On The Brink with Castle Island - Ric Edelman on The Truth About Crypto (EP.321)

Episode Date: May 23, 2022

Ric Edelman, the founder of Edelman Financial Services and the Digital Assets Council of Financial Professionals joins the show. In this episode we discuss: Ric's new book The Truth About Crypto His journey in the digital assets industry The current macro backdrop and how cryptoassets should be considered in a portfolio Views on the RIA market and how the crypto discussion is evolving The regulatory landscape, including views on the DoL, SEC and Elizabeth Warren How the Digital Assets Council of Financial Professionals is evolving Links mentioned on the show: The Truth About Crypto on Amazon DACFP Twitter: @ricedelman (Ric); @thedacfp (DACFP);  

Today on the podcast, I sat down with Rick Edelman, the author of the new book, The Truth About Crypto, and the founder of the Digital Asset Council for Financial Professionals, DACFP. Rick has been a longtime advocate for the crypto industry, and he's a legendary entrepreneur in the financial advisory world. In this episode, we discussed his journey to discovering cryptocurrency, his views on the regulatory landscape, the global macro backdrop, and much more. I think you'll enjoy this one. So without further ado, here's my conversation with Rick Edelman. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions

and do not reflect the opinions of Castle Island Ventures. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans, American International Group, AIG, $85 billion.

This is a different kind of. market and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mack, the two mortgage giants that have been threatened by the housing crisis. The bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of quantitative easy. And print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called a Bitcoin. Bitcoin. Rick, thank you for joining on the podcast today. I feel like it's long overdue. I've been a big fan for a while. So appreciate you joining. Man, it's my pleasure. Thanks.

Rick, I guess the place to start is just what got you interested in crypto assets and blockchain in the first place? I know you were really early to this. Yeah, I was first introduced to Bitcoin back in 2012 and my reaction I think was the same as everybody's when you first hear about Bitcoin. It's like, huh? What? It doesn't make any sense. And most folks I have found just dismiss it out of hand, you know, as wacky or silly or a fat or a fraud. But I was intrigued. I figured the folks who were introducing this to me are pretty smart people, and there must be a there there, and I needed to find it, you know, and so I started doing a bunch of research and spent a lot of time in 2013 trying to get my arms around it, and it didn't take long for me to realize that this is

a transformative technology. The most since the invention of the internet, the impact on global commerce is unprecedented, and it's going to revolutionize business. on a worldwide basis. And I also realized pretty quickly that it therefore has incredible investment opportunities and that the overwhelming majority of financial advisors, let alone consumers, don't realize any of this because we've gotten no training, no exposure, no experience. Nobody on Wall Street is engaged. And this was back in 2012, 13, 14, and it's because crypto was invented outside of the financial services sector by a bunch of techies, frankly, anarchists who wanted to bring down the global financial system and replace it within a totally new paradigm.

Well, that was kind of nonsense. That has disappeared. But the technology remains and persists. And now business and industry, government, Wall Street, have opened their eyes. They realize what this is. Janet Yellen a few weeks ago called it transformative. Even Elizabeth Warren, who a year ago, said that Bitcoin was for spinning straw into gold is now publicly encouraging the Federal Reserve to launch a CBDC, a central bank digital currency. The White House has issued the first ever executive order on crypto, calling for the fostering of the innovation and development of this technology. There's a blockchain caucus on Capitol Hill, 39 members of Congress are participants. So everybody gets it everywhere. And it's not just in the U.S., but globally, the European

Union is calling for a central bank digital currency in the EU. Great Britain is working on one. Every government around the world is doing this. They're all going to have them over the next five to seven years. And so this is a big deal. And Wall Street's late to the party. Financial advisors are late to the party. Most advisors don't own Bitcoin, but a hell of a lot of their clients do. And so because I'm always forward thinking, you know, I'm regarded as a futurist in our industry. My last book was The Truth About Your Future, all about exponential technologies back in 2017. I'm always trying to figure out what's next, where are we going, what is the advice we need to be giving our clients to help them for the future they're going to experience?

And I ultimately concluded that I can be more impactful for helping you manage and create wealth by focusing on crypto than any other single subject. And that's why we announced a year ago that I was leaving Edelman Financial. and I made that effective at the end of last year with a focus on DACFP, the Digital Assets Council of Financial Professionals in my new radio show, The Truth About Your Future, now 31 years. I just changed the name of my old show to focus on crypto because this is the way we're going to create wealth for millions of people who otherwise wouldn't be able to obtain it. I love that story.

