← AICPA Personal Financial Planning (PFP)
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- [00:01]
A
Welcome to AICPA's Personal Financial Planning Podcast. This is Kerry Sinnott. On behalf of the AICPA Personal Financial Planning Division, the home for professional personal financial planners, we're happy to bring you insights from experts in tax, retirement estate investment, risk management, practice management and client relationships. Be sure to Visit us@aicpa.org Pfp to find more resources and tools designed to help you guide your client. And now, over to our guest.
- [00:40]
B
Thanks, Carrie. This is Marc Astrinos and I'm here with David Aransky. Today we'll be talking about Bitcoin. We did a few sessions last year that goes into much more detail on this topic and today will be a continuation of that. I think the last time we went into a lot of detail about just what bitcoin was, and I think we're going to hit on that again. But before we even get into Bitcoin, I think it's really important to just go over why people invest, whether that's Bitcoin or outside of Bitcoin to begin with. Any thoughts on that?
- [01:10]
C
Yeah. So before we even get to investing, let's think about savings. People you have to provide for your needs. And you can do that either by producing everything yourself as you need it, and before civilization, that's often how people did it, or you can save for future needs. So the only reason you would save is because you either really to deal with future uncertainty. Imagine if you're hunting and you're worried about getting sick or you're worried about maybe you aren't able to get out there, you want to save some of what you have to deal with that future uncertainty. Beyond that, you have investing, which is taking that savings and actually putting it into something you expect to grow in value so that you actually are deferring current consumption beyond just contingency planning, but to have greater purchasing power in the future, and that requires a certain level of innovation, a certain level of trust, a certain level of speculation within it. And whenever you're thinking about buying an investment, you are really saying, I would rather, rather than planning for me to produce everything I need in the future, I'm going to instead have something that I will be able to trade with the people that are producing what I need, I. E. Money. And you might buy, start or buy into a company that produces something so that you have. You receive cash, you receive some form of money, and then you use that money to acquire the goods and services that you need in the future. And so when we're thinking about that, we often think of Stocks and bonds. And there's almost really two levels of return. And so Jack Bogle had this idea of an investment return and a speculative return. The investment return on a bond is going to simply be the interest payments that you're getting. Any other change in valuation is expected return. You're expecting interest rates to go up or down, and then you might sell that bond early to potentially get a higher total return. With stocks, you have the earnings yield and the dividend yield, and then you also have a change in multiple where the underlying value of that stock goes up relative to its earnings. That's what he called the speculative return. And so there's often this idea that you need to have income producing assets or it's not a valid investment, when in reality many of these supposed income producing assets we have, we are also implicitly assuming some sort of speculative return. That's in some ways the whole idea behind total return investing. If you don't want to have any sort of speculative return, you should probably only spend your interest in dividends, which right now interest rates are higher, but the dividend yield on stocks is very low. And so most people are planning to actually sell some of their shares of stock during retirement. But to fund their retirement, and in order to have your financial plan work out, you have to believe that there will be demand for those shares of stock, that someone will buy those for you at a higher price than what you bought them for today. Which sounds very similar to the greater fool theory that's often put upon things like gold and bitcoin.
- [03:55]
B
Yeah, I think that's a really interesting kind of distinction because what you're trying to say, I believe, is that one of the common criticisms of bitcoin is that it's so speculative and people often compare it to tulips or pieces of art. And why does it have any value? But what you're saying is all investing has speculative nature and we're going to get into kind of that. So maybe that's a nice transition of we talked about this last time, but what is Bitcoin? For the members who haven't heard the first couple of podcasts, what's your best way of explaining it? It's been about a year, so maybe you've refined how you explain it to people.
