Crypto Goes Legit

Welcome To It's All Money: Crypto Goes Legit

[0:02] DANO WEIR: Financial confidence for your hip pocket.

[0:05] DAREN BLONSKI, CFP®: Money is really just energy.

[0:07] DANO WEIR: Thanks for checking out It's All Money. Welcome to It's All Money from Sonoma Wealth Advisors. My name is Dano Weir. I'm the marketing director, podcast host. I'm joined by Daren Blonski, CFP®, Bitcoin enthusiast. I can say that. He's crunchy, so yeah, he doesn't want it, it's not an official designation. Today we are talking about crypto going legit, going legit. There are several signs that we've seen that crypto has come out of the basement, and it is more and more and more a question you're being asked by people you're speaking to, clients and people who may want to work with our firm. Hey, how do I get some of that Bitcoin? What are they asking you? What are you hearing about Bitcoin from clients recently?

How Do You Actually Own Bitcoin?

[0:58] DAREN BLONSKI, CFP®: Well, I'm hearing a lot of questions about how do I own it and what's the best way to own it. And again, this is just general advice. It's not advice for anyone specifically, but there's a lot of controversy in the Bitcoin world around ownership. So one thing to be really clear about is over the years, Bitcoin's never been hacked. What's been hacked is the exchanges where Bitcoin is traded. So think about that. If Bitcoin goes on an exchange, I mean, it's held there for the benefit of Dan and the benefit of Daren, people have broken into that exchange and taken the Bitcoin in that exchange because something called the public and private keys existed in that exchange on behalf of Dan or Daren. What has never happened is when Daren has receipt, meaning he is the only one that has what we call the private keys of his Bitcoin, that's never been hacked. There's some that say, well, someday with AI it's going to be hacked, but we don't have any proof of that. And it would be very, very difficult to hack it at this point. So one of the things I'm getting lots of questions about with Bitcoin is how do I own Bitcoin? So there's a couple of different ways to own it. You can buy it now from an exchange and then move it to something called a cold wallet. That's when you're in receipt of the public and private keys of that Bitcoin. Therefore, it's very unlikely it's going to get hacked. It's more likely you're going to lose that cold wallet in the codes, or the seed phrases as we call them, to that cold wallet. You can leave it on the exchange, which is high risk because someone could technically hack one of those exchanges and take it. We've seen that happen in history. And then the third way, you can own an ETF, or exchange traded fund, that tracks the price of a particular crypto like Bitcoin or Ethereum, ADA, or one of those. So those are kind of the three different ways to own it. And each of them comes with a different risk associated with them. And the way to know which one to choose is to get clear about what your intentions for owning the Bitcoin are. If it's just about price appreciation, then probably owning some kind of ETF is the best and most reasonable way to do it. If you're really interested in owning Bitcoin because you believe that de-dollarization is happening, then you probably want to have it in a cold wallet.

What's Actually Changed With Crypto?

[3:22] DANO WEIR: In the time that you have been following and owning Bitcoin, what is different now? Because this episode is about crypto going legit, I can go to a major trading platform now and basically get a Bitcoin ETF. The first Bitcoin you ever bought was purchased how?

[3:40] DAREN BLONSKI, CFP®: On exchange. So, on an exchange, I bought that Bitcoin there.

[3:44] DANO WEIR: Which exchange?

[3:46] DAREN BLONSKI, CFP®: Can we say the name? Coinbase. Yeah, so Coinbase. And then I use a thing called Swan Bitcoin now, where I'm literally just buying Bitcoin every Wednesday at the same time, a certain amount of money. So there's different...

[4:01] DANO WEIR: But at the time, the website for... Because I've been to some of these exchange websites, they look insane, like the sites. Yeah, it looks like you're going into like the dollar store of financial products, versus at the time, if I was to buy on, you know, a major trading platform, it felt kind of like, well, you can buy now, and, like, I think even Schwab is now allowing you to buy crypto on it, or they're about to, or they said they're going to, I don't know if you can yet.

