Get Rich Education 488: Why Does Bitcoin Have Any Value?
Learn the pros and cons of bitcoin, the world's largest cryptocurrency.
Bitcoin can be moved well across space and time. You can't move dollars over time due to inflation; you can't move gold over space due to weight and security concerns.
Real estate, bitcoin, and gold are all scarce and take real-world resources to produce.
Bitcoin is a global digital currency that's decentralized.
Nick Giambruno joins us to discuss why bitcoin has value today.
Since there can only be 21 million bitcoin, it cannot be debased like dollars are.
By April, bitcoin will experience a halving. Rather than 900 new bitcoins brought into issuance daily, there will be 450.
The SEC's recent Spot EFT approval will give more investors bitcoin access.
The higher the stock-to-flow ratio, the harder the asset.
What about governments shutting down bitcoin, regulating it, or taxing it to death? We discuss.
Bitcoin price volatility is a problem in currency adoption.
Lots of energy is used in bitcoin mining. But much of it is stranded energy.
Bitcoin cannot produce income.
Keith Weinhold stresses his preferred way to hold bitcoin.
Timestamps:
Bitcoin's value proposition (00:00:01)
Keith Weinhold introduces the topic of Bitcoin's value and why it is relevant to a real estate show.
Jamie Dimon's criticism of Bitcoin (00:05:27)
JPMorgan Chase CEO Jamie Dimon expresses his disdain for Bitcoin and blockchain technology in a heated conversation.
Bitcoin's resistance to debasement (00:07:19)
Keith Weinhold discusses the resistance of Bitcoin to debasement and the skepticism of governments and financial institutions towards it.
The origin and value of Bitcoin (00:08:18)
Nick Giambruno, an international investor, explains the history and value proposition of Bitcoin, emphasizing its decentralization and resistance to debasement.
Bitcoin's hardness and production rate (00:14:21)
Nick Giambruno delves into the concept of Bitcoin's hardness and its production requirements, comparing it to other assets like gold and real estate.
Bitcoin's upcoming halving event (00:16:28)
Nick Giambruno discusses the significance of Bitcoin's upcoming halving event, which will impact its stock-to-flow ratio and reinforce its value proposition.
Bitcoin's scarcity (00:19:42)
Bitcoin's limited supply and its unique scarcity attribute, compared to other commodities like gold.
Upcoming halving event and Bitcoin ETF approval (00:20:53)
Discussion on the significance of the upcoming halving event and the approval of a new spot for Bitcoin ETF, indicating the growing acceptance of Bitcoin.
Bitcoin as a currency and value proposition (00:22:42)
The value of Bitcoin as a currency for transferring value and its resistance to debasement, emphasizing the importance of self-custody of Bitcoin.
Global adoption of Bitcoin (00:24:30)
Comparison of Bitcoin adoption in different nations, highlighting the potential benefits for early adopters and the impact of Bitcoin on the world's financial landscape.
Bitcoin's market potential and investment consideration (00:27:27)
The potential market share of Bitcoin in the global economy and the consideration of Bitcoin as an investment asset.
Government's ability to regulate Bitcoin (00:34:11)
Discussion on the government's potential regulation and taxation of Bitcoin, emphasizing the power of economic incentives and Bitcoin's resilience to government intervention.
Bitcoin's uniqueness and credibility (00:36:12)
Differentiating Bitcoin from other cryptocurrencies, highlighting its credibility and resistance to change, making it the real innovation in the crypto space.
Bitcoin as a Store of Value (00:37:55)
Discussion on Bitcoin's role as a store of value and its comparison to gold.
Bitcoin as an Emerging Form of Money (00:38:25)
Explanation of Bitcoin as an emerging form of money and its distinction from established money like gold.
Bitcoin's Transaction Network and the Lightning Network (00:39:37)
Explanation of Bitcoin's transaction network, scalability, and the use of the Lightning Network for smaller transactions.
Earning Income from Bitcoin (00:41:40)
Discussion on earning income from Bitcoin through related companies, dividends, and caution regarding Bitcoin lending services.
Bitcoin Exchanges and Custody (00:44:20)
The importance of custodying your own Bitcoin and the risks associated with centralized Bitcoin exchanges.
Connecting with the Guest (00:45:13)
Information on how to connect with the guest and access a helpful Bitcoin guide.
Bitcoin's Energy Use and Price Volatility (00:46:01)
Insights into Bitcoin's energy use, price volatility, and the use of stranded energy sources by miners.
Real Estate vs. Bitcoin (00:47:04)
Comparison of real estate as a wealth builder with the merits and risks of owning gold and Bitcoin.
Disclaimer and Conclusion (00:47:54)
Disclaimer about the content and a conclusion to the episode.
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Complete episode transcript:
Keith Weinhold (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. Why does Bitcoin have any value? And why is a real estate show dedicating one episode to this topic now? The benefits and criticisms of the world's largest cryptocurrency Bitcoin today on Get Rich Education. If you like the Get Rich Education podcast, you're going to love art. Don't quit your day. Dream newsletter. No, I here I write every word of the letter myself. It wires your mind for wealth. It helps you make money in your sleep and updates you on vital real estate investing trends. It's free. Sign up egg get rich education com slash letter. It's real content that makes a real difference in your life, spiced with a dash of humor rather than living below your means, learn how to grow your means right now. You can also easily get the letter by texting gray to 66866. Text gray to 66866.
Corey Coates (00:01:06) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.
Keith Weinhold (00:01:22) - Work degree from Quito, Ecuador, where I am today, to the Mosquito Coast, Nicaragua, and across 188 nations worldwide.
