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286. How can I evaluate crypto as a potential investment?
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Join us for this episode of A Wiser Retirement® Podcast as we dive into how to evaluate cryptocurrency as a potential investment and whether it deserves a place in your portfolio. We’ll also unpack the latest crypto news, from major acquisitions to pending legislation, and discuss how these developments could impact the future of digital assets.
Related Podcast Episodes:
- Ep 281: Crypto Update: Tariffs, Ripple’s Victory, and What’s Next for Investors
- Ep 275: Crypto Update: The U.S. Bitcoin Reserve, SBF’s Prison Interview, and 24-Hour Nasdaq Trading
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Blockchain's Future Impact
Speaker 1the amount of things that will be on a blockchain 10 years from now is going to blow people's mind. Simple things that are the examples that come to mind will probably take the longest. Oddly enough, is like a car title, a house deed, the stuff that government runs the registries of. That's happening.
Speaker 2Welcome to a Wiser Retirement Podcast. Are you curious about how to build your own crypto portfolio? I'm Casey Smith. Today, I'm joined with Robert Shorthout, founder, ceo, portfolio manager of Teton Crypto Capital. Each week, we bring you practical advice on retirement, investing and planning for your financial future. Don't forget to subscribe to the podcast wherever you're listening. Hey, robert, good morning. So Robert and I I think everyone's figured out by now we're pretty good friends. Um, and I wanted to say congratulations, friend, on a big achievement robert has his own private pilot's license.
Speaker 1Yeah, that was um. It was supposed to be a month ago and then it got bumped. Um, and those listening that have done this will understand. But yes, the checker, I got bumped and then finally got it done last week, so it was um. I slept very good that night afterwards, yeah, but it was, it was fun.
Speaker 2So check rides are always um, you never know, quite know exactly what's going to happen, especially you know the first time you do it right, examiner could be in a horrible mood. Uh, you just in your. In your case, examiner was really busy with a busy checkride prior, so I think you got off easy cause she was kind of like ah, I'm ready to go home.
Speaker 1Yeah, I was kind of um coached that it may be an hour and a half for the oral hour and a half for the flight portion.
Speaker 1Yeah, and it was 45 minutes and then 50 minutes. So it was like I almost, you know, I knew that I didn't fail, cause she said I didn't fail, but it felt like I was failing because it was happening so quickly, um so, but yes, it was, uh, it was a fun ride home not having to, you know, I guess, get to breathe a little bit, so yeah, yeah, for those who, um, haven't done this before, when you go in for the uh, the oral exam portion, it's not like it's a pass fail but no one's grading.
Speaker 2it's not like you're right Doing a test and they grade you. It's it comes to see the art of doing it, because it's it's really, um, uh, how they perceive you're answering the question. So if you answered every question right but you were hesitant on on each question, they probably still fail you. Yeah. You know so so you have to be, you have to kind of have to play the game.
Speaker 1And I felt like I was in the oral portion, I was answering questions pretty well up front, um, yeah, and then she asked me stuff around the pedostatic system and if stuff was partially failed and I was like I did not study this portion of it, um, and never was guided that I needed to know this kind of thing right um and then later I learned that she was trying to figure out where the edge of my knowledge was, so.
Speaker 1So she found it, she felt like she was happy with that and we got to go out and fly.
Speaker 2So that's cool, well, congratulations. So where are you headed?
Speaker 1now I am on my week and a half. I'm taking two ish weeks off and then I'm headed into instrument training.
Speaker 2So yeah, instruments we don't. We don't want to be a JFK junior, so yeah.
Speaker 1Instrument training is very important.
Speaker 2Although your airplane could probably save you.
Speaker 1But I don't have a plane, I just rent it. Well, yeah, true, but the airplane you?
Speaker 2fly has a lot of technology that would prevent you from being a JFK, but hopefully, you still can be dumb.
Speaker 2You still want to be you still want to have an instrument rating? Yeah for sure. You never know what your, what situation you're going to end up in, but anyway, that's a big deal man, congratulations, thank you. All right, so let's get started. Uh, we're gonna kind of go through some crypto news first and then we'll start in our main topic. So, robert I'll let you. You live in this world every single day. I'll let you kind of tell us what we need to know about crypto news over the last month yeah.
Speaker 1So in the previous episode we talked about ripple buying hidden road Road for $1.25 billion. In this episode, we're going to talk about Coinbase buying Darabit. I would imagine maybe nobody listening to this podcast has heard about Darabit, or maybe one person, but Darabit is an options platform that focuses specifically on options for crypto. Coinbase bought them for $2.9 billion, so roughly twice or just over twice as much as coin ripple bought hit road for. I was thinking of a way to kind of the moment that crypto should celebrate. Obviously, these m&a deals are getting bigger and they're happening rather quickly. In these first three or four months of 2025, I will be excited when crypto um m&a deals, the. The headline number is bigger than the bankruptcy numbers we were talking about three years ago. So then I feel like we have made it to that point. We have that threshold that we need to get over to really celebrate these. In my opinion but it's so that number would be 10 billion for those keeping track at home, because that FTX was quite the big meltdown three years ago.