You know, so you were early in 2012. And so one of the things I'd love to get your perspective on is just these narratives over time have shifted so much. When I first started looking at Bitcoin, I was looking at it from the perspective of it being a payment system that would disrupt credit cards. And obviously, that didn't happen right away. Over time, we've started to see different narratives take hold. I always like to talk about the story of the five blind men touching the elephant and they're all touching it blindfolded from different perspectives. And you're touching the tusk.

You might think you're touching a rock. You're touching the tail. You might think you're touching a pillow. And that's been my experience in digital assets, as people sort of grab. to what they understand. So I guess the question is, how do you frame this, which is broader to people that might not be familiar with the technology in terms of what is this stuff? In its most basic fundamental element, this is the digitization of money. It's as simple as that. We have digitized virtually every other element of our lines. We're doing our banking online and

our investing online. We get our paychecks delivered to us electronically direct deposit to our bank account. We pay our bills digitally via automatic payments. When's the last time you used cash to spend money? We're using PayPal and Venmo and Zell. Social Security checks are direct deposited. And yet, the Federal Reserve continues to print cash. The cost of printing, distributing, storing, safeguarding all of that cash, it's incredibly expensive. It's archaic that I've got to go get in my car and drive to a building to walk up to a machine so that I can get money pushed out of a slot for me so that I can spend it at Starbucks. That's ridiculous. Why have we not digitized our money? And that's what blockchain technology allows.

allows us to do. And this is huge. This is the biggest thing ever. The first biggest thing ever was the internet itself, which allowed us to connect with each other, person to person. We could send emails and texts. It allowed the invention of Facebook. The internet of people allowed us to connect with each other on a personal level. And then came along the internet of things, internet 2.0, which was where, you know, Bluetooth, my car talks to my telephone. And that was a big deal, and that's going to become an even bigger deal as the technology grows with 5G. But now we have internet 3.0, the internet of money, being able to move money around the world, fast, free, safe, transparent. This is revolutionary on a global scale, because money makes the world go around.

and being able to digitize money has all sorts of astonishing benefits, not merely speed and cost benefits, but it's going to eliminate poverty on a global basis. There are a billion people in the world who are unbanked. They don't have enough money. They don't make enough money to have a bank account or they don't live within 100 miles of the bank branch. Well, thanks to blockchain, you don't need banks.

All you need is a cell phone and three quarters of those. billion people do have a cell phone. That's all you need to have an online digital wallet that allows you to receive, store, and send money safely, and leveling you to establish credit and obtain debt so that you can go to school, start a business, get engaged in the financial system without having to be involved in the current banking structure that is incredibly expensive, of incredibly slow and quite frankly, incredibly exclusionary. This is huge on so many levels. I love the framing in comparison to the internet as well.

And so if you think about this maybe from an advisor's perspective, when the internet came along, there were ways to get your client's exposure to that megatrend, primarily through equities. Talk a little bit maybe about the advisors' challenges today, just in terms of structural ability to get their clients' exposure to what's going on here and how you think about explaining to an advisor how they should be thinking about running their business? When I got started back in 2012, it was at that point, you know, when you hear people talk about the Wild West environment, and my refrain was, it's not the Wild West, it's Lewis and Clark.

I mean, it was really early and it was just a crazy environment and really wasn't ready for prime time. It really wasn't suitable for the advisory marketplace to engage in an efficient, effective way for the benefit of their clients. And that was really too bad because the economic opportunity was huge, as we know. I mean, when I first got introduced to Bitcoin, it was $400. And so everybody's missed that party, sadly. And we're never going to see 40 million percent increase in a decade, which is what we saw Bitcoin in its first 10 years.