- [04:31]
C
Yeah, I think the easiest jumping off point for most people is to think of bitcoin as digital gold. It's a scarce asset that's very hard to produce more of. In the case of bitcoin, we know exactly what the total supply will be. But the issue is it's really so much more than digital gold. And so that analogy doesn't really do it justice. But that's a decent starting point for trying to grasp what it is. But in reality, bitcoin is like an autonomous digital monetary network that's open to anyone, but controlled by no one. So it provides this immutable ledger powered by the most robust, the most decentralized consensus mechanism we know of. That's what bitcoin really is, which is like kind of the Internet of money. This idea is far more than just a boring asset like gold, a boring, scarce asset. It's really those network properties that give it the reason people might demand it in the future. And so practically speaking, what is all the, what are all those fancy words mean? Bitcoin is the asset that we think of buying bitcoin, but it's also this network, and they're really one and the same. You can't fully pull them apart. But it's often helpful to think of them as separate things because the asset itself, being scarce, has some level of demand in the same way that gold does. But it's really that network around it that I think gives it the superpowers that I think is very underappreciated. And one way to think of what the bitcoin network does is it gives you the ability to send value digitally, anywhere in the world without a middleman, and in a way that doesn't require permission and is very resistant to censorship. There's literally no other monetary network that can do this better than Bitcoin. And in order to send value across this network, you have to have its native token that is Bitcoin the asset. And so to the extent that there is demand, or you would expect there to be demand in the future for a monetary network that can send value in a permissionless, censorship resistant way, there then is demand for bitcoin the asset.
- [06:23]
B
A lot of people get hung up on this because if you're comparing it to stocks, for example, stocks pay dividends. When you buy a stock, you're buying the future cash flows of that company. And so if people are fixated on that and then they think of bitcoin, despite your definition, maybe get into that, like, how can this thing that doesn't generate any dividends or have future cash flows have value just because of this network?
- [06:49]
C
Yeah, the same way that the dollar has value. Right. The dollar doesn't produce any interest unless you invest it, unless you lend it out. If you simply hold dollars, the reason you hold them and the reason you think they have value is because you expect someone to accept them in exchange for the things you want and need later on. And a common criticism then of Bitcoin is, yeah, but I can't go buy coffee with my Bitcoin. I can't go buy a car with Bitcoin. That's okay. You also can't go buy coffee with Apple stock. But what you can do is convert that to whatever the currency you need is very easily. And although the dollar is the most universally accepted medium of exchange, the most accepted currency in the world by far outside of the dollar, pretty quickly, maybe the euro and the pound and the yen, maybe there's a few other currencies that you can reliably convert into dollars to buy what you need to, but most of them you can't reliably convert to dollars outside their local jurisdiction. So arguably, bitcoin is already a more liquid asset than many other things in that it can be converted to whatever currency you need to buy stuff. And so if you're in some foreign country, maybe they don't accept Bitcoin, but you can probably find someone that'll exchange Bitcoin for whatever currency you need and get that. And so the fact that it doesn't produce any interest in dividends is because it's fundamentally not an investment asset. It's a monetary asset, much more similar to the dollar and much more similar to gold. The difference is because it is not universally the global reserve currency, the money that everyone is using, the thing that everything is priced in, it's going to have more volatility than the dollar. Literally, the dollar doesn't have volatility because everything's priced in the dollar. And so what we really care about is its purchasing power over time. And in the short term, the dollar is going to be the most stable asset you can find for hedging short term purchasing power. But over the long periods of time, we expect that inflation's going to be at minimum 2 to 3% with the dollar just price inflation. But that's after we account for the fact that there's these innovations that allow us to produce more goods and services over time. The actual inflation rate of the monetary supply has been closer to 7%. So in other words, the dollar's a melting ice cube. It's losing 7% or so of its value every year. Some of that's made up for with innovations of technology that we see that the things we're trying to buy only go up by 2 to 3% a year. But it's a melting ice cube. And that's okay in short periods of time, but you wouldn't save long term the dollar. So effectively what we've done is start saving in the S&P 500, saving in real estate. And that's really what bitcoin is competing against is that long term savings. And so I think that's the better way to think of it is as long term savings. And then it's comparing what's a better store of value, Bitcoin, real estate, stocks. And the real answer is we don't know. I would just argue that it should be considered in that same bucket as a long term store value.
- [09:37]
B
Yeah, I think it's easy to conflate saving and investing because we just think about them the same way. And you're right, everybody is trying to find the fastest horse in the race to not lose value. And oftentimes the default would have been stocks and real estate. And. And I think what you're arguing is that Bitcoin might be a contender to solve that same solution. And maybe we shouldn't get so emotionally tied to what the asset class is and how we describe it, but just what does a better job of doing that?