Speaker 2I can't believe people do options on crypto. Oh my gosh, that makes my brain explode.
Speaker 1There's options that you can do on leverage in crypto so you could add fuel to the fire. There's even 100x leverage in some exchanges. It is insane. I mean the liquidation that would happen if it goes the wrong direction on you is pretty crazy.
Speaker 2Yeah.
Speaker 4Very quickly Right.
Speaker 1Yeah, so that headline is there. The next headline is also a potential m&a deal, um, but circle, the issuer of usdc, the stable coin, um, the biggest stable coin that is based in the us, um is the company's. Circle is an ipo process. I want to say they would hope to go public this fall. They're doing the road show, but they have been um, uh, receiving offers one from ripple and and one from Coinbase, to try to buy them out before they go public. Circle was hoping to go public at roughly a $5 billion valuation. I know that Ripple their last offer was $6 billion. They were saying we'll just take you now and Circle said no thanks to that. Obviously they're going to try and negotiate.
Crypto News Roundup
Speaker 1Um, what the little wrinkle here is um, three quarters of circles revenue is derived by volume of USDC that goes to Coinbase and Coinbase gets that revenue. So with high rates like they are now, relatively speaking, circle is a decently profitable business. If the rates go lower, I would imagine those margins get compressed very quickly and the business doesn't look as pretty right. So it would be interesting to see who wins this battle. I don't know if my stomach is right here, but my gut tells me that Ripple wins this one because they need to be in the stablecoin business in their opinion, and they have launched their own coin. But I'd imagine they would wind that down and keep usdc, since it has so much broader market capitalization at this point. Um, but yeah, so we'll see. I imagine within the next month we may have an update on this one.
Speaker 1So, um, on the topic of stable coins kind of a bit of a thread here um, meta. So facebook if, for those that remember, in the summer of 2019, they had, uh, announced they were launching their own um stable coin called diem. Diem was going to be a basket of us dollars, the euro and, I believe, the japanese yen and lawmakers, everyone like lost it. They're like nope, this is, you know, on the heels of facebook, coming out of their cambridge analytical scandal, where they were basically had no trust. Um, and now you're like, oh, you want to run everyone's money for two billion, three billion people. Um, so that got wound down, that project, um, and that team actually became a different cryptocurrency. We're not gonna talk about that today, but, um, facebook is back saying that they want to launch um, the ability to do payments in a wallet built into your facebook account, but with existing stable coins, and at first I was like oh, that's weird, you would think they would take another stab at it. And then I realized PTSD.
Speaker 2Yeah exactly.
Speaker 1Then, when I started digging into it, I realized that the updated bill that's going through the Senate and house, there's updated text in it saying the big tech players cannot issue their own stable coin because they're worried about too much control over the financial side and the technology side by the same company. So the companies are literally called out meta, amazon and Google in this bill, like I don't know if that happens often in bills, where you call companies out saying they can't do something. But here we are, so they just change your name.
Speaker 2Well, I don't know if that happens often in bills, where you call companies out saying they can't do something. But here we are, so they just change your name. Well, I mean they go back to Facebook and they're fine, right? I don't think it will be that simple. How many stable coins do we need? You think about stable coin? You think maybe one or two is probably all you need in the whole world, right?
Speaker 1Yeah, you would think so. Part of it is is like there's a stable coin, but a stable coin can be on one or many different crypto networks. So, depending on the network it's on, you may need other ones because they don't want to service that network. There's a bit of politics that go on, but you start to wonder how do you bridge these things? It raises other questions that some crypto networks try to solve in themselves. But what if the US government just created their own stable coin? That some crypto networks try to solve in themselves, but-.
Speaker 2What if the US government just created their own stable coin?
Speaker 1That would be more of a CBDC. We haven't been talking about that these days because I think the politics around it and privacy, at least in the US, I mean with this Trump administration not going to happen? Yeah, there'll likely be a euro.
Speaker 1Oh, because you're concerned that if the government does that, every digital transaction they can see into everything they see receipt data effectively at that point Right now, the Fed and the US government doesn't outside without a subpoena because it's going through a Visa debit card or Visa credit card. The banks see that data but there's a layer, I guess, of protection of sorts.
Speaker 2Maybe if you give to the government or give to politicians, it has to be done through through through a coin like that. That way we know exactly where money's coming from.