That party is over. But there's still amazing investment potential and growth opportunity. You know, people talk about the stock market returning 5% or 10% in the In the world of crypto, we talk about 5x and 10x. So there's still a huge potential to be enjoyed. The problem is that in the early days, there really wasn't an effective methodology for this. And that persisted really until even two years ago. It wasn't easy for advisors to engage or for them to help their clients engage, which is

big part of the reason why so few advisors have engaged. Because, again, this was born and has grown outside the financial services industry. there wasn't a convenient, easy platform to do this. It's easy to buy stocks. It's easy to buy reits. It's easy to buy annuities. It's easy to buy bonds and commodities and futures and so on. That's because it was all invented, managed, created, and supervised by the financial services industry and its regulators. None of that is true in crypto. So it's been kind of awkward and difficult, complex, cumbersome, expensive to engage and advisors have struggled to do it. But that was the first 10 years. Now, in the past two years, crypto has grown up. And part of the reason

it's grown up is because the anarchists who initially created crypto and they did it strictly from a tech perspective because they were technologists have not been replaced by, but they have been supplemented by Wall Street. The crypto companies, because they have enjoyed such amazing profits and have created such incredible wealth, mostly for themselves. We now have the richest people in the world are all in the crypto space, companies from finance and FTX and so many others, that they now have plenty of cash. And they're using that cash to grow their business and to get it mature. And one of the things that they've been throwing their money at, HR. They have been hiring Wall Street executives and government legislators and regulators.

There are a huge array, hundreds and hundreds, actually we're probably now in the thousands of former Wall Street executives, former Washington regulators and legislators who are now working for crypto companies. And they are bringing with them all their expertise and all their knowledge of how you operate a financial services company in the crypto space. And this has led to the creation, the deployment, the adoption of the kinds of business structures that financial advisors want to say, that legal and compliance staff want to say, that investment committee personnel want to say that sales and marketing teams need to have. And as a result of that, in the old days,

which is, you know, more than two years ago, you pretty much only had the ability to buy Bitcoin and Ethereum directly from an online platform like CoinVix. Now, you have publicly traded stocks, such as Coinbase, riot blockchain, Marathon Digital, Silver Bank. You now have publicly traded companies that are considered proxy stocks like Micro Strategy, which owns six billion. million dollars with the Bitcoin and the stock price trades with Bitcoin. You have Bitcoin futures, ETFs. You have OTC securities, grantor trusts from Grayscale, Osprey and Bitwise that allow you to buy Bitcoin, Ethereum, even an index from Bitwise, the Bitwise 10 crypto index fund, which is like the S&P 500 of crypto. You have crypto ETFs, which are buying the stocks of companies that are building

out the infrastructure of this space. There are dozens of them. There are now SMAs and TAMs available. There are qualified IRA custodians that are allowing you to do this inside an IRA. Fidelity is even allowing people to do Bitcoin in their 401K plans. So now you have such a wide array of investment opportunities from some of the biggest, most powerful household names in American finance that advisors now have a smorgas board, about. opportunity. They have an incredible menu of availability so that however you like to manage money, however you like to operate your practice, there's now a crypto sleeve available for you that fits within your culture, that is familiar to your clients, that is seamless, that allows you to upload

to Orion and InvestNet, allows you to do block trading, allows you to, by the way, debit your fee, that allows you to manage your practice as seamlessly in this asset class crypto, as every other other asset class like real estate and bonds and stocks and commodities. And that is, that's new. That's different. Most advisors are not aware of this fact. Most of their home offices are not aware of this fact. I'm doing a lot of consulting and coaching with major Wall Street firms to help their teams get knowledge about this because it's not taught anywhere. Nobody has exposure to it. And we're providing this level of info and content to help people realize it's not only safe to get in the water, there's actually a swimming pool. You don't have to jump in the ocean anymore where

there are sharks. There's actually a safe place to engage. And most folks are unaware of any of the above. It's always been my impression that the companies, and I'd say this even holds true today, the companies that are really at the forefront of this have senior leadership that is entirely bought into the vision. So if you think about fidelity, you think about square, think about some of the first mover, quote unquote, traditional businesses. My impression from the advisor channel is that you have some groups that have that senior level buy-in and have moved. And so maybe they have SMAs on the platform already. Maybe they've integrated with some of the listed products that you're talking about. But it feels to me like in that channel, we're still dramatically underpenetrated

when it comes to crypto. And there's a dynamic where individual advisors are pushing up the chain and saying, hey, we need to do more. We're losing assets. We could be getting paid on this. But it hasn't really sunk in maybe to the leadership in that RIA community. Would you say that's an accurate representation? Yes, very accurate. Matt, and let me tell you why that's the case. It's inertia. Let's remember that the overwhelming majority of firms are very well established. Most advisors have been doing this for 30, 40 years, and the average age of financial advisors is now 62. We now have now had more CFPs over the age of 70 than under the age of 30. So these folks have been managing a lot of money for a lot of people,

for a lot of years and doing extremely well. Everybody's making a lot of money. Clients are happy. Maybe not the last three months, but over the last decade, clients are real happy. And advisors are making a lot of money. Their firms are making a lot of money.