Keith Weinhold (00:01:29) - You're listening. One of the United States longest running and most less than two shows on real estate investing. I'm your host, Keith Reinhold. Yes, we're a real estate show, but with 488 episodes, it's time to focus at least one of them. Finally, on Bitcoin. We'll bring it back to US real estate next week. Now, this is for a few reasons. Today, Bitcoin is largely misunderstood. It's become so big that it's hard to ignore. And there are two recent Bitcoin events two happenings with global impact that makes now the right time to cover this. Now look, I think that it's human nature that when you learn about something new for the first time and you don't understand how it works like Bitcoin, it's sort of innate to you start criticizing it or sort of discounted in your mind, chiefly because you don't understand it. Though Bitcoin's pseudonymous creator, Satoshi Nakamoto wrote the Bitcoin paper in 2008 and the first Bitcoin was issued in 2009. And, you know, when I first heard about it sometime after that, I probably discounted it in my mind as well.
Keith Weinhold (00:02:45) - And I think most people that don't understand Bitcoin, you know, they first think something like, oh come on, what is this. Just magic internet money. How does that work? How could that have any value. And I think is one matures when encountering the unknown. They inquire rather than criticize it. Look now and I'm getting really personal here, aren't I? I don't do drugs and I never have. But I don't criticize those that do drugs because it's a world that I just don't understand at all. Last year I was having dinner with a couple. They asked me what book I'm currently reading, and I told them that it's a 350 page book about Bitcoin, and the response was laughter, sort of dismissing it. And they said, well, how could anyone write that many pages about Bitcoin just completely discounting the whole thing? Well, for me, a turning point on Bitcoin is when I found highly intelligent people that understood it well and they were excited about it and they endorsed it. Now real estate has more intrinsic value than the dollar or gold or Bitcoin.
Keith Weinhold (00:04:02) - Because real estate is essential to your survival. You can make arguments that the dollar, gold and Bitcoin all have questionable backing. But today enough people agree that the dollar, gold and Bitcoin all have value. People are agreeing all three gold, the dollar and Bitcoin have varying levels then of anthropogenic faith. Today you and I, we live in a digital world that's comprised of 195 world nations. Well then, shouldn't money be made of something that's digital and doesn't know any national borders? Think of Bitcoin's value proposition this way you cannot move dollars across time. That's due to inflation. You can't move gold across space that's due to weight and security. But consider this Bitcoin can be officially moved across both space and time. Its supply is absolutely fixed. At 21 million, there can never be more than 21 million bitcoin either. It's traded on the blockchain, which is basically a digital ledger, but not every intelligent or influential finance person believes in Bitcoin. Of course, not every one of them. For example, it gets a little heated here from last month.
Keith Weinhold (00:05:27) - This is one of the most powerful men in the world. JPMorgan Chase CEO Jamie Dimon. He's getting annoyed about CNBC asking him about Bitcoin just entirely too often. What do you make of the other firms the BlackRock's of the world.
CNBC (00:05:42) - That that obviously and Larry Fink change his view of this obviously. And maybe he changed his view because you think he genuinely believes in Bitcoin or or believed it because he thinks that there's a marketplace for it and he wants to be part of that market. But what do you think of the there's about a dozen big financial companies, fidelity included.
Jamie Dimon, JP Morgan Chase (00:05:59) - Number one I don't care. So just please stop talking about this. And and I don't know what he would say about blockchain versus currencies to do something versus Bitcoin that does nothing. And maybe that's not different than me. But you know, this is what makes a market. People have opinions. This is the last time I'm ever in state. In my opinion.
CNBC (00:06:18) - Gold really didn't do anything either.
Jamie Dimon, JP Morgan Chase (00:06:21) - Yet because it's limited in supply.
Jamie Dimon, JP Morgan Chase (00:06:23) - So it's and it's been used. Uh, so you think so, huh? I do think there's a good chance that when bitcoin when we get to that 20 million bitcoins 42 know that Satoshi is going to come on there laugh hysterically. Go quiet. All Bitcoin is going to be erased I think. How the hell do you know it's going to stop at 21? I've never met one person who told me they know for a fact they take that as it's not.
CNBC (00:06:44) - It hasn't happened because by the last one will be mined in 2150. And it gets harder and harder every time there's another halving. But but, Jamie, I do like looking back over.
Jamie Dimon, JP Morgan Chase (00:06:55) - Just do what you want. I'll do what I want. Ask for gold.
CNBC (00:06:57) - You can. The six characteristics that make gold valuable for 4000 years. They're all present in Bitcoin. That's all I'm saying. I love you and I don't want to. And I also don't I don't also don't want to be a you may enjoy Joe.
Jamie Dimon, JP Morgan Chase (00:07:08) - You may be right.
Jamie Dimon, JP Morgan Chase (00:07:09) - Yeah. Like I don't own gold either. So okay. That's what.
CNBC (00:07:11) - I mean.
CNBC (00:07:12) - Couple of quick final question.
Jamie Dimon, JP Morgan Chase (00:07:12) - I like to own things that pay me incomes, but it doesn't cost money to carry anyway. And it costs money to carry Bitcoin to. By the way.
Keith Weinhold (00:07:19) - Uh, that was Jamie Diamond. Now governments and banksters like Jamie Diamond, they often dislike bitcoin because it cuts out the use of their chief product, the dollar. So governments are especially hesitant to want to promote bitcoin, a lot of them in the world. Anyway, I've got a conversation with a bitcoin expert coming up. We're going to talk about its value proposition and then the criticisms. Yes, I'm in Quito today. I was last year in Ecuador two years ago, this Colorado sized nation of 18 million people. I plan to attempt climbing to the summit of a 20,000 foot mountain later in the week. As for today, let's continue with why should Bitcoin have any value? Today's guest is the founder of the Financial Underground, and he is the editor in chief of that publication.