Speaker 1Well, so there's pluses and minuses, right? I mean there's the privacy side and then there's also the efficiency side, right? I think that the the, the opponents of a CBc would say it would just turn into what china has and china's super surveillance on theirs. And I respect that, um. But I also can see, you know, every time I go to buy something and they're like oh, if you pay with cash, you get a discount. I'm like I know that person's not paying their taxes, like, and there's someone that pays their taxes.
Speaker 1It's a little frustrating. Um, yes, I would like a discount, but anyways it's a bit of a soapbox topic for me.
Speaker 2Yeah, Going back to airplanes, there's a guy out at our airport, a mechanic, and he's told everyone I don't use them, but he's told everyone he will only accept cash going forward because the government doesn't need to know what he's doing. I'm like it's because you don't want to pay your taxes.
Speaker 1Let's to know what he's doing. You know, I'm like it's because you don't want to pay your taxes. Let's just say it right. Well, that, and also, like I imagine they, um people with that mentality probably don't have optimum um, like technology, uh, like etiquette, so they're probably leaking data elsewhere. That probably tells a story, anyway he wouldn't even take a check.
Speaker 2He wants people to bring like cold, hard cash, like, first of all, it's not cheap to work on an airplane so every time someone touches it, it's gonna be like 1200 bucks right who's? Walking around right.
Speaker 1I. I think at the end of the day you know we don't we're in the experimentation stage largely. I mean there's the market cap of all stable coins is, I don't know, 150 billion dollars or less. That's a lot of money, but not really in the grand financial scheme, Right? Um, I think there'll be a um settling down over the next couple of years. It'll be it all figured out. Um. Also as part of this bill. It's not made in our notes here Um, this bill would bring tether, so USDT under us jurisdiction, even though it is based in Argentina.
Speaker 1Now I think they have moved from the Caymans to Argentina. Um, um, it's interesting, they kind of just did that. I mean they could block them out of the market, which would really hurt them. So then you would have a rest of the world stable coin that's based in dollars. Right, and the U? S. The part that we don't typically talk about as stable coins is when it, when it comes to a dollar based stable coin, that's actually a good thing for the U? S cause that those are buyers of treasuries and obviously Um and obviously billions of dollars.
Speaker 1I mean like it's getting to be something that, like the fed, probably pays attention to um versus, you know, traditional um type of assets. So, anyways, I think that we will stop there with stable coins for today and we'll say one last thing. Um, so, paul Atkins, he's the new um. Uh, he got voted in by the Senate and confirmed. He's the chair of the SEC. You know, wind back four years ago I was excited when Gensler was coming in because he had taught crypto at MIT. It could not have gone any worse, in my opinion. So I've been hesitant to be excited about Paul, even though I hear great things about him.
Speaker 1But in his first speech he literally came out and said that the SEC needed to create clear, clear um guidelines for crypto issues and explore idea of a safe harbor. And I was like that sentence alone. I was like, okay, we different administration here, right? Um, the safe harbor idea is when a crypto first launches. If, by definition of what we currently have in the law now it is a security, there's no doubt about it because it's not decentralized and all the natures that it can morph into. So hester, purse another commissioner.
Speaker 1The sec has this proposal that would allow a crypto network two years and have to hit milestones to become, uh, effectively decentralized and then it would kind of get to be able to go a commodity. At that point it wouldn't have to necessarily do all the registrations that you would do with a normal security right. So it was great to see him say that um well, he had said that as part of his senate hearing and to see him say that after he's been voted in um, you know, doesn't do it. You know the the rubber's got to hit the road at some point. We'll need to follow through. But the sec currently um is walking, that walks, which is great to hear. So we will hopefully have more good news there and kind of maybe start to forget about the past a little bit and move forward with some good guidelines.
Inside Crypto Regulation Progress
Speaker 3Before we get back into the episode, have you ever wondered why annuities keep coming up as a recommended investment, while they're often pitched as a way to reduce risk and secure your future? Annuities frequently benefit the salesperson more than the investor. Download our free guide. Buyer, beware, why Do they Keep Trying to Sell you that Annuity at wiserinvestorcom? Forward slash guides. Now let's get back to the episode. Let's get back to the episode.
Speaker 2What do you see as far as regulation goes, any headway on that?
Speaker 1Yeah, so obviously we've talked a little bit about the stable coin bill in this podcast already. That is more of like a very basic Lego block. If stable coins can get figured out, out the regulations around that cause, like a how they can be backed, can, can they currently be um yield providing, which is no by this bill, um, which is only good for the issuers Cause then they get to keep all the yield Um but um. At the end of the day I think that that will get done. It sounds like it may even get um voted through the Senate before Memorial Day. Trump wants this bill on his desk by the August recess, he said. Once it gets through the Senate it's clear sailing. The House is all on board and definitely has the votes. So that's good news. They have a bill coming through they call the Market Structure Bill, which is more broadly. It may get into this whole safe harbor thing thing. It's much more nuanced. Um. Do we get that this year? I would be thrilled if we did.