And the advisors are playing golf one or two days a week. What's not to love? This is very happy times. Why disrupt that with something new, totally different and in many areas, regulatory unproven, untested, we are lacking some rules. There's a myth that there's no regulation, totally untrue.

There's a massive amount of regulation from everybody, Finro, the SEC, the IRS, Treasury, FinC, CFTC, FTC, everybody has been weighing in on this. But there's still a lot of areas where the rules have yet to be forthcoming, and they're coming, they're working on it. But a lot of folks have an attitude of, why disrupt this? Why mess it up? Why risk my reputation?

because if I put a client into Bitcoin and Bitcoin blows up like it has the last six months, why would I want to put myself at risk of antagonizing my client and losing the client over this? Why do I want to run the risk of losing revenue? Why do I want to run the risk of losing reputation, you know, having a headline in the local newspaper because a client complains that I put them into something that lost money, this weird crypto thing? And I also don't want to run the risk of running into regulatory problems. because there are murkiness in some areas of crypto, and why do I want to run the risks of regulation,

reputation, and revenue when life is good? And for that reason, most advisors and most firms are sitting on the sidelines. They're not seeing any compelling reason to disrupt what they got, which is a good thing going. And I get it. That's certainly understandable. I mean, I built the largest RAA in the country with 300 billion in assets and 1.2 million clients and 1,500 staff. from 350 advisors. I understand the resistance, the reluctance to do something new and different that might disrupt the great thing we got going. But that's an inward-looking, flawed perspective.

For two reasons. Number one, you're denying your clients an investment opportunity that has the potential to be more impactful to their effort to grow wealth than any other single piece of advice you could provide, while simultaneously helping to actually lower the overall risks of the portfolio thanks to its diversification benefits. Second, denying this not only is harmful to your clients, it is in the long run harmful to the firm because you're telling your clients that you are living in the past, that you are resting on your laurels, that you are not engaging in the latest and greatest technological innovations, that you are, in fact, being oblivious and even worse,

resistant to them. And it raises questions of, what else are you failing to offer me? By failing to offer me this. Are you being ignorant of artificial intelligence and robotics in 3D printing? Are you paying no attention to neuroscience to nanotech, biotech, to ag tech, fintech, and ed tech? What else are you ignoring if you're ignoring blockchain? technology. And with that kind of a bad attitude, you're soon going to be regarded as a horse and buggy manufacturer in a world of jet engines. And this is going to cause more long-term harm to the firm in its inability to recruit and attract new young talent, the inability to recruit new young clients, many of whom are the children of your existing clients. And I think you're

being extraordinarily short-sighted in that thinking. And again, that thinking is coming from those 60-plus aged executives who have been doing this for 40 years and have no knowledge or training or experience in crypto and who simply don't get it. And this is going to be harmful to them, while it's also harmful to their advisors and to their clients. So those who get it and the first adopters, the early movers, are going to be the big winners. And we're going to see new firms come along that are going to supplant the old establishment. It's really well said and completely agree about the intergenerational wealth transfer. If you just think about this from a selfish perspective, if you're an advisor, you better be

on board with this because it's going to be a lot of money in motion over the next five to 10 years with the boomers. And so what I tell people is, look, if you're 65 and you don't want to learn any new tricks because you're an old dog, then just hire a new younger advisor and let Ben go at it. because they want to do it. That's where they want to live. And this way, someone in your firm, someone on your team can handle the client inquiries in this space. You don't want to do it, fine. That doesn't mean it doesn't need to get done. It feels to me like we're on the cusp of a few major infrastructure and regulatory breakthroughs. And so we have various ETF proposals for spot

Bitcoin product that are getting closer and closer. The SEC has been thus far reticent to approve, I believe that these proposals are in the form where they should be approved. The other dynamic is the retirement channel, which you brought up in the fidelity effort to put Bitcoin in 401Ks. We have seen some letters from senators about this. Elizabeth Warren wasn't too thrilled about it. The Department of Labor came out with some strong language. But it seems to me like this is inevitable. What will this look like a year from now, two years from now with a spot Bitcoin product with Bitcoin and other crypto assets potentially in retirement?

accounts, it seems to me like this is about to look a lot different in terms of total penetration. I just called Commissioner Crenshaw of the SEC on my radio show this week. And I asked her point blank about why the SEC has not yet said yes to a Bitcoin ETF and is this a when or is it an if. And her answer was the same as you would have expected because the SEC has been consistent in its messaging on this. And I'll tell you my prediction as a result of the Commissioner's comments, we're going to have a Bitcoin ETF within 18 months, and I've been saying that for seven years. So we don't know what it's going to take for the SEC to finally say yes. At this point, they're embarrassed.