Keith Weinhold (00:08:18) - He's a renowned international investor, and he specializes in identifying big picture geopolitical and economic trends ahead of the crowd. And you've seen him featured seemingly in everything from Forbes to the Ron Paul Liberty Report. He was a speaker at the well-known New Orleans Investment Conference as well. Hey, it's great to welcome on to gray, Nick. Jim Bruno.
Nick Giambruno (00:08:41) - Hey, Keith, great to be with you.
Keith Weinhold (00:08:43) - I think a lot of our listeners are real estate investors are going to be wondering now, why are you talking about Bitcoin on a real estate show? Actually, I think there are a few more commonalities here than what a lot of people think. What a real estate in Bitcoin have in common. They're both scarce, neither can be easily deluded, and they both take real world resources to produce more of. You could apply those same three attributes to gold. So real estate gold and bitcoin they have this scarcity. And really I think that's a wise investing theme. Go ahead and invest in what's scarce. Limit what's abundant and take zero cost to produce like dollars.
Keith Weinhold (00:09:21) - So really that's the commonality between real estate in Bitcoin. But on a real estate show, I think we have a lot of listeners that just don't have an overall common understanding. Nick, of just what is bitcoin and why does it have any value in the first place?
Nick Giambruno (00:09:37) - Well, that is a some very good observations and a very profound question. What is Bitcoin. Well, Bitcoin is a relatively new asset. However it has been decades in the making. People don't understand that Bitcoin didn't just fall out of the sky, or is some kind of accident in some mad sciences garage. This is something that has been in the the works basically since the late 70s, and it came out of the Cypherpunk movement. Now, you may have heard of these people. You may have not. The Cypherpunks are basically I find them as the good guys. They are involved in creating technologies that empower the individual and disempower the state. They are behind some of the most prominent freedom oriented technologies that you and I may take for granted, including encryption.
Nick Giambruno (00:10:27) - And that's another story in and of itself. Let me just briefly get into that, because that's what puts the crypto cryptography in cryptocurrency. Cryptography is a very important field. It's basically the method of encoding information so that only the recipient can see it. And it's very important to understand that while we take for granted the average person has access to unbreakable cryptography today, that was not always the case. Cryptography has been around since the time of the ancient Greeks, and maybe even before, but it's always been a government monopoly until very recently in terms of historical standards, when cryptography was made available to the average person. That is a very profound thing, because now the average person can secure their information and secure their online life in a way that nobody can break. The US government can't break it. Chinese government can't break it, nobody can break it. And that is very important. And that laid the foundation for Bitcoin. So what is bitcoin. It's just a summit. But it is a superior alternative to central banking.
Nick Giambruno (00:11:27) - And that is a very revolutionary thing. It basically does the job of what a central bank does but much much, much better and removes all of the corruption, all of the nastiness that goes along with central banking. So what we have here is a genuine, workable alternative to central banking, and we can get into the details of that. But if you want to look at it, what it is, that's what it is. And at the same time, it's a form of money that is not just resistant to debasement, it's totally resistant to debasement. You're talking about gold and real estate. Well, gold. What made gold money over thousands of years? Yes, it is scarce. However, I always like to use this example. There's a concept that's related to scarcity, but it's not that it was scarce. And the reason is, is think about platinum and palladium. There's actually scarcer than gold, like there are fewer ounces of platinum and palladium in the world than there are gold ounces. So why don't people use platinum and palladium as money? It's a very, very important point.
Nick Giambruno (00:12:26) - The reason is, is because the platinum and palladium supply is not resistant to debasement. So it's scarcer, but it's not resistant to debasement. What does that mean? It means the annual supply growth of platinum and palladium are basically equal to the stockpiles. So depending on what this year or next year's annual production of platinum or palladium are going to be, it can wildly swing the market. That is not true of gold. Gold is only about 1.5% growth per year. And that's very, very consistent. What does that mean? That is a very important concept. So the gold supply only grows at about 1.5% per year.
Keith Weinhold (00:13:02) - And this is basically an inflation rate.
Nick Giambruno (00:13:04) - Yes it is its inflation rate. But it's very small and nobody can really change that. Think about it. There's a. It's not as if people don't want to increase the gold supply. They would love to. The way that the gold is distributed in the world, and the cost it takes to mining it puts a really hard limit on what you can produce each year.
Nick Giambruno (00:13:22) - So that's what makes it a good store of value. And if something is not a good store of value, it's not going to be a good money. These are some very, very fundamental concepts I'm talking about because they also apply to Bitcoin.
Keith Weinhold (00:13:35) - Then when someone asked me what Bitcoin is to give it a really short definition, I call Bitcoin a global digital currency that's decentralized. And you brought up the decentralization. That's really important. That's where I can make a peer to peer payment without having to go through an intermediary where I can send my Bitcoin directly over to Nick. There was no bank involved in that transaction, for example, the decentralization of Bitcoin. But we talk more about why Bitcoin has value. I believe you began touching on it there, Nick. Bitcoin has this hardness, which is a strange term to people because Bitcoin is digital. So can you tell us more about Bitcoin's value that comes through its hardness.
Nick Giambruno (00:14:21) - Let me just touch on a quick point you made also. So simply put, the value proposition of Bitcoin is that it allows anybody, anywhere in the world to send and receive value without depending on any third party.