Speaker 1I'm kind of setting my expectations early next year just to kind of not be in a situation to be disappointed. Um, but that that's, um that's. We'll be interesting to see how the market reacts to that Cause I think there'll be a lot of you know, anticipation leading up to it that like it may already get baked in the prices. So I wouldn't expect like a huge pop because of that bill passing, but like it definitely puts a stamp of approval on the industry. That makes it harder for you know regulators to try to ring into you know the oblivion. So but yeah, it's, you know all these things lead up to. Should it be? Should you invest in crypto? Like, how do you think about investing in crypto? So I think we're going to talk a little bit about that.
Speaker 2When you build a portfolio, let's just say, of ETFs, you know we use most advisors, use the modern portfolio theory and basically each asset class has its own standard deviation or risk. So you think large caps would be, as far as equities would be, the most conservative, so that'd be like the S and P 500. And then you'd have S and P 600 or 400 for mid and small caps, which are a little bit more volatile but supposed to have a higher rate of return. Hasn't recently.
Speaker 2But then you have international which is going to be similar to your S&P 500, except you have the currency risk because of the foreign assets in there, and so, and then you add bonds, and of course bonds could be a whole podcast on its own. Let's just say they're more conservative than stocks. But bonds bond market can be more aggressive than stocks if you're in the wrong one.
Speaker 2So absolutely so so you, you let's just assume short-term us treasuries for bonds and, and how you build a portfolio is, if you want the highest rate of return, you kind of you drop the bonds down almost zero and then you have mostly large cap and mid-cap and you might have a sector or something like technology that kind of try to juice up returns or growth, a growth tilt in the portfolio.
Speaker 2So my question to you is is this how you think when you're building portfolios for your clients? Is this how you think about investing, or is crypto just totally?
Speaker 1different. Well, I'll say up front not a financial advisor, so none of this is advice in that sense. I don't build portfolios that care anything but crypto right. For me, it's like isolated, and if somebody decides to invest in the fund, that is the advice that they've either chosen for themselves or their financial advisors given them.
Speaker 2Correct. So. So if I was, if I had a client and they they had, they said, hey, I want to, I want to take some outsized risk. Your fund would be a choice because because it's, it's the, it's the the ability to get large returns over time. Right, right, in theory, On my chart I go well, hey, we could put 5% over here in this fund, and I know that this will be volatile, but if it goes to where we think it does in 10 years, then you have a much bigger return, absolutely. So I guess my question is when you're looking at because most people only know Bitcoin, right, so do you categorize things and like okay, bitcoin's kind of like your S&P, and then Ethereum's like your NASDAQ, and then your yeah.
Speaker 1So my fund is even more niche than that, so it doesn't hold Bitcoin or Ethereum, so I don't really have to, I guess, answer that question per se. Right, we've built the theory and the thesis around all about commercial utility like and how things are going to be solved long term for business problems because, I think businesses are the first major adopter of crypto, even before, like consumers.
Speaker 1I think certainly consumers gamble on crypto. Now they don't do anything else but that maybe they buy coffee because they think it's cool, right, but it's not really being used anywhere else. Um, even in gaming. Gaming is an industry that could be obviously consumer focused, that has all the things you can buy and sell in it Over time. There's economies I do think they come on chain, but even they're not ready for they haven't fully adopted or even partially adopted crypto at that point. So my thesis, and just generally, I'm a long-term thinker. When it comes to investing, I don't necessarily care about where the market's at today, where it's at tomorrow, it's all about where I think is going in five or 10 years, or three to five to 10 years. So use that kind of, I guess, a set of binoculars there. And there's no joke. We used to say the number of cryptos that were in in existence early on in the podcast. It was like 20 000 was the number. We used to say it is like close to 35 million at this point 35 million.
Speaker 2Yes, with an m yes, um because you want to build your own portfolio portfolio 35 million choices.
Speaker 1Yes, um and 99.999 of those are absolutely trash. There. It's like it takes all of five minutes to make a token and then if you can market it, then great, but it's still at that point. What's the value in it? Right, Like it's more of like a beanie baby. At that point you had to find people that care about it, so like you have the Trump token that's launched.
Speaker 2That has no purpose.
Speaker 1In my opinion, it is part of the meme coin bucket. It's it has no purpose In my opinion. It is part of the meme coin bucket. Um, the fam, the Trump family, is not going to say that, um, because they're going to say it's useful, because you can buy his different things that he's selling. You buy the Trump watch with his meme coin. They're going to say that you should do utility there and that's you know what.