We now have Bitcoin ETFs all over the world. They're in Europe. They are in Canada. They're in Australia. And they're in Japan. We are losing our global leadership in the securities space because the SEC has been so slow to act. They are taking a paternalist attitude, and they just have to get over it. They have to acknowledge that this is an asset that trades 24-7 on a global basis, and they are not able to

control the pricing disclosures. And that is an inherent risk of this asset, but those engaged simply shrug their shoulders and saying, I get it, I understand it, and I'm willing to tolerate it in exchange for the investment opportunity it offers. The SEC is ultimately, I believe, going to have no choice but to fall in line with that because all they're doing at this point, they're not, it's like prohibition. Prohibition didn't stop Americans from drinking. All it did was force Americans to do it in secret, paying more money to get the booze and to drink booze that was toxic because it didn't have government regulators on the quality control. And that's why the government ultimately eliminated coalition. We're in the same scenario now. Because the SEC has

said no to a Bitcoin ETF, the most popular investment vehicle in America. They are forcing investors to go elsewhere. That long laundry list of product availability I shared with you, much of that wouldn't be necessary if the ETF existed because ETS are cheaper. They are more transparent. They are more liquid. They are more popular. They are more familiar to all investors. And it would be much easier for people to engage in that fashion. They would prefer to do it in that fashion. The biggest crypto players all want to deliver in that fashion, and in the absence of it, we are forced to go to more cumbersome and complex approaches that are more expensive, have higher account minimums that have less liquidity and transparency. Who is being served here? Who's being protected here by this SEC in action?

It makes no sense. So they will ultimately get along with it. But in the meantime, you shouldn't wait as an investor or investment advisor. Because a lot of folks are waiting. And most people say, as soon as there's a Bitcoin ETF, I'll invest. Well, Bitcoin's already $30,000. How much more are you going to wait? If I had waited, when I got involved, when Bitcoin was $400, if I had waited for the ETF, I'd have missed the run-up from $400 to $30,000.

How much more of the gain are you willing to miss? because the efficient preferred methodology isn't yet available to you. So this is kind of the issue that we're facing today. And I think, quite frankly, shame on our regulators for not acting faster in truly what is the consumer best interest. And the Department of Labor is making an equally absurd position. Their opposition to Fidelity's announcement of introducing Bitcoin to Fidelity 401K plans is dead wrong.

It's not only stupid, it is simply dead wrong. Their comment that they have grave concerns over what? It's not their business to decide what investment you can and cannot buy. That's not their job. They're not my mother. Their job is to make sure that there's proper disclosure, that there's transparency, that the fees are reasonable. That's their job. It's not their job to tell me what they think I ought to be investing in or not.

In fact, they go after employers who fail to offer proper levels of diversification in the 401k plan. So along comes a provider willing to expand on the diversification. and they're screaming at them. Makes no sense. And Elizabeth Warren is making even less sense. She is the Massachusetts senator for crying out loud. Fidelity is the largest employer in the state. You move fidelity out of that state.

You will crush the Massachusetts economy. And Elizabeth Warren doesn't seem to understand who she was elected to represent. And her notion that this is bad just demonstrates that both she and the Department of Labor don't understand investment management. We all know that the best way to invest money, the single best way, the most proven, well-established, endorsed way of managing money is dollar cost averaging. We all know it's the most successful investment management strategy there is, because it smooths out volatility when you invest at a regular interval, a regular amount of money over long periods

of time. Well, that's the definition of a 401k. There's no lump sum investing. There's no market timing. Every paycheck, every two weeks, a very small amount of your money comes in. into the account and you do that for 40 years. And we know that dollar cost averaging works best with a volatile asset. It doesn't make any sense to dollar cost average in a bank account. This is why we tell our clients to dollar cost average with stock fines because those are volatile.