The Genius Act And New Regulatory Clarity

[4:33] DAREN BLONSKI, CFP®: So what's been happening is the network effect. The network effect is when there's more people that look at it, they start saying, oh, this is going to be legit, and then it legitimizes it, and then it gets infrastructure built within the financial system to be able to buy and sell it. What was happening in the previous administration is they were fighting against that legitimacy and making it very difficult to own, making it very difficult for people like our institution to own it for our clients because we didn't know what the regulatory frameworks were. What's happened with the Genius Act is basically it's creating a regulatory framework so that institutions like ours know how to behave with it and how to advise our clients on it.

[5:12] DANO WEIR: Guiding and Establishing National Innovation for U.S. Stablecoins Act. They picked only a few letters out of there to make that acronym. So that's what you're talking about, the Trump presidency has seen that through. They're also considering Bitcoin now for mortgages, so I feel like the mortgage one...

Crypto And Mortgages: A New Asset Class

[5:34] DAREN BLONSKI, CFP®: The mortgage one is considering whether or not they give you the mortgage, whereas before you could have a lot of assets in crypto and they would say, oh, that doesn't count as a real asset.

[5:42] DANO WEIR: That's what I'm saying. I feel like that framework is really easy to understand, which is: for applying for a mortgage right now, let's say that you had $200,000 in Bitcoin in 2020. If you had $200,000 in Bitcoin and you went, hey, I have this amount of cash, I have my job, and I have my Bitcoin, they would go, well, if you want that Bitcoin to be considered for your mortgage, you've got to turn that into dollars, and then those dollars can be considered. In which case you take a capital gains hit. But now you don't have to convert it, you can just leave it as the Bitcoin. That's it. A perfect example of this is now on the table. We're not forcing you to take it from the monopoly money to the U.S. dollar. You can keep it in monopoly money.

[6:28] DAREN BLONSKI, CFP®: Wait, isn't the U.S. dollar monopoly money too?

[6:31] DANO WEIR: Sort of. No, monopoly money's... Monopoly money's coming along. This is a new type of stablecoin. It's paper coin. You don't know about paper coin?

[6:41] DAREN BLONSKI, CFP®: Well, there's other coins too, but yeah.

[6:44] DANO WEIR: That to me is a perfect example of the legitimacy now. This is, I mean, they're not forcing you to run it back through the Rube Goldberg machine to get it back into dollars. You can leave it in the digital format.

Wall Street Gets In: Institutions And Extended Trading Hours

[6:55] DAREN BLONSKI, CFP®: Well, and you see big institutions like Schwab and BlackRock and Fidelity has been doing for a long time. Franklin Templeton really getting involved in dealing with cryptos and having ways for people to buy them, sell them. They're interested now, which this is another thing we talked about. There's extended trading hours coming now for the regular stock market. One of the things that crypto trading has really pushed is extending the actual trading hours for U.S. stocks because all these exchanges realize they're missing out on a lot of revenue because they can't participate. And so a lot of these institutions are saying, we want in on this too. And I think they've been lobbying the Trump organization to really push this stuff through and get involved with it, because it's a big opportunity for a lot of these institutions.

The $100 Million Lobby Behind The Genius Act

[7:42] DANO WEIR: And to be clear, the Genius Act saw a ton of lobbying. I read an article from NPR, which I guess still has funding, that said $100 million was put in from the crypto lobby to get Genius passed. So clearly this was very important to the crypto industry to try to get this framework in place. You mentioned companies, big companies which offer a Bitcoin ETF: BlackRock, Fidelity, Franklin Templeton, just among a few of the brand names that people might recognize. Countries, whole countries, are working on strategic Bitcoin reserves, and not small ones, not micronations. The United States technically has one, with some they've already seized, and they're looking at building a bigger one.

Countries Building Strategic Bitcoin Reserves

[8:27] DAREN BLONSKI, CFP®: What's interesting is it was just disclosed that the Biden administration sold most of that. Yeah, they sold most of it on the way out last year. And so the Trump administration was really not happy about that. It caused all this like, oh my gosh, well, maybe the government's not going to really engage with it, and price volatility kicks in.

[8:48] DANO WEIR: Interesting. So the UK has some from seizures. China is said to have already a strategic Bitcoin reserve, although that's according to China. Countries which are considering reserves: Japan's considering one, Switzerland is proposing that they also have one, which, not a big surprise there, that they would be on the cutting edge of some banking.