Nick Giambruno (00:14:32) - At the same time. It's a form of money that is 100% resistant to debasement. That's its value proposition. That's a very profound thing. So going to the hardness. Yes, hardness is a concept that a lot of people get confused. Look, I love gold, I own gold, I recommend gold chain from the gold community. And I know the gold community. So I think a lot of people in the gold community get confused around this hardness now. They think it's hard, like physically hard, like abrasive metal. That's not what art means. Hard. And in terms of a hard asset, what it means is hard to produce. That's what it means. Yeah, that's what a hard asset is. It's hard to produce. And what is the opposite of that? Something that's easy to produce. Nobody would want to store their value, store their savings, store their economic energy into something that somebody else can make with no effort, almost like, you know, oh, let's put our life savings in arcade tokens or frequent flyer miles.
Nick Giambruno (00:15:26) - It's ridiculous when you think of it in that way. But that is, in my humble opinion, the most important attribute of money is that it's hard to produce all the other attributes of money. Quite frankly, are meaningless if the money is not hard to produce. Because if it's not hard to produce, none of the other stuff matters. And that's the most crucial attribute of money.
Keith Weinhold (00:15:45) - Yes, reinforcing why we have that investing theme of invest in something that's scarce and difficult to produce and takes real world resources to produce, much like real estate does. Much like gold with all the mining and assaying and much like Bitcoin, because to produce new Bitcoin, it takes electricity, it takes hardware and it takes software, some real world resources in order to produce Bitcoin. We talk about the production rate or the inflation rate in just a couple months. Here we're coming up on something really interesting, which is really one reason why I have you on the show talking about Bitcoin now. And that is the having event, the halving being that rate of new Bitcoin issuance is cut in half every four years.
Keith Weinhold (00:16:28) - So tell us more about that and bring the stock to flow ratio into the conversation here. We're at a cusp.
Nick Giambruno (00:16:34) - Of a very important moment in monetary history. Because you can quantify the hardness of an asset. It is quantifiable. It is basically the inverse of the supply growth. And there's another way of saying that, as you mentioned, the stock to flow ratio basically. In short, you got the stockpiles. That's what's available. And then you have the flow which is like the new supply. So the higher the stock to flow, the harder the asset is and the more resistant to debasement it is. And same thing when you take the the supply growth, you want a smaller supply growth. It's just the inverse of the stock to flow. So gold has always been mankind's artist money for thousands of years and gold's stock to blow ratios about I think it's around 60 which means it takes about 60 years of current production to equal current supplies. If you look at silver, it's much less than gold.
Nick Giambruno (00:17:25) - And every other commodity is closer to one, which means that every year the new production basically equals the existing stockpiles. And that's not a very good attribute for something that you want to have as a store of value. Now, what is going to happen in this having that's coming up in around April of this year? You can quantify the stock that flow. I just told you how to quantify it. So right now Bitcoin and gold have about equal stock to flow ratios in about equal hardness. However a key feature of the Bitcoin protocol is that every four years the new Bitcoin supply issuance gets cut in half until around the year 2140, when it is just goes to zero. So Bitcoin is not only going to exceed gold's hardness in a few months, it's going to double it. Now that is a very interesting moment in monetary history because mankind has not had a harder money than gold I don't think. Ever. So this is all going to be very important and it's coming very soon in April. Late April I think is when it's going to happen.
Nick Giambruno (00:18:28) - So a very important moment in monetary history.
Keith Weinhold (00:18:31) - There is real profundity there with the stock to flow ratio of Bitcoin exceeding that of gold with the upcoming having. And if you, the listener still hung up on the stock to flow ratio, we're talking about the ratio of the existing stock, how much of this stuff already exists, whether it's real estate or gold or Bitcoin divided by the rate of new issuance. So the higher the stock to flow ratio, and as it has the greater hardness it has. And currently 900 new bitcoins per day are being produced. And the having means just what it sounds like in April that will drop to 450 new bitcoins being mined into existence each day. So really you can think of Bitcoin as being disinflationary. It will continue to inflate until the year 2140. Like Nick described. That's when new bitcoin will cease to be mined. And until that point, the new amount the flow continues to get halved. Every four years, there will only ever be 21 million Bitcoin that exist, and 19.6 million of those have already been mined.
Keith Weinhold (00:19:36) - So you can get an idea of the hardness and how this helps supply the value of Bitcoin.
Nick Giambruno (00:19:42) - Well, absolutely. And it's he talks about that. I think it's something like 93% of the time, supply has already been mined, and the remaining 7% are going to come online over the next 120 years or so. You might want to get some before other people figure this out. There is definitely not enough Bitcoin for every millionaire to have one bitcoin, it's far less. I think there's something maybe 50 million millionaires in the world, probably more. They can't all have a bitcoin. It's a very tight supply and we have a situation here too that is related. Because Bitcoin is the only asset, the only commodity were higher prices cannot induce more supply. If gold went to 10,000, you can be sure there are going to be more gold miners getting into the business, more economic deposits being found and and exploited and more supply eventually coming on to the market. Great point. And the same is true for every commodity.
Nick Giambruno (00:20:38) - Gold is just the most resistant to that process. However, Bitcoin, no matter how high the price goes, it cannot induce the production of more Bitcoin. That's a very unique scarcity attribute that I don't think people really appreciate very much. It's certainly there.
Keith Weinhold (00:20:53) - So this upcoming halving event is one reason why I'm having Nick on the show now to do our first ever Bitcoin episode in almost 500 episodes. And the other reason is the nation see of the SEC approving a new spot to Bitcoin ETF. And all that basically means is it helps give everyday investors really easy access to Bitcoin without having to set up a crypto wallet and bam, hey, your mom can become a crypto bro now.