Well, along comes Bitcoin, the most volatile asset ever. It is perfect for a 401k, especially since you now do it on a tax deductible and a tax deferred basis with an employer match giving you free, additional Bitcoin. This is the best place. And I'll add one other final point. Most Americans, as you know, Matt, I've been heavily involved in the financial literacy space forever in my career. I created the funding our future coalition, which is the largest coalition ever formed, more than 45, now 75 organizations devoted to solving America's retirement security problem. We know that for millions of Americans, they are not saving at all. They can't afford to.

They don't know enough money. They don't know how to. And we also know that for millions of know, it's the only place, they say, is their retirement plan at work. In other words, if you don't let them buy Bitcoin in the 401K, you're denying them the opportunity to buy Bitcoin ever anymore. So we need to add crypto to our workplace retirement accounts because it's the only place that people are going to be able to access it because they have no other investments. They

don't make enough money. They don't have a financial advisor, et cetera. So this is wonderful news. It's true leadership from Fidelity. And coming from Fidelity, this grants credibility for everybody else on Wall Street to move along as well, expanding the product offerings, broadening the accessibility to millions of Americans to help them create wealth. Department of Labor is dead wrong. Elizabeth Warren is dead wrong. They're going to ultimately, then because they're wrong. They have no basis for their position. And all they're doing is delaying the wealth creation for American investors around the country. And I'll tell you the point I think this is going to be. This is not only such a great opportunity that fidelity is creating

for American workers, American employers are going to jump on this and they're going to turn it into a recruiting tool. Come work for us. And we will give you free Bitcoin via the employer match in the 401k. They're going to use this to attract great talent because young workers are already buying Bitcoin. And now to be able to buy it in my retirement plan at work, wow, sign me up. I want to work for you. So DOL is totally out of step. They're dead wrong. And they will ultimately give. I think you totally nailed it. And it'll be a political issue here at some point. So the Biden EO, I think at the first paragraph states that 30 plus million Americans own some sort of cryptocurrency or participating in this economy. At some point, this becomes a

political issue and people start to become single issue voters and we start to get politicians that actually agree with what you're saying, agree with what I'm saying. And this becomes less of an issue. I think we're at that time now where we're just going through that power shift. And it'll be interesting to see how the politicians evolve. You're absolutely right about it. And they're going to lose because it's going to become a voter issue. You're going to have candidates in November saying, I endorse crypto and that's going to attract voters. You know, you've got 20% of U.S. adults own crypto, and they want to know that their candidates are supporting this. Rick, so just to maybe pivot over to the macro, you've been through a number of cycles.

I want to talk a little bit about what you're seeing in the market right now around people's perception around crypto in an environment where we have rising rates, high inflation. Are there any comparable times that you would compare this to? And how do you just think about the role of crypto in a portfolio today versus 10 years ago? Well, crypto has a short life. It's only been around since 2009, and it therefore has never experienced a declining economic environment. It's never experienced a recession or high inflation, high interest rates, low employment rates, and certainly never anything that we're going through right now. It hasn't gone through wars and it's gone through a pandemic, but it hasn't gone through anything else. So it's untested. And therefore, there's a lot of conjecture. How, will Bitcoin behave during a period of X? There was an assumption through its development and innovation that it was an inflation hedge. That was a primary basis for Satoshi Nakamoto to invent Bitcoin, creating a fixed supply. 21 million coins, 19 million are already in the marketplace.

And that's it. And since you have a fixed supply, unlike dollars, where the Fed just prints them as much as they want, five trillion of them over the last couple of years during the pandemic, you can't devalue Bitcoin through printing more of them. And this, the theory was, will serve as an inflation hedge. That theory was untested until the past nine months. And it has failed the test. Bitcoin has fallen in value along with everything else, stock market, the bond market, and so on. So we are finding ourselves being, asked for the question, what's with that inflation theory? What happened? I thought that was a big part of the value proposition of Bitcoin. I never particularly subscribed to the inflation argument

because it was untested. It was a good theory and it makes sense. And I believe in the long run will prove valid. But that's not the primary reason you buy Bitcoin. It's a side reason. The fact that it has not maintained its value during this inflationary period is because there have been other factors that have taken a higher precedent, a more significant role in this scenario that I think is a bigger cause for Bitcoin's decline over the past six months. And this is of greater interest to me. We have a scenario in the past six months that Bitcoin has, has never experienced before.