- [10:08]
C
Yeah, and it can be hard to figure out with Bitcoin because Bitcoin's had such a seemingly exponential rise. Like there's a concern that it can easily go back down there and it could. Right. The price of anything is supply and demand. And especially when that thing we're talking about isn't producing anything else. It's purely supply and demand. Back to kind of Bogle's framework, It is in that framework purely speculative in that regard. You are expecting that you will be able to exchange that either directly for goods and services or for another asset that the person you want to acquire those goods and services from will accept. And so when we think about the supply dynamics, Bitcoin supply is known there will never be more than 21 million bitcoin. The vast majority of those are already out there in the market. There's only a very small percentage that's still yet to be mined over the next hundred or so years. And so really what we're talking about is why would one expect there to be future demand for bitcoin? And that kind of goes back to what we were talking a few minutes before. Is there a foreseeable situation either now, somewhere in the world, whether it's for you or not, but does someone demand to have the ability to send value somewhere else across the globe without permission, resistant to censorship. And in values that are unlimited, you can't send dollars without going through a certain amount of hoops in terms of for large values, you can't send send gold in any large quantities without shipping it across the ocean. And then you have still have the issue of auditing and making sure it's authentic. Bitcoin can provide the way to transmit value across the globe in huge amounts and immediately be audited for authenticity. And so this is especially important when you have two trading parties. Maybe don't trust each other, and maybe there isn't a centralized third party that they can trust, especially when everything flows through the dollar system. If you are a nation that is, maybe we're in this kind of cold war era with other countries right now we've seized Russia's assets, like maybe they don't want to trust clearing certain transactions through the dollar system. Our largest trading party, China. Where are trust levels with China? Trust is deteriorating around the globe, and yet we all still have to trade together. And so having a neutral asset at which you can settle trade, I think is valuable. And historically that's been gold. But gold has all sorts of issues of not being able to send it quickly. And so bitcoin could emerge as that kind of settlement layer. And then on a personal level, like, on an individual level, that may not be an issue. But bitcoin provides the ability to have portable wealth. You can move wealth with you very easily because it's digital. And so if you are in Ukraine and the war breaks out and you want to leave, like, you might actually be able to take that wealth with you, or you aren't going to take your house with you, you aren't going to take your stocks with you. And so I think there is a level of demand. So even if you don't see a need for bitcoin, the question is, does somebody else demand it? Will I be able to convert my bitcoin into something that helps me acquire what I need? And do I expect that to grow over time or decrease over time? And then you have the overlay on top of that of it being a scarce asset? And so as long as demand doesn't go down, you would expect the price to stay the same or go up? And we can talk about how do you think of expected returns with bitcoin over. Over something else? Because if you are comparing it to stocks and bonds and it doesn't produce anything, what's its expected return? That's an interesting theoretical question that we can go into if you want.
- [13:21]
B
Yeah. Before we do that. Other than the ability to send dollars around the world, whether you're a country or an individual, are there other reasons why people should care and consider wanting to own bitcoin? We talked about it being potentially one of the, one of the horses in the race to combat inflation, which is why people invest their money anyway. Are there any other reasons other than the ability to send money that you would consider important to, to factor in?
- [13:50]
C
I do think the inflation one is a concern. That's certainly one that's been highlighted lately of having something that other people can't print more of, but that still does rely on other people demanding it. Like there isn't a perfect inflation hedge because there simply isn't. Even inflation protected bonds aren't an imperfect inflation hedge because is your own personal consumption going to line up with the cpi? Probably not. So there's always issues.
- [14:15]
B
Yeah, I think maybe just elaborating on this like inflationary hedge argument, is there potential other factors? Are there any upsides as we go through the monetization phase? What happens to bitcoin? Does it help you hear people like doomsday people talk about how it can help them if something really goes wrong? Are all these things part of your decision making framework or is it just purely the ability to send money and the potential inflation?