Nick Giambruno (00:21:22) - It is certainly a milestone in acceptance. I think it signifies that Bitcoin is no longer a fringe. It's here to stay. It took over ten years for the SEC to approve one of these things. I think the Winklevoss twins applied over ten years ago for the first Bitcoin ETF, so they reluctantly did it. I don't think they want it to do it.
Nick Giambruno (00:21:43) - I think they lost a couple of key court cases that kind of forced their hand, but they did approve it. I frankly don't recommend the ETFs. It's not really Bitcoin because what you have is a Bitcoin IOU, several Bitcoin IOUs. So let's say you buy the Blackrock Bitcoin ETF. Will you have an IOU from your broker for the Blackrock ETF share. And the broker has an IOU from Blackrock. And then Blackrock has an IOU from Coinbase which actually holds the Bitcoin. So I always tell people look it's a spectrum. If you want to take that trade off and you're taking a trade off for convenience over a security and sovereignty, if you want to take that trade off, that's go right ahead. But be have your eyes wide open and be conscious of the trade off that you're making. I always prefer to, uh, tell people Bitcoin is unique. This is a bearer asset. People forget about bearer assets. Bearer assets are a very good thing. They give the people who hold them ownership over them.
Nick Giambruno (00:22:42) - I think people who are interested in sovereignty. One thing too that's very important is that even if the Bitcoin price stays flat forever, it doesn't go up at all. It still offers people tremendous value as what we were talking about before, even if it stays flat and doesn't go up ever again, it's still offers anybody, anywhere in the world the ability to send and receive value from anybody else, anywhere in the world, and to hold money that's resistant to debasement, that's hugely valuable, even if the price doesn't go up. So and you can only get those benefits if you hold Bitcoin properly in your own bitcoin wallet, where you control the keys and only you control the keys, because that's who has ownership to this. Bitcoin is by who controls those private keys. You can just kind of think of that like the password dear Bitcoin. So that's what you want to do. If you can learn how to drive a car you can learn how to self-custody Bitcoin.
Keith Weinhold (00:23:33) - I love what you did there, Nick, because what you helped us do is you helped us transition from talking about Bitcoin as an investment asset to using bitcoin as a currency, if you wish to use it to transfer value.
Keith Weinhold (00:23:47) - Really, Nick, I think a lot of people in the United States, one reason that they're not that interested in Bitcoin is because our currency, our United States dollar, it sure has problems. It sure recently went through a big wave of inflation, but our currency just is not as bad as some of these worthless pieces of paper have been in the Argentine currency or in Turkey or in Iran or Haiti. So maybe Americans don't have enough of a reason to want to go ahead and get a currency that holds its value. So what are your thoughts with what people in other nations are doing, including El Salvador, with immediate legal tender versus the United States, where we have this dollar that's being debased but just not quite at the rate of most other world nations.
Nick Giambruno (00:24:30) - That's a good point. I see this in my travels around the world. It may seem like an advantage for the Americans, but I think it's a disadvantage because they're going to be catch on to this last because they're going to have, oh, we've got the dollar.
Nick Giambruno (00:24:43) - The dollar's great. So why do I need to look at other alternatives. And and they're going to be the last people. So you're going to have I think what you could see over this the next few years, and certainly over the longer term, is that countries like El Salvador, the countries that are experiencing the highest rates of inflation now and are thus more motivated to look at a superior form of money like Bitcoin or gold, but a lot of them are going to Bitcoin. These are going to be the countries that might fare better over the long term, because they're going to be relatively early adopters in this superior monetary technology. Nobody takes a horse and buggy from New York to California anymore. No, you don't need to because you have airplanes, you have cars, superior technologies for transportation. And likewise, we now have a superior technology for money, which is to say storing and exchanging value. That's all money is. People think it's all confusing. You need a PhD and there's all these charts and confusing jargon.
Nick Giambruno (00:25:38) - Money is not confusing. It's actually intuitive and anybody in the world can understand it. It's just something that stores and exchanges value. It's really quite simple. So now we have a superior technology for storing and exchanging value. And I think people who adopt it first are going to reap the most benefits. There are a lot of Americans who have adopted it, but they have been spoiled by the fact that the dollar has been the world's reserve currency. Now, I think that's going away. That's a whole other story. I think that's the two big reasons why, you know, you shouldn't just depend on the dollar one. We can talk. This is a whole new discussion about the dollar as the world reserve currency. I think it's going away. But now despite that we also have a superior alternative with Bitcoin. So yeah, I think the people who are going to adopt this technology sooner are going to reap the most benefits.
Keith Weinhold (00:26:24) - Well, Nick, in your opinion, is Bitcoin's takeover inevitable and how does that look?
Nick Giambruno (00:26:30) - I don't think anything's inevitable.
Nick Giambruno (00:26:32) - I think it's a good that I mean, if I thought it was inevitable, I would sell everything and buy it. I have a more diversified portfolio, but I have a strong conviction in it, very strong conviction in it. But nothing is certain. Nothing's 100%. So I never tell people, you know, and I'm not giving anybody any investment advice. I'm not a registered investment advisor or anything like that. But in any case, even if I was, I wouldn't tell anybody to go all in on anything. And that's certainly not how I manage my risk. However, I do have a very high conviction in it, and I think as it stands now, it has an excellent chance at gaining huge market share in the market for money. And people don't think of money as a market, like a real estate market or a technology market, or the market for any industry. But money is a market. It's probably the biggest market. And I think Bitcoin is you need to put it into perspective, the market cap of all the gold in the entire world is about $13.7 trillion.
Nick Giambruno (00:27:27) - The market cap for all Bitcoin in the world, last I checked, is around $850 billion. So we're less than 10% of gold's market cap. It has. And that's not even including all the fiat currencies. All the fiat currencies have a much larger market cap than even gold. So Bitcoin is just a blip on people's radars. So I think it has a lot of upside from here.
