We Study Billionaires - The Investor’s Podcast Network - BTC205: Bitcoin Interest on FDIC Insured Cash Accounts w/ Alex Leishman (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. On today's show, we have back the CEO and founder of River, Mr. Alex Leashman. As usual, Alex brings the fire with an impressive recap on their recently released report on businesses adopting Bitcoin on their treasuries. In fact, the numbers are up by 30% just in the past year alone. In addition to that, Alex has a massive, massive announcement about receiving interest in Bitcoin for the dollars you have deposited into your FDIC insured cash account.

Starting point is 00:00:35 You heard that right. Guys, this news is crazy interesting. So without further delay, get ready for an exciting conversation with one of the best builders in the space, Alex Leishman. Celebrating 10 years. You are listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish. Hey, everyone. Welcome to the show.

Starting point is 00:01:09 I'm here with Alex Leashman. from River. Alex, it's always a pleasure. Welcome back to the show. Thanks for having me on. Great to be back. So this is where I want to start this conversation. You guys are becoming known as releasing these banger articles out into the public and September was, was yet again, another banger. And for people that aren't familiar with this report, I'm telling you all, you need to check out these reports that they're releasing. There's so much information. We're going to show some of the graphics from this report as Alex is talking, but this report in September was called Why Business Bitcoin Adoption grew by 30% in one year. What was the impetus for

Starting point is 00:01:49 highlighting this? I'm sure it's on your radar. I'm sure you're seeing business accounts being opened at River. What sparked the writing of this, Alex? So the real inspiration for this was the actual trends we were seeing, which was a very fast uptick in the amount of business clients, largely small and medium-sized businesses opening accounts with us and buying their first Bitcoin. And what we noticed happening was that really the reason behind this is that business adoption follows individual adoption, personal adoption. And for every person that starts to invest in Bitcoin and starts to understand Bitcoin, a subset of those people run businesses. And so whenever somebody running a business starts to invest in Bitcoin, the next logical step for them is,

Starting point is 00:02:34 well, I'm doing this for my own personal treasury. Why wouldn't I do this for my company too? And I think enough time has passed and enough individuals have adopted Bitcoin that now this is the trend we're seeing. The next wave is them onboarding their businesses. And that's what we're seeing. I love it. I mean, it's so simple, but yet people were so used to just thinking in terms of the individual and don't run their own business. And so it just makes total sense that you would see this playing out for individuals that control a lot of the equity. And there's a chart that we'll get to here in a little bit that kind of emphasizes that key point that I wasn't surprised, but I was surprised to see. We'll talk about that a little bit more.

Starting point is 00:03:10 The slide that I have pulled up right now, talk through this for people that are just listening to the audio so that they know what we're discussing here. But in general, I'll just simply say, you're showing how it has grown just in the past four years and you lay out these different metrics with respect to liquidity, regulatory accounting, institutional acceptance, and then just the precedence. But any key highlights that you have from this particular slide that you want to throw on there, or do you want to just jump to the next one? Yeah, I mean, I think the real takeaway here is that four years ago, you know, someone running a business, their primary goal is to succeed in that business and for that

Starting point is 00:03:44 business to operate smoothly. If they're going to buy Bitcoin in that company, it has to be reasonably easy. And there were a lot of elements of the landscape four years ago that made it very difficult. Accounting norms were not set in stone. So their finance teams and accountants were like, oh, like, you know, we could do this, but hey, look, I'm going to have to go. research a bunch and it's going to cost you a bunch of money. And, you know, that kind of risk isn't a risk that most business people want to take. And so a lot of that stuff has been solved

Starting point is 00:04:10 and that's really opened the door for a lot more money to flow in. On that point, I just pulled up another slide for folks listening. And you guys did an audit or you did a questionnaire just asking business owners what their biggest concerns with adding Bitcoin to their treasury was. And surprisingly, accounting and tax treatment was number one by a landslide. It was the number one thing. And this is something that I know Michael Saylor has been beating the drum on is just the gap accounting treatment for years. This finally got changed, I think at the beginning of this year. Is that correct, Alex? Like maybe January or? I believe it was around then. Yeah. Yeah. And just so people know, it's like the way that the accounting treatment was before is if you bought