Athletes Getting Paid In Bitcoin

[9:15] DANO WEIR: There have been athletes, I don't know if you've heard this. Yeah, I have heard some athletes who have been, quote, paid in Bitcoin. In 2020, Russell Okung, he was an offensive tackle, an offensive lineman for the Seahawks and a couple other teams. If you know who Marshawn Lynch is, Marshawn Lynch was a good running back because Russell Okung was a great offensive tackle. In 2020, his last year in the league, he got paid, quote, in Bitcoin, which was actually he got paid in dollars and then bought some Bitcoin. But he did it as part of a promotion with a trading platform. So he put six million in Bitcoin in 2020, which is now worth 20 million.

[9:51] DAREN BLONSKI, CFP®: So a good investment for him.

[9:53] DANO WEIR: A few other athletes have also done the same. But I actually think that you will start to see more payments in the currency itself. So not doing a runaround, not getting paid in dollars and then putting it in Bitcoin, but as more and more people have it, the payment will just happen in Bitcoin, circumventing the dollar and the banking system, basically. So more signs that this is, you know, the network effect, this is spreading worldwide.

Blockchain's Bigger Promise: Beyond Currency

[10:21] DAREN BLONSKI, CFP®: Well, and I think what's even for sure more spreading in perhaps Bitcoin, or Ethereum, or ADA, or XRP, what's really coming into... the history of our existence is this idea of blockchain, and blockchain being used as a way to categorize things, to order things. It's the digital system for taking data and making sure that data integrity exists. And that's really coming into existence. I think you'll start to see people having property put on the blockchain, meaning you own that property because you own that piece of the blockchain that it's tied to. Like we saw that with NFTs, you own this image because you own the keys to that blockchain. I think you're going to see a lot of innovative things. Side note, we could actually have a hundred percent integrity in our elections, which is put on the blockchain. The solution's already there, both sides just don't want the solution, just FYI, and another tinfoil hat moment for you. But the point being is it's coming into advent. It's an asset that people need to take seriously. It's for real, it's here to stay, I don't think it's going anywhere at this point. We do have some clients that have an aversion to it, and that's fine. But the reality is it's happening, and it's here, and it is an important asset to consider in anyone's portfolio.

Crypto Adoption Is Like The Cell Phone Revolution

[11:44] DANO WEIR: Speaking of growth, this is just looking at 2023 to 2024 growth of crypto ownership. This is from Visual Capitalist. In Asia, there's a 22% increase, in America a 39% increase, in South America a 117% increase in the number of people who are owning crypto, just by region. So you're seeing that growth happen. I'm trying to think of a comp, trying to send it back 50 years and think of what is something new that came onto the market that was new and different. I mean, would it be the advent of stocks instead of just holding cash? Think about the cell phone.

[12:27] DAREN BLONSKI, CFP®: Like, you know, I remember 15 years ago, a cell phone, it was like, oh, I don't really want a cell phone, it's a leash, it's something that people can get me, I'll just use the pay phone. But now it's like, I run my life on this thing.

[12:45] DANO WEIR: And you have no choice.

[12:46] DAREN BLONSKI, CFP®: You have no choice. Because if you opt out of a cell phone, how do you even do that? You have to have something now because there's no physical lines left. And I think that's the similar thing where crypto is headed. It's not far out where if you opt out, you're disadvantaged severely.

A Blast From The Past: The Pager Story

[13:07] DANO WEIR: This is a side note, but back in the 90s, my grandfather had a boat. He lived down in Los Angeles, and he used to go down to the boat. And a huge problem my grandma would have would be she'd try to call him, but there's no way to get to him on the boat. So my dad...

[13:24] DAREN BLONSKI, CFP®: That was probably strategic.

[13:26] DANO WEIR: Well, my dad, trying to be a great son, he goes through, because we live up here in Northern California, he goes through all this trouble from Northern California to buy a pager for his dad down in Southern California. And we made it happen, and they opened it up, and we were on the phone with them, and he opens it up and goes, what's this? My dad's like, it's a pager, Grandma can get a hold of you now on the boat. He was not happy. We couldn't figure out why. I was like, oh, he wasn't going to the boat to work, he was going to get away. So yeah, I don't know that he'd be loving Bitcoin either, but it's just something you have to deal with, it's a part of what's going on with the change.