- [14:43]
C
So the inflation is an important one. I think this might actually be a good place then to talk about the kind of how to think of the expected returns of bitcoin. So at some point Bitcoin will reach its market saturation point. Whether that's where we are now, whether that's way higher or whether it has to go down first, I don't know. But thinking of using the analog of gold, like gold's a mature market and what's the expected return of gold? Most people look at it and say the dollar supply increases at about 7%, the gold supply increases at about 1 and a half to 2%. And maybe the expected return of gold is somewhere in between those. Or you look at the productivity gains of the world in real terms, subtract out the one and a half to 2% and you get an idea. Basically, gold keeps up for the most part with the expansion of the money supply. And I think that's going to be relatively true for Bitcoin too. Now bitcoin is more scarce than bitcoin, than gold in terms of what we'd call stock to flow. In other words, the amount of new bitcoin being created relative to what's out there already is already lower than Gold. But as a rough cut, I would say the long term expected return of bitcoin should be something similar to what the way we think of gold today. But that's after it reaches market saturation. So if we expect that overall demand for bitcoin grows between now and that eventual saturation, then during that monetization phase, Bitcoin should have a much higher return than that. And how much, that's hard to say. It's really hard to predict future demand. The supply side is pretty inelastic. So that we have, we do know it's one of the really the only things where we can't increase the supply no matter how hard. Even things like gold, like if the price goes up enough that unlocks new deposits that weren't worth mining before. With Bitcoin, because of the way it's structured, with the difficulty adjustment where the more people are trying to mine Bitcoin, the harder it gets to mine Bitcoin. We don't have to worry about inflating the supply beyond what what is scheduled in.
- [16:32]
B
That makes a lot of sense in your mind, is there any risk to not allocating or considering bitcoin? Oftentimes people don't pick the hottest stock like Nvidia or the dot coms. Sometimes people just end up with a more passive approach. And so could that same argument be made for bitcoin or are there some negative consequences to not allocating?
- [16:55]
C
Right now, in the case of Nvidia and any of the magnificent seven stocks, most investors have a reasonably passive portfolio these days, or at least they're going to own the largest stocks even if they have a more active approach. So you already own them. The question is just whether you overweight them in bitcoin. Like Bitcoin's not part of the S&P 500 index. It's not part of even the US total stock market because it's not a stock. But if you are a passive investor, Bitcoin's market cap is around like one and a half trillion dollars. The global stock market is a hundred million and change. So by that regard it already is. If you think of if you use the stock market as the denominator like it already is over 1%, but you're not going to have that in your index. And the reason that most people don't have to think about IPOs and owning the hot stocks is they already own them. Most people don't have even the market weight to bitcoin. And that doesn't mean you should own everything that exists. There are all sorts of reasons to not go out and try to add every asset that exists in the world to your portfolio. And I think for many years, including myself, I used to be in this camp, like I don't want bitcoin. Like I don't want. There's a lot of things I don't want to own. But I think at this point where we've reached, where we've reached in bitcoin's kind of adoption, we have ETFs, we have large financial institutions going around and advocating for Bitcoin. And we have nation states that have adopted Bitcoin as legal tender. We have other nation states that are using it as mining to help stabilize their grids. You have political candidates talking about it. You have the most successful ETF launch in history. It's probably worth paying attention and considering is Bitcoin going away and if it's not going away, does it make sense to have at least an agnostic approach to it where it's included even in a very modest level of your portfolio? I don't know the answer to that. That's something that everyone should decide on their own. But I think it's at least worth paying attention to now.
- [18:39]
B
Yeah, I've known you for a while and I remember going to conferences where people called Bitcoin the equivalent of rat poison and all these negative things which I've heard you change your tune over the years. And maybe it's worth revisiting like what caused you to change your mind about Bitcoin? Because I know that you were very skeptical many times.
- [19:01]
C
Yeah, I had mostly excluded Bitcoin based on heuristics started. I don't want to own anything that isn't a real investment asset. It doesn't produce any interest in dividends. I used to also think the same thing about gold. Like why would anyone want to own gold that doesn't produce anything? The then real interest rates went negative. When you were effectively paying to lend your money to the US Government in real terms, you would buy a Treasury inflation period bond that had a negative real yield. Suddenly it's hold on maybe something that is scarce and has an expected return that simply has a zero or slightly positive real return is suddenly more attractive because in investing it's all relative game. And so that was step one. And then it was in late 2019, early 2020 that I think I finally just got frustrated with everyone with a lot of bitcoiners trying to expl Bitcoin and not understanding it. And I had a few clients that I wanted to talk out of it because I was worried how much they'd allocated to Bitcoin outside of our portfolios. At that point there were no ETFs. So I said, all right, I'm going to dig into this so I can speak their language I can really understand and steel man their arguments and then also show them where I think they've misunderstood. And I for months was reading books and trying to understand it and came out the other side realizing that most of my objections to Bitcoin were not accurate. They were things that I heuristics that I developed. Oh, it looks like a get rich quick scheme. Look how much it's gone up. Oh, it's just dumb money chasing. Oh, it's the greater fool theory. Who's going to possibly want to buy Bitcoin? There's going to be a better Bitcoin that comes along and no one's going to want to own Bitcoin. They're going to want to own Bitcoin 2.0. What's actually unique about Bitcoin? And all these questions that seemed so obvious of all this uncertainty about Bitcoin's future were things that had actually been resolved a long time ago and that a lot of my concerns weren't true. I just hadn't done the research because I had screened it out on a heuristic level.