Starting point is 00:04:55 Bitcoin at 100, and let's say it went down to 80, so you're down $20, you have to list that $20 loss on your income statement. And let's say your business only made $20 in that same period of time, you would be showing on your income statement, which is representative of the operations of the business, that you made no money, when in fact you made $20 and it was completely written. You didn't even have to sell your Bitcoin. You were continuing to hold. it because the volatility and the price had dropped 20, it would look like you literally made nothing. So this gap accounting treatment was not representative of the operations of the business. And finally, this got changed. And I would think when you guys took this

Starting point is 00:05:41 questionnaire, says down here at the bottom, the sources river business clients, was this at the beginning, was this prior to the gap accounting change or was this after? I'm just kind of curious whether that's still a driving factor. This was after, but by definition, sort of these people decided, well, now they can finally do this. Like, their biggest concern was tax and accounting. They since gotten over that hurdle. And there's still work to do when you buy Bitcoin in a treasury. And we try and make that as easy as possible for our own clients.

Starting point is 00:06:08 But it's still today, you know, the number one biggest thing for any institution or anyone with a real amount of money. Like, they just want to get those things right because they live and die by whether the IRS is okay with what they're doing and their investors and things like that. Now, for the most part, the report was heavily focusing on businesses and their treasury management, but you did have a small section in here about institutional Bitcoin ETF holders, which I also found fascinating because when I'm looking at a lot of the metrics that we're going to talk about after this particular slide that I have pulled up, it's showing the adoption rate, and I don't think it's even including ETF considerations. It's just considering business treasuries and the numbers are crazy.

Starting point is 00:06:52 as we'll get to. But the slide that I have pulled up right now, you're just kind of showing the breakdown of the people that are buying the ETF. And you kind of have, I don't know if the graphic is to scale, but it's sort of to scale to kind of give people an idea of where most of it's coming from. And most of it's coming from hedge funds, market makers, asset managers. And then one of the ones that I find most interesting and what's the word I'm looking for. I'm confused that there's not more is the insurance companies. It's a pittance. And when you look at how they manage their float, you know, as a Buffett person, you know, that was the thing that Buffett would always talk about was the float on Geico and how they were able to compound a lot faster because

Starting point is 00:07:38 they were able to invest that float. When I'm looking at the insurance industry, it's a pittance. None of them are buying the ETF. It doesn't appear many of them are buying Bitcoin either. And when you're thinking about how so many of their future outlays or this growing expense because of inflation impacts, they need to get on the bandwagon. Is that the thing that you find most surprising or concerning with some of the research or where there's some other industries that have kind of surprised you as to their allocation? Well, it doesn't necessarily surprise me or concern me. It's almost just a sign that we're still early.

Starting point is 00:08:12 Yeah. The reality is the vast majority of capital, especially in the same. institution capital still doesn't believe things are going to fundamentally change. They think the old way will keep working into the future and that the U.S. dollar will continue to sort of behave as it has. And I think you and I probably have some disagreements there. And so at the end of the day, they just actually don't believe that the change that we know is happening is actually happening. Yeah. Well, let's talk about that really fast because you brought up a really interesting point. And we had a little side discussion before we started recording.

Starting point is 00:08:47 And you had made the comment, which I totally agree with, that there's a big difference between the terminology of a reserve asset and a reserve currency. So explain what you mean by this. And I think this is a really important precursor to some of the rest of the conversation that we're going to have. Sure. And there's a lot of ways you could break this stuff down. And there's formal definitions for things.

Starting point is 00:09:09 But by and large, when you look at what the reserve asset of the world has a lot, has been historically. Well, actually, before 1971, it was gold. And the reserve currency had changed between Spanish galleons and British pounds and the Dutch currency and the Gilder and Franks. But those were all gold-backed currencies. And so the reserve asset behind everything was gold. For the last 50 years or so has been a unique period in time where the reserve asset and the reserve currency have been the same thing. They've been the U.S. dollar. And what I believe is happening as we're entering an era where we're seeing a divergence again. And the reserve currency will say the U.S. dollar, the currency that is needed for commerce and global commerce, but the reserve asset is going

Starting point is 00:09:58 to shift back to a hard currency. And instead of gold, it's going to be Bitcoin this time. So that's how I see it. I would just put a little bit of nuance. I agree with everything you just said. Just a little bit of nuance on the reserve asset over the last 50 years, I think is the long duration bond, the 30 year bond in particular, which is obviously denominated in dollars. But because of that extra duration, that's why it got bid so much over that period of time and was something that people could preserve their buying power in is because the interest rates keep going down. The longer the duration it is, the more valuable.