Scarcity And Why Bitcoin's Fixed Supply Matters

[14:12] DAREN BLONSKI, CFP®: Blockchain, Bitcoin, all these things, it does create an opportunity for more accountability financially. It becomes very hard to fake things, and going to this stablecoin... one of the big pushes behind Bitcoin is the U.S. government. The only reason we're not in a complete and absolute depression right now is because the government can still print. They're printing and printing to stimulate and keep this economy going. And given what I'm seeing in the data with things decreasing, like unemployment going up, but then other economic indicators are going down, you're about to see round 1,000 of print, baby, print. It's just going to start ripping again. And the thing with Bitcoin is there's only ever going to be 21 million, and that's what part of the value is. There's scarcity there, there's built-in scarcity. There's no scarcity of the U.S. dollar. And so as the government just starts printing, eventually the wheels come off the bus and there's too many dollars printed, and then you'll see a quick pivot to things like Bitcoin.

How Sonoma Wealth Advises Clients On Crypto

[15:09] DANO WEIR: Last thing out the door, because we've just spent the whole episode talking about how this is growing, it's expanding, it's new. You've just said print, baby, print, so you've got to stick with something that has a fixed supply. So, how do we as a firm, and how do you advise your clients, to see Bitcoin and crypto?

[15:33] DAREN BLONSKI, CFP®: As a firm, we look at it as just another asset. We're not going to buy into the de-dollarization argument, that could be real or not real, we don't know. But we do look at it as a maturing asset, just like any other asset out there. It's a digital asset. And just like you own some stocks, just like you own some bonds, just like you own some real estate, some gold, some natural resources, there's digital commodities and digital assets that you should think about owning or considering in your portfolio. We think they're an important part of a well-balanced and diversified portfolio.

Have Questions About Crypto? Let's Talk

[16:07] DANO WEIR: If someone is watching this and they have questions, are you able to advise them and talk to them about the crypto space?

[16:13] DAREN BLONSKI, CFP®: Absolutely. Yep, just reach out.

[16:17] DANO WEIR: Just reach out. SonomaWealth.com is where you can reach out and take our free wealth analysis. If you're new to our firm, if you're one of our clients, thank you so much for checking this out. We hope this has been educational to you, that's why we make these shows. And also, I mean, you want to hang out with us, I think. No, you just wanted the information, that's great too. SonomaWealth.com. And thank you so much.

[16:40] DAREN BLONSKI, CFP®: Way to make it awkward, Dan.

Closing Thanks

[16:41] DANO WEIR: Thank you so much, it's my gift. Thanks for checking out the show. Thanks for watching and listening to It's All Money. We hope today's episode shared information to increase your financial confidence.

Outro

[16:51] DANO WEIR: Now is the time in the show for the voiceover with a bunch of words at the end. Listen close though, you might find out something you didn't know. It's All Money is powered by Sonoma Wealth Advisors. Sonoma Wealth Advisors helps individuals and families in Northern California and across the country with building, managing, and sustaining wealth. Sonoma Wealth is a comprehensive, holistic finance solution offering financial planning, asset management, tax planning, 401k solutions, and appropriate insurance. Take our free wealth analysis now at SonomaWealth.com. If you haven't already, like and subscribe to It's All Money on YouTube, Spotify, and Apple Podcasts. It's All Money features human hosts, musicians, editors, video crew, and voiceover talent. Video production by Forz Media in Roanoke Park, California. Online at ForzMedia.com. Music by Neon Beach, Sparkle Rising on Soundstripe. Voiceover by me, Dano. Thank you for listening to the very end. We appreciate diligent viewers and listeners. Fermata Advisors LLC is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. This content was produced by Fermata Advisors LLC, DBA Sonoma Wealth Advisors, DBA Fermata 401K, DBA Fermata Tax. The opinions expressed by Fermata Advisors LLC on this show are their own. Information presented on this program is believed to be factual and up-to-date, but we do not guarantee its accuracy, and it should not be regarded as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual. Viewers and listeners are encouraged to seek advice from a qualified tax, legal, or investment advisor to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.