- [20:45]
B
I know that we aren't going to get into any price predictions, which I'm not asking you to do, but certainly one has to believe that it will be worth more in the future. Can you talk a little bit about how you think about that in terms of what the opportunity set is for Bitcoin? A lot of people think it's too late. How do you view that?
- [21:06]
C
I don't think it's too late at all. I think we are right at the beginning of it moving from a fringe asset to a more mainstream asset. And I think it really was going to take the ETF probably to get that. And now there's options coming out on these ETFs. And so you're starting to see Wall street and financial firms look at this as a potential asset. And if that happens, I won't be shocked if five to ten years from now it's pretty common, or at least not weird to have a small allocation of bitcoin, much in the same way that people have a small allocation of gold. It's not uncommon for people to have a 5% allocation of gold. Not everybod does. A lot of people don't but it's not abnormal. And I think Bitcoin's market value for what its future potential is in terms of a store of value asset is relatively small. So, yeah, I wouldn't own Bitcoin myself if I didn't think that demand, at least that demand wasn't going to go down. But in many ways I'm okay to own Bitcoin, even if its expected return is lower than my stocks and bonds. It provides certain attributes that you simply can't get with stocks and bonds. If you want to have portable wealth, if you want to have the ability to send value somewhere without permission, without having to go through the legacy financial system, you need Bitcoin. And so that gets back to you made earlier the comment about is it an insurance policy? Is a doomsday thing. There are all sorts of scenarios, doomsday scenarios where bitcoin becomes extremely valuable. And I personally think that you should consider it for that. But that's probably only a very small percentage of Bitcoin people that would do that in a very small percentage of the portfolio that you would buy insurance for. The most bullish case for Bitcoin is probably actually that things continue going on the way they have, yet the world doesn't fall apart, that the dollar doesn't lose its reserve currency status. And that's my base case. I'm not in the camp that thinks the dollar is going to go to zero anytime soon. The dollar monetary system does have some structural flaws in that you have to continue expanding the money supply over time for the system to stay solvent. And that requires running larger and larger deficits. That's inherent to the system. And you can say it's flawed, but I don't know that it's so flawed that it's going to break anytime soon. It may mean that it becomes unsustainable. If we can't keep nominal growth above nominal interest rates, like that's totally a possibility. But as long as we can keep nominal growth rates above nominal interest rates, there's no reason the system can't go on for a very long time. But in a world where you expect deficits to keep growing and you expect that problem not to get solved because it really can't without kind of creating a contraction, then Bitcoin should continue to go up in value. You have an ever expanding number of dollars and you have a scarce asset. So just the exchange rate between those, you would expect it to go up and that's without any change in demand. So if you take everything we've said and said, yeah, but fewer people in the future are going to want to own Bitcoin, then maybe you can argue the price still goes down. But if you say the demand for Bitcoin stays the same or with all these other things going on in the world and with people concerned about inflation, people concerned about the high valuations of real estate and the high valuations in stocks and worried about in real terms whether their bonds are going to be paying, I think more and more people will start to say, yeah, bitcoin's worth having as a small percentage of my portfolio. And as that happens, that increases demand and pulls the price up. But the long steady state expect return of Bitcoin is not these sky high numbers that everyone's talking about. And so in my mind, the model you should buy in is how much Bitcoin would you want to own if its value effectively stays the same or just keeps up with inflation? Like, I'm not someone that would advocate for YOLOing into Bitcoin.
- [24:27]
B
Yeah, certainly the answer I would expect from a cpa, certainly more contained. But you do see some people talk about how much wealth there is out there and if Bitcoin were to capture some of that, how much a bitcoin could be worth and the numbers get astronomically big because like you said, there's no limit to how much can be printed by some of these governments around the world.
