view this in a more of a macroeconomic lens and get caught up in that, where you can take it in the technology side of things. But a few days ago was Bitcoin White Paper Day, a celebration of when Satoshi released the White Paper to talk about what is Bitcoin, how he's built it.
01:05:28
Speaker
And the title of that self talked about peer to peer money. Like this is something that you're removing these these trusted third parties that all the times we've placed trust in people that shouldn't have trust. The problem is by by.
01:05:44
Speaker
Just because you own Bitcoin, this is a poor argument, but a common one here is, well, whatever, this institution collapsed, that institution collapsed. I thought Bitcoin was supposed to solve that. It's not Bitcoin's fault. That's this institution's fault that you're not supposed to place trust in.
01:06:01
Speaker
So we have brought centralization back in. And there are places that that helps. It's necessary to an extent. That's where even when you when you when you own Bitcoin, there's a lot of ways to own it. You can you can keep it on an exchange. You really want to be very cognizant of what exchange you have that on. You kept it on Mt. Gox or FTX or litany of other ones over the years. Your Bitcoin was was taken.
01:06:22
Speaker
It was either stolen from you directly or was stolen because it was actually never bought. And you just had a, you know, your screenshot shows that you had Bitcoin that didn't exist. That would be like, Trey, you said, Jim, I want to buy some real estate in Hawaii from you.
01:06:38
Speaker
And I said, all right, here, give me a million bucks. I'll get you beachside property in Hawaii right now. So give it to me. I'll give you a picture of it even. Like, perfect. That's mine. But you're a really busy guy. You're not gonna go to Hawaii today or tomorrow or in the next year. So I can go out and sell that same beachfront property to a million other people. And suddenly I just got a lot of dollars. And maybe there's one real estate actual house in Hawaii. Maybe there's none. That doesn't matter because I have your money.
01:07:05
Speaker
And none of you are able to actually testify that, hey, I have taken custody of this thing. I've been there. This is mine. And that's what all these bad actors in this space do. They've given you a picture of your beachfront property, but you're not actually going and verifying that, yes, this is mine, and I'm taking custody of that.
Bitcoin's Finite Supply and Wealth Management
01:07:21
Speaker
And so in essence, by keeping on exchange, you're doing that. And again, that's dangerous. That's sort of like buying gold, but then never actually seeing the gold and trusting that it's at a gold vault in Switzerland.
01:07:34
Speaker
Which they probably, maybe they have the gold, I don't know. But then even if they have it, what if someone else who's really smart is able to go in there and take it, plunder it. Maybe it's suddenly Switzerland's in a war zone and they get invaded and someone takes that gold. It's not yours anymore, sorry. So there's that.
01:07:52
Speaker
You can move it all over to like a hot wallet on your phone, which I keep some Bitcoin on a mobile wallet. That's just, I keep some on there so I can send payments to people and use it as a day-to-day manner. I think it's going to be really important for that payment layer of Bitcoin, that means of exchange. You can move it over to a single signature hardware wallet, or finally, as you just talked about, a multi-signature wallet. So yeah, there's,
01:08:20
Speaker
degrees of trust. And what you highlighted at the start of this part of the conversation is there's trade-offs with convenience and trust and security. And depending on what you're gonna use it for, if you're gonna day trade Bitcoin, which I would not advocate to do, you probably wanna keep it on the exchange. That way you're not moving it on and off the wall. That'd be equally as goofy. But if you're actually, if you're going to own this thing as a means of personal wealth,
01:08:48
Speaker
growth over a prolonged period of time, I think it's foolish to not actually take custody of it. And once it becomes a decent amount of your net worth.
01:08:58
Speaker
I think it's equally as foolish to not go ahead and move this to a multi-key setup to remove risks. A lot of those risks, maybe they're not, maybe not risk of third parties, you're probably a pretty big risk to yourself. Something happens, you just forget your password. I forget passwords all the time. Like for Google, I literally reset my Google password anytime I go into Google. That's just a way of life. Most people who
01:09:27
Speaker
are taking it upon themselves for self custody. They lose it because they make a mistake, not because there's some person who's like knock on their door and stealing their Bitcoin. And the other major way that people lose Bitcoin is by leaving it on an exchange, which in essence is always connected to the internet. It's accessible from anyone anywhere in the world with an internet connection or who can socially engineer a support person at that exchange and trick them into sending your Bitcoin away.