Starting point is 00:10:35 That impact is with the change in interest rates. And you're right. It has been Fiat, Fiat with duration was the reserve asset and spot Fiat was the reserve currency. And I think COVID, I think 2020 is going to be this mark like 40, 50 years into the future when we look back. I really think COVID is going to be that mark in time where we see that there was a massive change in reformation with respect to the reserve asset. I want to quickly bring up, and I love that terminology, I think people should really start using that more. I want to bring up this chart that just does an amazing job that you guys did with this report showing the Bitcoin distribution.

Starting point is 00:11:15 And I'm blown away at the distribution here because I think a lot of people were looking at the buys that are coming out of these ETFs. And when you put it in this graphic, I mean, it's not much. You're really starting to compress all these other areas if the ETF buys continue to persist to the tune of billions, sometimes in a day. What other highlights do you have with respect to this particular slide here with the ownership distribution? Well, you know, the real takeaway here is that the vast majority of Bitcoin is owned by Bitcoiners. It's owned by people that saw this early over the last 15 years.

Starting point is 00:11:53 And I see that to, you know, likely to continue to be the case for a long time. But I would pay attention to the right side of this chart, businesses, funds, and governments. that will continue to grow. I think that will be the growing part of this chart. And it kind of makes sense. Bitcoin, this whole industry has always been, first, the crazy individuals. We had 15 years of crazy people like me and you and the OG Bitcoiners buying this stuff, telling people, guys, this is the future, this is the future.

Starting point is 00:12:22 And a decade and a half later, and the institutions finally go, okay, now I agree with you. Let's make this thing run. And so now it's sort of, we're in this new era. We're in the era of the blue and black bars there. And I think let's see where that takes us. Yeah, this is going to get interesting. Let's take a quick break and hear from today's sponsors. All right.

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Starting point is 00:16:40 Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right, back to the show. Okay, I want to bring up another one that you have. And this is the one that I was referencing a little bit earlier with respect to public markets versus private markets. And this is the first time I've seen this graphic or somebody kind of talked to this and put numbers on it. And it's fascinating because in your report, you highlight that the private companies actually have more Bitcoin than the public companies. And it's interesting because we're always talking about micro strategy or we're talking about Tether.

Starting point is 00:17:18 Or we're talking about like these really behemoths that are accumulating hundreds of thousands of Bitcoin. But as you can see in the chart and your research, so talk to us a little bit more about this idea. What do you think is driving this? Yeah. So I mean, I think what you can see here is that in 2024 we saw a public company holding of Bitcoin really start to grow quickly.

Starting point is 00:17:40 But this sort of makes sense, right? What kind of companies can accumulate Bitcoin? It's companies where they're run by an archetype of a person who's. I call an orange pill dictator. A company still really can only accumulate Bitcoin if it's run by an orange pill dictator. And there are very few public companies that actually match that. You have micro strategy, you have block, and you have Tesla. And really nobody else, right?

Starting point is 00:18:07 So it's really mostly private companies that are ruled by these founders that can just make unilateral decisions. We're going to buy Bitcoin. We're going to accumulate Bitcoin that can really do this much more easily. So I think that's actually the main reason behind this. This is the follow-up that I love. Check out this chart here with your projections of these businesses continuing to buy, more adoption coming on board.

Starting point is 00:18:32 And then when we look at the numbers, these numbers are crazy. Because when we're looking at how many Bitcoin are mine per day, this is just business adoption. This is not ETF adoption, correct? I believe so. Yes. This does not include ETFs. So the numbers, I mean, I hate to be over zealous here in my excitement, but I'm looking at things like this and I'm saying, this is about to get really interesting.

Starting point is 00:18:59 Like, I just don't know how it can't get super interesting in the coming year or two. Like, how could we be wrong about that, Alex? Like, what are we missing? There are arguments that were wrong. But I think really the more interesting arguments are maybe around timeline. And it really all depends on, I think, what happens with the political institution. in the United States and the fiscal situation of the United States and how rapidly those deteriorate. The more rapidly those deteriorate, the more quickly this trend moves. And there's obviously

Starting point is 00:19:30 a lot of political uncertainty there, right, in terms of how fast that will happen. And so that's where I think we could be wrong from a timeline perspective. We get some administration that really turns things around, that really tightens the budget, that really gets the house in order, opens up the country for business again and really gets things spinning and responsible. I think that maybe businesses will feel less of an impetus to go to this hard money because the old system still kind of works well enough. And so that's where I think may delay the trend. Yeah, but that's not your base case, I'm assuming. No, sadly. Okay. I want to bring up another one here. You have a great section in the report where you guys are just talking about the anatomy of a typical