Speaker 3Yeah.
Speaker 1There's, there's no right, at least in the us. There's no utility there, um, there's no value. They're not like giving you a discount, as far as I'm aware, right, um, so I don't know it. There's all these funky little things you'll find with the crypto so is it the same as doge you think about?
Speaker 2dogecoin does it have, I mean elon, could you buy a tesla temporarily with doge?
Speaker 1um, I, he joked about that. I don't think there was ever time you could buy actually for a while, you could buy a tesla with bitcoin. I don't think you can even do that now.
Speaker 2No, um, so it was too dangerous to the environment, or something like that yeah, which you know, politics um but at the end of the day, there's no.
Speaker 1I mean, I know that you can go to Starbucks and well in some places, and buy coffee with Bitcoin. Okay, that's great, you bought your $7 coffee, the transaction fee is it probably cost you $25.
Speaker 1Yeah, I don't even know if it's maybe it's like even on the low and say it's $3, okay, I, yeah, I don't even know if it's maybe it's like even on the low and say it's $3. You're still okay, you're paying 50% more for your coffee and then, I don't know, it's a novelty right now. Right, there's not a real use case. Um, so you know, part of trying to figure out, like right, you've done the homework. Like how do you narrow it down? Like, do you invest on all 20? You could? You could just do an even distribution.
Introduction to Crypto Portfolio Building
Speaker 2I mean, if you just went to coinbasecom, he said this is my only universe, so that's going to narrow a lot of crap right, there's two, three hundred things there yeah, oh, really yeah, there's the meme coins.
Speaker 1There's obviously bitcoin, ethereum.
Speaker 1There's a lot of the major l1s like okay but it's interesting, as it became more obvious and this is Coinbase hasn't said this, this is my perception as it became more obvious that Trump was winning the election on election night. From then till now, coinbase has listed other tokens that I believe probably wouldn't have made the cut underneath the previous administration. They look a little more meanie. They look a little bit more um. You know, coinbase is trying to take advantage of the current moment. Something's hot. They want to. They're all about trading fees, right, right, you know what? I believe? That that universe should exist, um, and if they want to have that as part of their platform, so be it.
Speaker 2So in the Coinbase platform, if we narrowed it down and we said these coins are not memes and they have some utility to them, which ones would that be?
Speaker 1I hesitate to give. Maybe I'll give the parameters on how I go about looking at them, instead of giving advice on which ones to buy. So for me it's like what problem is the project solving? Is it something?
Speaker 2that I understand. You know that's a bit of a Warrenren buffett way of going about it, right like, and, if I remember correctly, you can click on the uh, the coin in coinbase and it tells you there's a description. There's a description you should be able to figure out if it's useful or not um that.
Speaker 1To me, that would be the beginning of the homework on that one. Um. There's other websites you can go to, like coinmarketcapcom or coingeckocom. Punch in the ticker and you would get more information. You also probably get links if Coinbase doesn't have them out to the project's website and so it allows you to kind of be more informed than just the hundred words that Coinbase may give you in front of you and you know.
Speaker 1the other thing in crypto that could be a little tricky is sometimes you may look at trading volumes and Coinbase will say, oh, over the last 24 hours or week or whatever this has been a 60% or 70% of people have been buying this.
Speaker 1Okay, that's fine. That doesn't mean that it can't be manipulated, right, there could be outside people coming in wanting to pump that one up. So you have to be cautious with the signals that you see if you're using it. If you're using that signal I personally don't use that one, but if you do, I have heard people get caught up in that. So the next level is the team that's building and you know, trying to develop that project. Do they have experience in that market? That's something that I care a lot about. Like it's not just a guy running around with a hammer looking for a nail. You see a lot of crypto projects like that that eventually, when they first launched, they make the founders rich at some level and the public basically is the exit liquidity for them, and then it just goes off into Bolivian and becomes one of the 30 million.
Speaker 2That's almost like a pump and dump kind of thing. Yeah, it's.
Evaluating Crypto Projects
Speaker 1It's a more sophisticated pump and dump that maybe run longer, um, but it's, you know it. It probably wouldn't make it to the coinbase platform, but that's not to say that you couldn't find it elsewhere. If you really ended up down a rabbit hole, um, and just this kind of gets a little bit far in the weeds. So maybe we could do a whole podcast about tokenomics. But how? How is the token pool, or the float, if you want to use a stock term, how is it structured? Because some tokens have a fixed number, never going to be greater than that number, like XRP has a hundred billion Bitcoin's. Another example never going to have more than 21 million after they're all mined. In that case, in the XRP case, they're all already out there in the wild. So who has them? Is it heavily weighted towards the founders? Are there a lockups? Is there a set period of time that those tokens become available? Because all those things really come into affecting the liquidity and just where the price sits Much like stock lockups for IPOs that 60, 90, 365 day windows. It gets volatile because, whether it's employees or whatever they had, shares they may want to sell. So the same thing happens in crypto and just generally I go back to all the time is do I understand this? You don't need to understand the technicals of it, you don't understand how it's built per se, but do you understand the market, what they're trying to solve? And ideally I like seeing teams that came from that industry call it banking. They came in, they're like you know what Crypto can solve this problem that we've been seeing in this industry. They start the startup, the token network or whatever it may be. They go back to solve that problem. A they understand the problem, they understand the customer, but they also probably have contacts in the industry to help grow that business again, versus the crypto bro that's running around with this hammer trying to find a nail. Those are very different animals, very different levels of respect within the industry and all those things.