Keith Weinhold (00:27:46) - One important question an investor can ask themselves once they learn more about Bitcoin is, can I really afford to have absolutely none? You're listening to get reciprocation. We're talking with Nick Bruno of the Financial Underground Warren. We come back when now we've talked about the upside of Bitcoin. Let's talk about a lot of the criticisms you're listening to get rejection I'm your host Keith Weiner. Role. Under this a specific expert with income property, you need Ridge Lending Group and MLS for 256. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's.
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Keith Weinhold (00:29:52) - This is Richard Duncan, publisher of Macro Watch. Listen to get Rich education with Keith Winchell. And don't quit your day dream. You're listening to SOS created more financial freedom for busy people just like you than nearly any show in the world. This is jet versus cash, and I'm your host, Keith Whitehall. We're talking with the Financial Underground's Nick Bruno. We're talking about Bitcoin in a dedicated episode for the first time ever here in the history of the show. And when we had a chance to talk to Nick Bruno, you can see why we wanted to do this. But, Nick, a lot of people in the United States are concerned that the US government might do something similar to what China did and just go ahead and shut down Bitcoin and shut down cryptocurrency because Bitcoin, it basically competes with the US government's product, the dollar. So what are your thoughts when people say, oh I don't know about that. The government can just shut Bitcoin down.
Nick Giambruno (00:30:53) - I'm glad you mentioned China because the communist governor of China is a very powerful governments.
Nick Giambruno (00:30:58) - It's one of the most powerful and maybe arguably the most powerful government in the world. And they've tried many times to ban Bitcoin. You know how it turned out. It was a total failure because Bitcoin is basically code in its mathematics. So it's not the easiest thing to ban even if they wanted to ban it. You're trying to ban mathematics because that's all Bitcoin is. And further many Bitcoin wallets and it all works on cryptography. As and as I said, cryptography is just advanced mathematics. Many Bitcoin wallets have a way to back up your funds a 12 word phrase. So if you can memorize well words, which represents your wallet, you can potentially store billions of dollars just in your head. Now this is how are you going to ban that? You can't ban that. It's completely impractical. I always tell people, you know, look at how governments have tried to ban cannabis. Everybody has been able to buy cannabis in any city they wanted to. And then also other countries have tried to ban US dollars.
Nick Giambruno (00:31:57) - Argentina tries to ban U.S. dollars, Venezuela tries to ban U.S. dollars. You know what it does? It creates nothing. But an underground market doesn't extinguish people's desire to have dollars. And I think that's what we have here. I think economic incentives are more powerful than governments. And aside from that, I don't think that's going to happen because what they approve all these ETFs, that they were just going to turn around and ban it? I don't think so. Further, you have lots of court cases. There is established federal court cases that have ruled that computer code, which Bitcoin is just computer code, is equivalent to free speech protected under the First amendment of the US Constitution. Oh yes, I understand the Constitution is not people can change it and it's malleable. But still, that complicates any government's desire to ban it. They're going to have to overturn those federal court cases. That's not going to be easy. And even if they do, how are you going to ban something that somebody can just memorize with 12 words written on a piece of paper or in their head, it's completely impractical.
Nick Giambruno (00:32:58) - And then, of course, you have the example of China, which has banned Bitcoin several times. You know what? Absolutely nothing happened. But Bitcoin business is moving out of China and Bitcoin adoption among regular Chinese people going up. They can hinder businesses and large like entities that have big presences. They can hinder that certainly. But Bitcoin is global. It'll just go where it's treated best. It's like water. It'll just move to wherever it's treated best. I always say this too. So even if like the northern hemisphere disappeared, let's say there's an all out nuclear war between Russia and the US that will basically wipe out the northern hemisphere. You know what? Bitcoin won't miss a beat in the southern hemisphere. It'll still keep going in the southern hemisphere because it is decentralized and un over tens of thousands of computers around the world. And if even one of those computers survives Bitcoin lives on. So I think this is a very, very hard I wouldn't want to be trying to ban this thing because it's not practical.
Keith Weinhold (00:33:56) - Other critics say, all right, if the government can't ban it, well, the government can just then allow it make it be legal, but they can regulate the heck out of it and they can tax it at really high rates. What are your thoughts there?
Nick Giambruno (00:34:11) - Well, the government can do whatever it wants, but I think, yes, it can do all of those things. But I think here's the main point is that Bitcoin is we talked about economic incentives. Economic incentives are more powerful than politicians. And I think that's a truism. So as more people become holders of bitcoin aware of bitcoin, I don't think restricting bitcoin or banning bitcoin or adding regulations to Bitcoin or adding taxation to it, I don't think that's going to help anybody win an election. Is that going to help anybody win an election? I don't think so. That would be extremely politically unpopular. Yeah, that could happen. It would be bad news for the people who live in that jersey. But you know what? It's not going to kill bitcoin.
Nick Giambruno (00:34:52) - It's going to just be a hindrance for the people who live under these Luddite politicians who would do such a thing. But I don't think they're going to do such a thing. They just approve the ETF. I think Bitcoin has reached escape velocity in terms of its political popularity. I don't think anybody is going to win an election by being tough on Bitcoin.
Keith Weinhold (00:35:11) - A number of congresspeople hold bitcoin, Cynthia Loomis being one of the more prominent ones. And then you and I talked about the SEC spot Bitcoin ETF approval earlier. Well, that's a bit of a de facto stamp of approval on bitcoin really in a sense. And I think another criticism Nick, in my opinion this is easy to dispel. But some people will say, well, there are tens of thousands of cryptocurrencies out there. This stuff's just junk. There's something like hump coin that a prominent rapper promotes. I mean, all this stuff is just a bunch of junk. When all these cryptocurrencies come out. And I tend to think that's very different than Bitcoin.