Institutional adoption. Throughout Bitcoin's history, it was, let's remember, created by anarchists and invested in by individuals, ultimately retail investors. And these folks in the early days were buying Bitcoin as a spite of the financial markets and the global financial system. And as it got bigger in price and rose in value, it attracted a higher degree of retail investors to the point where there are now 300 million of them around the world who own it. Over the past two years, we have begun, still very early, but we've begun to see institutional engagement. We've got a few public corporations buying crypto, micro strategy, mass mutual,

time life and others. We have begun to see Wall Street get engaged, hedge funds, pension funds, endowments, venture capitalists, private equity are all now engaging. Billionaires are routinely engaging, many very publicly announcing. They've changed their view about crypto. It has now gotten to the point that in the last year, there was more trading by institutions, than retail investors. So when the bear market came along with rising interest rates and the institutional investors began selling and moving to cash, they have been indiscriminately selling. They've been selling bonds because of rising rates.

They've been selling stocks because of fears of lower corporate profits. And then they're pairing back their risk exposures. They're pairing back on everything, just like they did in 2008. And they're selling their Bitcoin just like they're selling their stocks and their bonds. Makes no sense. They're kind of like they didn't get the message of why they're buying Bitcoin in the first place. They're buying it because it's an alternative asset because it is an uncorrelated asset, because it is an inflation proof asset.

Nobody seems to have given them that level of training. They think they just bought another emerging markets asset. And they're treating it like all of their other emerging markets and their alternatives in their portfolios. And so they're selling indiscriminately. The hell of the inflation thesis is their point of view. So the real question we're asking ourselves now is the following. Is this a new paradigm for Bitcoin? Will this institutional behavior persist long term, meaning Bitcoin is just another asset class?

Or is this a short-term aberration where we need to give the institutional investors a little bit of time, to learn about what it is they bought, to help them understand the way they're supposed to manage it, so that they stop managing it foolishly to their own detriment. And if so, Bitcoin and its non-correlation behavior will reestablish. Jury's out, it's too early to tell, wait and safe. I don't think in the long run it will interfere with the fundamental investment thesis of the future price of Bitcoin, but it will have an impact on the volatility of Bitcoin in the short term as we go through periods like we've had the past six months and particularly the past week and at 30 days.

I think that's really well said. One of the things that I think about a lot is there's this temptation to look at the macro with Bitcoin and crypto assets when really the market structure is just incredibly nascent when you compare it to other asset classes that we're comparing it to. And so think about two years ago, if you were a financial institution, there wasn't even a reference rate that you could feel comfortable with in terms of putting on a customer statement. I mean, basic, basic stuff. Right now, the top five global custody banks, none of them offer Bitcoin. What do you think this market is going to look like when that changes? Right now,

you can't buy Bitcoin on Fidelity.com, Schwab.com. And so we're talking about just an incredibly nascent, just market infrastructure to support this asset. And so I think it's a little bit dangerous to lump this in with the macro when it's just the pipes aren't even built yet for this to behave like a macro asset. And here's the problem. To your point, Matt, because you're exactly correct. The problem is that people are frustrated by the fact that you've got this whiz-bang thing called crypto and it isn't delivering on its promise to the full extent by virtue as evidence, the volatility it has demonstrated. The problem is that people are not fully understanding the nature of an emerging technology.

In other words, when the Model T first emerged, and people started buying it in bulk, and that was Henry Ford's goal, was to make it so affordable everybody could have a car. What people quickly discovered is that it didn't work very well for the simple reason

that they were driving cars on roads built for horses, dirt roads with ruts. That's not how a car operates well. And it didn't take very long for people to realize we need to pave these roads. We need a smooth, flat surface for cars to operate on or they can't achieve their potential. So in the early days, anyone who drove a car had a horrible experience. And then we grew up and we built the infrastructure that allowed cars to do what we now see them doing. And that's where we are at Bitcoin. Bitcoin

is a product that is operating on an infrastructure that wasn't built for it. Naturally, the ride is going to be bumpy. We need to acknowledge that. That's the negative part of being early. The good part of being early is that you're able to invest when Bitcoin is only $30,000, as opposed to the folks who are waiting for the Bitcoin ETF, which by the time it shows up, Bitcoin might be $500,000. So you've got to tolerate this.