Speaker 1So what? What do you think most crypto is trying to solve? Because the first thing comes to my mind is cross-border transactions. But how many that? I think the countries that still work off of paper and the small manufacturers that try to say sell into, like a G7 country, like America or whatever, they're going to see the biggest leap. They're going to go from paper into technology and at the same time, get immediate financing because the crypto brings the financing piece. That's a challenge for this. The mom and pop manufacturer in vietnam, for instance, um they would have to have a local bank relationship, versus now, they could just need internet and they could, um potentially get access to the financing would come through like a stable coin type um, stable coin or even crypto token, I mean, like, I mean one or the other um, and the cool thing is, then you mix in smart contracts and like it verifies things happen before they get their money.
Speaker 1Like you can set these up, these things up to be rather sophisticated. So cross-border payments, um, trade finance, supply chain management, which kind of bleeds in on that, but just kind of the tracking of goods and proving providence. Supply chain management also mixes in, like the um, uh, proof of ownership, in the sense that you can prove something's real. So is my gucci handbag, if counterfeit, or is it a real one? Um, they've, gucci and some other of those high-end brands obviously have incentive to make sure there's not counterfeits or to help fight it, and they've even put, like nfc, tags on the bags that will go back to blockchain to prove that this bag was made in this factory in this date. So you know the history of it Again, that's, so they can continue to sell you a $5,000 handbag.
Speaker 2It's kind of like the Cabbage Patch Kids up in Cleveland, georgia. They each came with their own little story how they were born. They're just ahead of their time, way ahead of their time.
Speaker 1They even beat the internet time, we even beat the internet um, that's funny, um. And the last one is tokenization, and tokenization is a very broad topic and I think that this actually is probably more applicable to the average listener. That may be um in an industry here in the us business owner and they want to understand how crypto is going to affect it. So if you're selling goods, um, and you want to represent that value in a blockchain for whatever reason, to again it may bleed over into supply chain management, but, like, so you can track things or whatever the idea that you put on a blockchain, the amount of things that would be on a blockchain 10 years from now is going to blow people's mind. Simple things that are the examples that come to mind will probably take the longest, oddly enough, is like a car title, a house deed, the stuff that government runs the registries of right um, that's happening, but literally on the way to record this podcast, this morning I was listening to a panel um.
Speaker 1So the dtcc it's an acronym that you recognize um that very few people probably do. They basically are the agency of record um for the us um equities and bond market, like who owns what as part of those transactions. They are a consortium that's owned by the different banks, but they said in short order, which my guess in their opinion is probably three plus years, but in short order they plan to bring $10 trillion of US assets on chain tokenized.
Speaker 4Oh, wow.
Speaker 1Oh my gosh that. So what does that do? Well, you also have a market or a world where I have a tokenized um personal investment fund that I'm part of right now. That's just an asset that I get to hold and doesn't outside of potentially any sales. I don't get to um benefit from that. You have a world where, if you want to take a loan against that, there's a market that could be easily created, or easy, somewhat easily created, probably. So in the examples are fresh and new, but they also, I think, we're still experimenting. We don't fully understand how this will change it, but it's coming and it's coming in a major way, which I think is the point there.
Speaker 2So in your fund you're mostly investing in these crypto coins that are not in the us is that right um?
Speaker 1so could you explain the manufacturer.
Speaker 1Yes, so the idea of borders I used to care more about. I care less about it now that the us is starting to get its act together. Um, when the us was cranky the last four years around crypto, I liked the ones they well they tend to perform better that were in Asia or their middle East or whatever, doing different things. But slowly borders are going away in crypto, which I think is a great thing, cause then that will really allow the technology to kind of grow and flourish. So so.
Speaker 2So so we're looking for crypto that has utility, can be used for something.
Speaker 1Or the signs of budding utility. I think it's somewhat early on some of these to say that there is utility, but there's promise, good promise.
Speaker 2But something's in the works already, correct.
Speaker 1Not that we have an idea Right.