- [24:48]
C
Yeah, there isn't a good model to say this is what Bitcoin should be worth. To me, it's something that directionally seems obvious to me, like the direction it's going. But in terms of quantifying that and the pathway that it takes to get there and how quickly it happens I think is very hard to grasp because you're effectively modeling human behavior. And that's hard to do in any precise way, but directionally it's actually often not that hard. And so to me, you look at all these things and directionally it seems to be no, I think demand is only going to increase, at least over long periods of time. There's absolutely gonna be ups and downs like there is in any market. But I think the future is pretty bullish for it or I wouldn't own it and we wouldn't be talking about it and educating our clients about it.
- [25:28]
B
Yeah. And you had mentioned the ETF earlier, which from what I understand has been one of the most successful launches. There's probably 10 or so companies that have launched Bitcoin ETFs. What do you want to say about advisors and clients who are Trying to evaluate holding kind of Bitcoin pre ETF in original form or Bitcoin via etf. And what do you think through with that?
- [25:50]
C
Yeah, the only way that you get all the benefits and features of Bitcoin that we talked about, the ability to send value anywhere in the world in a permissionless and censorship resistant way. You only get those if you own actual bitcoin. You own it directly, you control the so called keys for it. And so most people really I guess not anyway because you could have kept it with a third party concern. But most people that were the seriously understood Bitcoin pre etf, that's how they held it. And I think that's still the best way to hold it if you want all those. For many people though they're not there yet, in order to get to where you want self custody Bitcoin, it requires a pretty good understanding, technical understanding of how to do that in an appropriate and safe way. And so to me the ETF is a starting point for that. It's the that initial stepping stone of hey, I understand this conceptually. I've read enough that I do want to have an allocation of this, but I'm not ready to take self custody of it and really be in charge of it. The ETF is a great entrance point for that. It's really simple, it's really easy. You don't have to worry about any of that stuff. You can buy it from a BlackRock or Fidelity or companies that have big trusted names that you're familiar with. And you can buy it in your brokerage account, you can buy it in your Roth ira. And so it's really easy. And I also think from an advisory perspective, like practically speaking, it's the only way that you can do this on behalf of your clients, unless you want to get into some a lot more complicated. So in our practice we have clients that own Bitcoin directly, especially pre etf, and ones that only own the ETF and a lot that own both. But I think most advisors are going to be focusing on the ETF and then maybe educating beyond that. And clients go and facilitate purchasing, quote, unquote, real Bitcoin on their own. Because the ETF is really just getting you kind of price participation. And so it's a great, maybe you want to save your seat there. And if you ever wanted to own real Bitcoin, you could sell the Bitcoin in your Roth IRA and go buy it directly. I think it's valuable for that. I like the etf. It makes it really easy. And there's some debate about is this really the most successful ETF launch. Look, the price hasn't gone up nearly as much as I would have expected since these things were approved in January. And first of all, the price has gone up since January. It's been the best performing, I think, so far the best performing asset class of the year. But really the real measurement point is when did it become obvious that these ETFs were getting approved? And it's when there was a court case that the SEC lost back at the end of the summer in 2023. And if you go back to that starting point, really when the news broke, not when the ETF started trading, but when it became high degree of confidence that this ETF was coming, Bitcoin's price is up like 150%. So I think pretty clearly the ETF has increased demand for bitcoin. And I think a lot of it's coming from that store of value play. People that see concerns around inflation, they see the deficit spending, and they in the past maybe would have considered something like gold or real estate, but now they look at real estate and how expensive it is relative to cap rates, and they look at stocks and they see how expensive they are. And then they compare gold and Bitcoin. And if you buy into some of the thesis around bitcoin, one of the nice things right now is it doesn't take a very large amount to potentially make a big impact. I talk to people that sometimes say, yeah, I'm going to wait till this is a more mature asset class, but then I can totally see why people would want a 5% allocation of Bitcoin, just like people have a 5% allocation of gold. Okay, you can wait until we get to that point to where, say Bitcoin is 5% of, you know, market cap of the overall assets people are considering in their portfolio. Or if you think it's already going there, you can allocate 1%, which is roughly the. If you use the stock market as a denominator, the market cap today, and then just let it grow into that 5%. And so you can allocate much cheaper today. That's not the only reason to do it. I think you need to understand this. I don't think bitcoin's the type of thing you should buy like a meme stock and just buy dud just because. But I think you don't need to go that deep to have a big enough understanding of. Wow, this is something that I misunderstood. This is something that is valuable to somebody in the world and also provides some protection against the debasement of the currency.