scenario, you've got to acknowledge that that's the scenario we're in. And most people don't get that. I think it's really exciting some of the work you're doing with the Digital Asset Council for Financial Professionals. So maybe talk a little bit about the work that you've been kicking off and what's on the horizon for that group. I created DACFP nearly five years ago as a crypto education company. We don't manage money. We don't offer product. We are strictly focused on serving advisors and giving them the knowledge they need to be able to help their clients. And we focus on their firms, helping them create a crypto strategy that fits within their culture, helping you decide, should we allow crypto as an investment option? If so, how,

which of the different ways to buy crypto are we going to allow, and which crypto itself, Bitcoin or Ethereum or tokens. Are we going to get into NFTs? We're going to allow staking and lending and borrowing? Are we going to do mining? I mean, there's so many different aspects to this, which is the way we want to do it that fits within our culture and our business model. And then helping advisors explain all this to clients. So we offer a wide variety of educational options. We do a lot of webinars and live events. We have Vision, which is our big annual a live event. It's in Austin, June 8 and 9, a wonderful two-day agenda. In fact, in addition to having a lot of the sharpest people in the crypto field, we're taking everybody to a Bitcoin mining farm.

It's going to be a ton of fun. And we also offer a lot of content on our website, but our big claim to fame is our certificate in blockchain and digital assets. It's over a year old now, more than 2,300 advisors from eight countries have gone through the course. It has rave reviews from everybody who takes it. It's a world-class faculty. Scott Stornetta, who is the co-inventor of blockchain technology, is on our faculty. Shauna Hoffman, who ran IBM's blockchain business, Anders Bronworth from the Boston Fed, and many others.

Fabulous faculty. And the course is so easy to take because it's online. self-study, 11 modules, take it at your own pace. You can binge it in a weekend or you can spend months doing it. You get 13 CE credits. And unlike all other CE courses, you'll actually learn something new. I mean, do we really need any more CE classes on annuities? I think we all understand how they work. This is totally new and different. Your clients are clamoring for this, and you can no longer wave your hand dismissing it as a fatter or fraud. You need to be able to answer their question, what is blockchain? What is Bitcoin? Should I invest? And if so, how and how much?

You need to be able to answer these questions or you look silly. Recent surveys have shown that two-thirds of investors expect their advisors to be able to answer their questions. And if they can't, they're going to leave and find a new advisor. So you need to be able to help your clients in this space. In fact, one of the things I teach is how to make money, how to build a business, how to attract clients and assets by hating Bitcoin. So I'm not trying to get you to love Bitcoin. I don't care whether you do or not. I want to get you knowledgeable about Bitcoin so that you can decide what the advice is

you want to give your clients. And I can show you how to serve your client really well by never, ever recommending you. So it's not about selling it to you. It's about educating you so that you're as knowledgeable about Bitcoin as you are about annuities. Someone who's very close to me recently asked their financials. advisor about Bitcoin and what they got back was a blog post about how Tether is apparently a fraud

in this person's eyes and that they should avoid all Bitcoin. So I think we need to send that person to DAC FP for a little education. Yeah, this is the frustrating thing. You know, I mean, we've all heard of Bernie Madoff and yet I don't see advisors telling their clients to stay out of stocks. There are frauds in every aspect of life, everywhere. And we need to learn how to identify them, how to segment them, and how to avoid them. And crypto is no different. In fact, you could argue even more important than ever because the relative lack of regulation and the fact that it's a global asset makes it relatively easy for frauds to persist. And so rather than simply saying all crypto is bad, that's like saying all stocks are bad. I mean, that's just silly. You look

silly saying it. I agree. Well, Rick, the book is great. It's called The Truth About Crypto. Everyone I want you to go out and buy it. Where can we send people to learn more about what you're doing with DACFP and overall just follow you on the internet? You can just reach us at DACFP.com. My book, The Truth About Crypto, is out and out, available from wherever you buy your books. It debuted as a number one bestseller on Amazon and it's getting five-star reviews. I'm really excited about how well the books being received. So we're finding a lot of advisors are buying it in bulk to give to their clients because it's a great educational tool and a great way for you to demonstrate that you're on top of this. Hey,

I've learned about this and want you to learn about it too. So, real easy to help you. Just visit us at DACFP. Take a look at our certificate course because it will really help you show your client you're staying cutting edge in this latest new investment opportunity. Awesome. Well, Rick, thanks for everything you're doing for the industry. It's great to have you on. My pleasure, Matt. Thank you. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island.V.C. To listen to all of our podcast episodes, please go to On the Brink-Podcast.com or just click on the tab in our website. Thanks for listening.