Speaker 2You may see them doing proof of concepts or different places with different, but something's in the works already.
Speaker 1Correct, not that we have an idea Right. You may see them doing proof of concepts or different places with different whether it's government agencies, or you might see, like the big consulting agencies around the world, the big four doing projects into different businesses and different places and the more times that happens, the more breadcrumbs I like to see, which helps me kind of build my theory, do the cryptos have their own website.
Speaker 2You can go and read about them.
Speaker 1Most of them do. I would say, all the ones that you want to care about, do. If there's no website, big, big caution there. Right, but I think generally it's the websites. But it's also, like you know, I often get asked by potential investors like how do you know this was a good one? Well, a, I don't know. We'll find out together, but I but my thesis is, this one is good and part of it is is. I may have seen I don't know a dozen or five dozen videos with different people from this business slash crypto network that are on panels with central bankers, if they're talking about payments or if they're on their conferences, and also you start to see this confluence of breadcrumbs come together. You're like, okay, one, Okay, fine, who cares? Maybe even a dozen, no one cares. But when you start to see a long trail and it become more serious people on stage with the crypto network you're like okay, they're adding some stamp of approval.
Speaker 1They're not verbally saying that, but like they're not going to be, you're not gonna find a central banker on a stage with a crypto network, Right, If?
Speaker 2if, if they're fully against it, like they're just not going to accept that gig, so and so let's, let's contrast that with meme coins. Meme coins, yeah.
Speaker 1So we kind of hinted at in the beginning the there's different buckets in crypto. Meme coins is a bucket that I do not play in at all. I'll say up front I I used to think it was a big distraction for crypto. I think it's a mild distraction. I've kind of walked back a little bit there. Um, but meme coins is nothing but consumers gambling and crypto is the way that I've come to define it.
Speaker 2So it's like going to.
Speaker 1Vegas, yeah, but interestingly enough, to kind of use some technology terms, it's like going to Vegas but buying an option on your blackjack hand. That is long dated, right. So the crypto, it could go down, it could go up. It's not like an immediate loss. Sometimes it is, but generally not. It's just kind of this weird mix of things.
Real-World Utility in Blockchain
Speaker 1Um, meme coins are this inner, interesting intersection of finance I use that very loosely um or money, um with pop culture. Um, and if you want to bet on pop culture, meme coins are your way to do it these days, which is interesting, yeah, and if you rewind, you could buy a baseball card that was a bit of like pop culture, or if you wanted to be I don't know in the late 90s you're part of the grunge movement like. There's no real way to own that besides just buying a t-shirt right or buying the cd. Now you can buy into what would be the um more of the ownership side of it, which is interesting. And you know, I, meme coins really took off in the summer of 2021. Um in 2020, yeah, 2021, when um, uh, everyone was locked at home, um, getting checks from the government and had nothing else better to do um, that was definitely a meme coin moment and elon was on saturday in life, so but I again, I just go back to there's.
Speaker 2There's no general purpose for these.
Speaker 1The purpose is gambling I think that if if you found somebody that was really into meme coins, they were being forthright and honest about it, they would say, yes, this is gambling and own it right like yeah there's nothing wrong legally with it per se, sure, but it's just like you know. If that's something you want to do, then great um.
Speaker 2And then I go back to kind of a third stool, a leg of the stool, I guess, would be, in my space, the wealth management space and you know, there's really only two ETFs, two types of ETFs. You can buy Ethereum, you can buy Bitcoin. Right now you think you said in the last podcast, there's 70 applications right now, at this point, yeah so 80 applications for more um more offerings.
Speaker 1What I prefer to have is a market cap based one there is one that I can pick, one, yeah, and never have to think about it again never have to think about it again.
Speaker 2It just sorts itself out kind of like the s&p 500. But right now we use bitcoin and we use ethereum very little bit of ethereum, but, but mostly bitcoin.
Speaker 1Um it's it's done well in the because you guys were last summer, so you're approaching your year mark.
Speaker 2Yes, exactly uh, we, we didn't buy it the day of, but within a few months of the launch, we, we added it, and how we did it was we added to portfolios that clients opted into. Right, so it wasn't just an automatic ad. Smart way to do it Some people were very passionate that this is all a fraud, and then some people are very passionate that this is the future.
Speaker 2I believe this is the future and we use a small percentage that if it goes to zero for some reason, then nobody's going to be harmed, but if it goes to where everyone says it could go, you'll be glad that we did it and I'll say did you see Jim Cramer yesterday? I try not to see Jim Cramer. I try not to see Jim Cramer too, but he was like in 10 years. He said in five years Bitcoin would be closer to $5,000 than $500,000.
Speaker 1Right. So the inverse Cramer, which everyone that's what people pay attention that was a great statement um, yes, so he is a quite the knack for um marking tops and bottoms.