- [29:43]
B
Yeah, I think the way that we started this conversation of why you should invest and what investing is with regards to risks maybe will seem less intimidating because this is intimidating. And I personally believe that you shouldn't invest in anything that you don't understand. And so as we begin to wrap up, how are these conversations going? I know you talk to other advisors, maybe clients, like, how much do you think people should consider? Obviously they need to educate themselves, but what's the starting off point?
- [30:11]
C
Yeah, I can just say what we do in our part. I mean, we do talk about it with all clients, but it's more of an educational approach. And then from there we help them decide what allocation is appropriate for them, whether that's 0%, 1%, 3%, 5%. We do have clients that have allocations greater than 5%, but in those cases they're typically buying bitcoin directly, not through the etf and we're not directly involved in that. And they're doing that on their own volition of they understand Bitcoin and can afford to take that risk and want more. But I don't think you can blanket say everyone should own bitcoin. But I do think we're probably getting to the point where Bitcoin is a big enough asset class, its potential impact in the world is big enough that you really should dig in and try to understand it. And listening to this podcast is not enough. This is, if anything, trying to give you a directional of, hey, here's where you should look, here's what you should consider. But it's probably time to start learning about it. You're going to get more questions from clients and they'll have an informed conversation, hopefully an informed opinion about it. And it's okay if that opinion is no, this is still, this is still fool's gold. You're crazy. You should only buy income producing assets. I think that's a fine opinion to have, but I don't think you should dismiss Bitcoin without first understanding it. I think it's time to understand it.
- [31:21]
B
Great. I think that is a great conclusion. Is there anything else you want to add to advisors that are listening to this that are feeling overwhelmed, which I don't know if you can relate to how you felt a while ago.
- [31:33]
C
Yeah, I mean, I have spent I don't even know how many hundreds, if not thousands of hours trying to learn Bitcoin. You don't need to go that far. There is great resources out there. Fidelity and blackrock have been putting out lots of great research and that is designed to speak to financial advisors in language that you understand. That's not all doomsday stuff. That's like talking. Really the real bull case for bitcoin isn't the doomsday stuff. And there's also products that make it very easy. So I would probably start by focusing there. You don't need to venture off into the fringe corners of the Internet to find out about bitcoin anymore.
- [32:05]
B
I guess the skeptic in me is wondering. The fidelities and blackrocks of the world, they're now pushing a product they have incentive to do, they benefit from it. Do you think they have genuine interests or is it kind of dual purpose there for their clients?
- [32:19]
C
Yeah, you never know, right? People are always talking their own book. You'll somewhat have to judge. Fidelity has been involved in bitcoin, I think since 2014. So they aren't one of the ones that's new to hey, these ETFs got approved. Let's also get one, see if we can capture some assets. There's at least a number of people there that truly understand this and have been building this up, I think in a really great good way. And go back and look at some of the comments from Larry Fink of blackrock. He seems to be understanding this and think it's important on a level other than just as a way to gather assets. So far, although their ETF has been one of the most successful ETFs ever, it's still a drop in the bucket for BlackRock. I think you see a lot of notable investors, including Larry Fink, looking around at the state of the world, looking at deficits and saying this may actually play a role purely as a store of value asset. And although it may not be being used as a medium exchange right now, the medium of exchange powers that it has could be very valuable in the future. And having that as an option is important. So yeah, I think it's always appropriate to be skeptical of anyone talking about anything, including me. I'm not here to sell you anything, but I obviously believe in Bitcoin myself and we educate clients on it. You should always go research and you should always have a skeptical view of it. I think the only thing I would say is don't lose that skepticism, but it's time to look into it.
- [33:33]
B
Wow, great. Thank you for that. And I think we'll wrap it up with that. So I appreciate your time today. Thank you mark the AICPA's PfP division has additional resources for its members that cover this topic. There is a webcast on Understanding Bitcoin and a three part podcast from last year on why you need to take Bitcoin seriously. Things do change, but these can provide some basic understanding on Bitcoin and how it can impact your client decisions. These thank you for listening. And now Carrie, back to you.
- [34:02]
A
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