01:09:56
Speaker
And maybe you get it back, maybe you don't, but you definitely don't want to take that chance with something that is finite in supply. So we started the conversation talking about how banks and governments and all this have the ability to print money for themselves and for their friends. You can't do that with Bitcoin. Once it's gone, it is gone. There's no way to print more of it. So either that has to come from somebody else to make you whole,
01:10:25
Speaker
or you're not going to get it back. And so you have to be very mindful with how you manage this asset. That's obviously one of the main benefits of Bitcoin, though, right? Like that's why you want to hold it. You want to hold it because it can't be printed, because the supply can't be increased and you're well stolen from you from out from under you by other people who have the privilege of printing the monetary units that you are forced to use. That that is the essence of the
01:10:55
Speaker
the foundation of value that Bitcoin brings to the world is that it is hard-capped, 21 million, there cannot be any more. And so whatever the range of custody option that you choose and the trade-offs that you choose to make, you just need to keep that in mind, right? You might be an individual, and if you're an individual and you have the means, you should absolutely hold your own keys.
01:11:17
Speaker
if you're an organization or an enterprise. Multisig is a great way to distribute the key management for the Bitcoin that is sitting in your treasury that you need to fund your business as like an endowment over the next hundred years. Multisig is a great way to involve multiple people and distribute the trust of that treasury to make sure that the Bitcoin cannot be lost there as well.
01:11:41
Speaker
And there are some businesses and enterprises who can't actually hold their own keys, either because they just really don't feel comfortable with it, their auditors hate it, hate the idea of it, or they have regulatory mandates that prevent them from doing so. But there are ways to use the technology that's under the hood here, right, that this multisig and private key management technology
01:12:07
Speaker
That allows you to distribute that risk across multiple institutions that are independent of each other. That's one of the custody options that we offer as well. And one of the things that I focus on on a day to day basis is helping enterprises and large family offices and
01:12:22
Speaker
people who need to have massive amounts of Bitcoin exposure and Bitcoin on their balance sheet, but they can't or don't feel comfortable holding their own keys yet. So we provide a path for them to get that exposure, distribute the risk across multiple counterparties, instead of relying on layers of counterparty risk by trusting some black box institution that you don't even know if the Bitcoin is actually there.
01:12:48
Speaker
All of these things are options for people, depending on their situation, organizations, depending on their situation. And, you know, Unchained makes that available. But Bitcoin generally has opened up this Pandora's box of new options for the world, right? It's opened up new ways to save, new ways to manage your wealth that create financial independence
01:13:13
Speaker
not only in the fact that you have this like incredible savings technology, but financial independence in the sense that you can manage your own wealth and you don't have to rely on somebody else.
Final Thoughts and Securing Bitcoin Effectively
01:13:24
Speaker
You don't have to trust somebody else with the majority of your net worth. You can hold it yourself. You can do that in a really safe way and you can get all of the benefits that come with doing that alongside the fact that the savings vehicle is there to help you, you know,
01:13:40
Speaker
endow your family for generations to come. That's really why we're here. That's what gets me up every morning and helps me to help people understand the value of Bitcoin and all that. It's rearranging the incentive structure of the world.
01:13:58
Speaker
and getting us to a place where we're building on savings and equity as opposed to on debt and something that is really fragile and collapses all around us at all times and creates all kinds of chaos in the world. We got to move away from that and towards something that speaks truth and reliability and has this lower time preference view of the world so we can get all the benefits of the greater productivity that we're all working for so hard every day.
01:14:29
Speaker
Awesome. Well, I think it's a good place to wrap it up. That was a varied conversation, but now I appreciate talking through just how can we utilize from a, I don't want to use the word savings or investing, but as a savings vehicle. And then, yeah, the common concern of how do I make sure that I don't screw this up somehow from being stolen or more than likely
01:14:55
Speaker
my own forgetfulness. And yeah, I appreciate you. I appreciate what Unchained's doing. And yeah, we'll definitely link some stuff to learn more about you. I'll link your article in this. And if people don't reach out, should they reach out to you directly? Should they reach out to Unchained? What's best there?
01:15:12
Speaker
Yeah, you know, I'm on Twitter or X or whatever they call it these days at TS underscore huddle. My article is both on the Unchained website and the blog as well as on my personal website, which is tracellars.com. You can get in touch with me there. And then, you know, I'm available on LinkedIn if you want to reach out there. But otherwise,
01:15:35
Speaker
Definitely go check out Unchained, see what we're offering. We do complimentary consultations as well so that you can get on the calendar of my calendar or somebody on my team. And we'll talk you through exactly how we approach this issue of securing your Bitcoin and all the other financial services that we layer on top of that core custody product to make sure that you're maximizing the value of your Bitcoin while you're holding it. Sweet. Thanks, Trey. I appreciate it. Thanks a lot, Jim. I really enjoyed it.
01:16:05
Speaker
Hey, thanks for listening to the Intentional Living Podcast. Now, today's show is simply entertainment and educational in nature. Do not take this as tax, legal, or investment advice. If you are looking for tax, legal, or investment advice, you should go talk with a tax, legal, and or investment advisor. Again, this content is simply educational and entertainment purposes.
01:16:32
Speaker
Thanks again for listening. We look forward to you joining us on the next episode.