Keith Weinhold (00:35:50) - Just like if there's some new stock IPO with zero fundamentals that comes out, I mean that doesn't diminish blue chippers like Apple or Microsoft at all. So I think of Bitcoin as the first or one of the first cryptocurrencies with a finite supply. So these overnight fly by night new cryptos I don't think that's really a very good criticism of Bitcoin.
Nick Giambruno (00:36:12) - No, I think this is one of the most popular misconceptions is that there is this crypto asset class and that Bitcoin is just one of 20,000 cryptocurrencies. And I think this is transparently false. It's like saying, oh, you know an increase in the pyrite supply is going to, you know, dilute the gold or something right. So it's kind of ridiculous. And the reason behind this is very simple. Bitcoin is the only one that nobody controls. Nobody can change bitcoin. It's the only one that is like that from Ethereum which is number two on down. They can be changed. A group of people can get together and change it. And in fact, Ethereum's monetary policy has been changed more often than the Federal Reserve's monetary policy.
Nick Giambruno (00:36:54) - It's just instead of the FOMC getting together and deciding what we should do with the money supply, it's a group of Ethereum developers and insiders that get together and change it. And the same thing is true of every other cryptocurrency. So that's the very defining feature of Bitcoin is that nobody can change it. That's what makes it interesting. If somebody could change Bitcoin, it wouldn't be interesting. And we don't need to get into the weeds of that. But needless to say, Bitcoin is the only one where the supply has credibility. We all know the bitcoin supply is 21 million. Nobody can do anything to change that. What is the Bitcoin supply going to be in five years? I could tell you with precision what it will be in five years. I can tell you with precision what it'll be in ten years. And you tell me what the Ethereum supply is going to be in five years. Can you tell me what the supply is going to be in ten years? You tell me what any cryptocurrency aside from Bitcoin supply is going to be in five years.
Nick Giambruno (00:37:41) - No you can't because it depends on how the developers are going to change it. So it's quite ridiculous to lump these two things together. They're entirely separate. Crypto is a cesspool. Quite frankly. Bitcoin is the real innovation.
Keith Weinhold (00:37:55) - And immutable protocol as they call it. Nick, I think one criticism is to pull back. We all know that money is three things. It's a store of value. It's a medium of exchange and it's a unit of account. And a lot of people say, I don't think Bitcoin can be a legitimate currency because all people do is store it. So it might meet the store of value criterion of those three. But I don't know about its legitimacy as a currency. Does that matter? I mean, people kind of use gold as a store of value, but not a currency. What are your thoughts?
Nick Giambruno (00:38:25) - Yes, it does matter. And it's a good question. The answer is is Bitcoin is not an established money. Take gold for example. Gold has been around for thousands of years.
Nick Giambruno (00:38:34) - It is an established form of money. Bitcoin is an emerging form of money. It's a very big distinction. So I personally think the way this will go and you know people disagree. But I think just logically, if you look at it, yes, story of value comes first. Why. Because once people store their value in Bitcoin, the monetary network of people who will be willing to exchange that bitcoin for something else grows and you can't have one before the other in terms of like nobody's going to exchange bitcoin if they're not already storing bitcoin. So the more people that store bitcoin have it available to exchange it for other people, it's like a network effect, any kind of network effect. That's a monetary network effect. And that's time to build further Bitcoin related misunderstanding is you kind of view Bitcoin in a different lens than just paying for like a cup of coffee, because that's really not what it's made for. The Bitcoin network has a hard limit on the number of transactions that I can process every day in order to keep it decentralized, because if it processed everybody's coffee transaction, you would need huge data centers to run the Bitcoin software.
Nick Giambruno (00:39:37) - The matter is, is that the Bitcoin software needs to be decentralized. So right now, anybody who has an average laptop, an average Raspberry Pi can run Bitcoin. That is very important for its decentralization. And if you were putting everybody's retail transaction on the Bitcoin blockchain would be impossible. You need large data centers. Now does that mean Bitcoin can't scale to become a medium of exchange? Absolutely not. You have to just think of bitcoin. What is a Bitcoin transaction represents. It represents final international settlement and clearance. So it's more akin to an international wire transfer. You wouldn't pay for a cup of coffee with from a Swiss bank account to Starbucks in New York. That's basically what you're talking about. What you do is you build layers. There are different layers that are built on top of that bedrock, which is the Bitcoin network that is immutable, unchangeable, and then you build transaction networks on top of that. So what we have with Bitcoin, the most prominent one right now is called the Lightning Network, which is another network that's built on top of Bitcoin that is really more suitable for smaller day to day coffee transactions.
Nick Giambruno (00:40:43) - You can actually send about 1/32 of a penny over lightning. So you can do all sorts of micro-transactions. Very interesting. So that's akin to, you know, like a credit card or a credit card is kind of like a layer two network that's built on top of central banks, which do international clearing and settling, and credit cards are built on top of that. And you can think of the same kind of solutions that are going to be built on Bitcoin. You're going to have different layers for different applications. And in terms of these medium of exchange and transaction network in Bitcoin it's the Lightning Network. And it's very exciting to use.
Keith Weinhold (00:41:19) - Yeah the Lightning Network it's been around for a while. It's been getting more adoption to help promote payments through Bitcoin. Being a real estate investing show here, oftentimes our listeners are interested in buying a property that will produce income from a tenant that's in that property. Can Bitcoin produce income?