Speaker 2Yes, so yeah there is an inverse index that anything that jim kramer says you do the you should buy. You do the opposite and it is outperforming jim himself right by a large margin, as well as the nancy pelosi index.
Speaker 1Right, uh no one beats that one correct, and that's, that's pure insider trading.
Speaker 2I'll say it yes, um that one sent you to jail normally unless, unless you're in congress. Yes, right, yeah, um, but yeah, so, so it's uh, financial advisory firms are not widely adopting crypto in right now and it could be a couple reasons.
Speaker 1It could be that it's a it's not easy. Even though though the ETFs are there, they don't. And I guess the second reason is they don't like they can't really be diversified, Like it's a challenge, right, you can be part of two and that's a diversification.
Speaker 4From the rest of the portfolio, from the rest of the portfolio.
Speaker 1But within crypto it's tough in what the, so I don't know if I think I think for crypto.
Speaker 2So in my space right now we're dominated by private equity and private credit offerings, and most of them are crap. Goldman Sachs has a couple of good options outside of that. I haven't seen a whole lot that unless you're a billionaire and have access to different access to people that I can think of for everyone else. It just doesn't make sense. So I feel like they're so focused on that. There's no independent firm. There shouldn't be any kickbacks for pushing that, but it makes you sound more sophisticated.
Speaker 2You say oh, I can get you a private credit fund. Oh, I can get you a private equity fund. That's only available to and if, or private in general, it's a private equity fund that's only available to and if. You say to someone, we're going to put part of your money in crypto. Now, all of a sudden, you just sound like a sleazy scam artist guy.
Speaker 2So I think there's a little bit of that to it. Rick Ellman is doing a good job in his conferences, getting out there and talking to people and say, hey, you should be doing this. Advisors are also very slow to adopt new things. In 2004, when ETFs became prominent, you were the crazy guy.
Advisor Adoption of Digital Assets
Speaker 2I was the crazy guy. I said this is the future. We're going to ETFs. No more ridiculous tax bills. This is the future. Now. I adopted it and I used to get blasted whenever I did articles for ETFcom or it was called Inside ETFs back then. But we get blasted because you're like these are derivatives. You don't really own anything. It's like you guys have no idea what you're talking about. You're angry about literally nothing. So there's some of that. With crypto, I would say that we're still adopting portfolios. More people every week opt in to the crypto model, but initially it was almost everyone under the age of 30 and almost everyone with a net worth over 2 million right, um, part of this new sec.
Speaker 1They want to revisit the? Um, what that rule looks like, um, what the standards are, all that stuff. And I think that, um, if done smartly, that the threshold should be lowered, um, because there's plenty of smart people out there that can do homework that don't have a million liquid right, yeah, um, and it is a bit discriminatory in that sense, um, but also I can see the flip side, where, you know, people would truly just be gambling, um, because they like chasing stuff that they don't understand.
Speaker 2So yeah, they're taking advantage of it. The reason why I think that role exists is to protect the investor from the advisor.
Speaker 1Right, and those thresholds have A been adjusted one time, but they have not been indexed. I mean inflation adjusted.
Speaker 2No, no, no.
Speaker 1So like they're just they don't make sense anymore. Yeah, no, no to 10-year bet a lot of times, absolutely, we're in crypto on the crypto portfolio?
Speaker 2Yeah, there's no. You should think of that in your head. This is here for 10 years. I don't want to touch it, but you can be in and out in a couple of milliseconds if you wanted to be.
Speaker 1Yeah, and you know it's an interesting crossroads because I talked to my investors or potential investors firm that uses like a PE style of diligence process, super in depth before we decide to invest in something. But we have we're married with the active liquidity of a token, like I could decide to sell tomorrow and get out of it. I don't I'm not married to a bad bet for the next three or five years. Um, so it's an interesting grassroots like investing in a business right.
Speaker 2Correct, absolutely, yeah, yeah, all right, robert, thanks for the insight and the updates. If you want to hear more on cryptos episode 281,. Terrorist ripples victory what's next for investors Episode 275. We talked about the US Bitcoin Reserve, spf's president interview. Haven't heard from him in a while.
Speaker 1He got moved. He's no longer in Manhattan. He's, I think, in Kansas somewhere, and not that Manhattan was a great situation, but I'd imagine it did not improve. Right so yeah, he definitely got himself in hot water.
Speaker 2Yeah, he gave to the wrong party, you know, even to the other party. Maybe be out of jail by now. Politics given to the other party. Maybe be out of jail by now. Politics, politics. Anyway, thanks for listening. If you want to learn more about crypto, crypto or Teton Crypto Capital, you can reach out to Robert in our show notes below. Thanks for listening. We'll see you guys on the next episode.
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