Nick Giambruno (00:41:40) - Bitcoin itself cannot produce income because it's just simply money. It's simply an asset in the same sense that gold doesn't produce income.
Nick Giambruno (00:41:47) - If you want to earn income from Bitcoin, invest in Bitcoin related companies and Bitcoin related businesses that pay dividends. There are some and there is going to be many more. There are Bitcoin mining companies. These are companies I specialize in covering. In my financial research. They're relatively new. They don't pay dividends yet, but there are several that are looking to establish dividends. You can also lend your bitcoin I mean that's not bitcoin giving you a yield. That's you earning a yield from lending your bitcoin. I would caution you because there's been a lot of these kinds of bitcoin lending services that have gone bankrupt. BlockFi Celsius I'd be. And so whenever I hear about Bitcoin yields I caution people to be not just vigilant, be double vigilant of how you would normally be because there's been so many scams in this area and bad companies that have gone bankrupt. Taking advantage of people looking to earn a yield on their bitcoin. It's really a nascent industry. And you know what? Look at Bitcoin's compounded annual growth rate over any period of time for years.
Nick Giambruno (00:42:50) - You don't need a yield. It's going up if the trends continue. And I always tell people if you're going to invest in Bitcoin, have at least a four year time horizon, because that's a long time horizon. But the reason is, is because that gives you through one halving cycle, these having cycles go every four years. It's almost impossible. There's maybe a couple of instances, a couple of days where the bitcoin price wasn't higher than it was four years ago. So I always tell people have a four year time horizon when you're dealing with Bitcoin. And when you look at the returns, that could be possible. And I think the pastor. Returns. Past performance doesn't guarantee anything in the future, but I think that being said, we can expect this cycle to be similar to the other cycles. When you see that kind of potential, it should really make you not interested in these yield products.
Keith Weinhold (00:43:39) - You mentioned a couple of bankrupt crypto exchanges there, BlockFi and Celsius. I got caught up in some of that.
Keith Weinhold (00:43:48) - Now I keep all of mine on a hard wallet because really what these exchanges do is they're centralize something that's supposed to be decentralized like Bitcoin, and it gives Bitcoin a really bad name. Nick, I had some people reach out to me when FTX imploded and people said, this proves that Bitcoin is a scam. And I had to gently explain to people, whoa whoa whoa whoa whoa whoa whoa. Just because Wells Fargo or Chase fails. We didn't say the dollar failed. It wasn't a failure in Bitcoin. It was a failure in these exchanges.
Nick Giambruno (00:44:20) - Oh, yes. This has been going on for a long time. And before FTX, there's Mt. Gox. There's a lot of these things. So I think the underlying lesson here in all of these examples is that don't trust third parties. And with Bitcoin you don't need to trust their authorities because if you can learn to custody your own Bitcoin, you are totally responsible, totally in control of your destiny. You don't have to worry about one of these bitcoin companies going bankrupt because you hold it and only you hold it.
Nick Giambruno (00:44:48) - And I think that's what makes it special.
Keith Weinhold (00:44:51) - This has been a great chat and I think a really good Bitcoin 101 for a person that still doesn't understand very much about it. And you help people understand Bitcoin, you do an awful lot of other things, including informing people about global trends and macroeconomics. So if someone wants to connect with you and learn more from you, what's the best way for them to do that?
Nick Giambruno (00:45:13) - The best place is Financial Underground Comm. I have a really helpful Bitcoin guide that shows people how to use it in the most sovereign and the most private ways possible, and I keep that guide up to date with the current best practices, because these things change very frequently. Like what is the best wallet, what is the best hardware wallet, and so forth. So I keep this guide alive with the best current practices. I think that would be a big help for people. Could definitely save them many, many hours of time by simply just identifying today's best practices. So I think that would be very helpful.
Nick Giambruno (00:45:45) - You can find all that at Financial underground.com.
Keith Weinhold (00:45:49) - Nick Bruno has been super informative. Thanks so much for coming on to the show.
Nick Giambruno (00:45:54) - Thank you Keith, great to be with you.
Keith Weinhold (00:46:01) - Another Bitcoin criticism is its energy use. Oh, look at all the electricity that mining consumes. What a waste. But the more you learn, you find that Bitcoin miners, they often use stranded energy sources that might not get used otherwise. In fact, miners have an economic incentive to use stranded and low cost energy. Volatility in Bitcoin's price has been a real problem if you want to use it as a currency. The price for one Bitcoin peaked at almost $70,000 in late 2021, and just a year later it was under 16 K, and now the price has swelled up a lot again from that recent low. In any case, if you choose to own Bitcoin or any other crypto, please store it on a cold wallet for security. It's a small device. It's about three times the size of a thumb drive. It looks like a thumb drive, and there is a learning curve that you have to meet in order to use one.
Keith Weinhold (00:47:04) - I don't own much gold or bitcoin, just a little. They both have their merits and risks like we've discussed. I'm a real estate guy. Even most gold and bitcoin proponents that I've talked with seem to agree with me that real estate is the proven wealth builder. I'm not sure if we'll ever devote another episode to Bitcoin here. I hope that today's episode at least equipped you to ask better questions, in case you want to know more about it. Today's episode had a more international than usual feel. Bitcoin has no boundaries. I'm in Ecuador and our guest Nick joined us from Argentina today. I'll be back in the US next week when I have some really important real estate trends to tell you about. Until then, I'm Keith Reinhold. Don't quit your daydream.
Speaker 7 (00:47:54) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss.
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Keith Weinhold (00:48:22) - The preceding program was brought to you by your home for wealth building. Get rich education.com.