Starting point is 00:20:13 business treasury. And you do a great job kind of explaining how businesses think about their treasury with respect to cash, cash equivalence and marketable securities. And then you have this little case study with Apple in particular and you're showing how they perform. So I'm going to pull up this slide and just to capture your thoughts on this. Yeah. So this is a breakdown of Apple's treasury. And what you can see, the typical ethos or the typical sort of operating model of people who do treasury management is first do no harm, right? Don't lose the money. And so what that means typically is they are investing that treasury in very low risk, but predictable things. And we're sort of an interesting point where it's almost now at a point where the safe thing to do is invest in

Starting point is 00:21:04 assets that lose in real terms. And so they're like really with inflation where it is what we've seen with Apple's treasury is it's grown in an absolute terms, but it's lost in real terms. Now, there are, there are, you know, I'm sure some reasons that might happen. Maybe Apple is paying down more expensive debt somewhere else or using that treasury, but Apple is a very highly cash flow positive business. You would expect their treasury to grow in real terms as well. And so what we plot here is Apple's nominal in real return. And what you can see is from 2020 on, Apple's treasury lost in real terms, despite it being invested in these safe assets. And this really begs the question, sort of like what worked in the past, what sort of kept up with inflation is no longer working.

Starting point is 00:21:52 And treasury managers should start looking at something different. And we do some analysis. And what we found is if only a very tiny percentage of a treasury is put in Bitcoin, like a single digit percentage of Apple's treasury was in Bitcoin, it would have grown in real terms. And I think more and more treasury managers are going to see that what's worked in the past isn't working in the future and they're going to need to look at something different. And I think it's an important highlight that I think everybody talks about micro strategy and how they're doing with their Bitcoin treasury management. But I think for Apple or some of these other companies, they don't have to take 100%

Starting point is 00:22:30 of their retained earnings and plow it in the Bitcoin for the board and everybody else to be on board. they could take whatever percent they're allocating to marketable securities. They could allocate five, ten percent to Bitcoin. And I don't think anybody's going to be upset with the volatility when you're only putting in a five or ten percent position size. I think that's going to be a major trend in the coming year for large, large market-capped companies like Apple to start buying, call it iBit, or maybe they're going to buy Bitcoin outright on River, which is what we would obviously want them to do. But what are your thoughts? Do you think that that's happening this

Starting point is 00:23:07 cycle or do you think that that's further out until some large cap companies start leaning into it with five or 10 percent position size? I think it's further out. I think there hasn't, I could be wrong about this. But really, for me, the, when we know what's happening is when the first public company not run by an orange pill dictator makes this decision, right? When is the first sort of run by committee company buying people for their treasury, that is a huge moment. That's a huge moment. And so that's actually most big companies. But don't you think BlackRock is having that conversation with some of these CFOs that are running these treasuries? I would think that they are. I mean, they have to be saying,

Starting point is 00:23:48 hey, this is the most successful ETF we have ever launched in the history of ETFs. I don't know. I think we're at that moment already, Alex. I love that you disagree, but like, well, really, this is sort of where the great man theory of history comes in. Like, who's that CFO, right? Who's going to be that CFO that will put their career on the line to make this happen, right? People who are in this industry, people who are treasury managers, their whole job is to not mess up and not get fired. They didn't get to where they are by, you know, saying, we're going to put the treasury in this other crazy thing. At some point, that will happen.

Starting point is 00:24:27 Who's that going to be? Who's that guy going to be or woman? who's that CFO that has that conversation with Larry Fink and goes, yeah, from a first principle's perspective, things have changed and we need to change. And this is, let's take a baby step. And when that happens, we'll know it. Yeah. I think Apple, Google, one of these big tech firms, if they even put 1% on, I think it's almost like a shot heard around the world. Would you agree that it's just going to have a knock on effect? Totally. I mean, even buying one Bitcoin, it's really like any

Starting point is 00:24:57 amounts. Like, that's actually the barrier. The barrier isn't like they don't have the money to risk. It's the political norms and culture. That's actually the friction to this stuff. Yeah. So if you had the chance to speak directly to Luca, let's say he's the CFO at Apple, you had the chance to speak to him directly right now. Let's say he's listening to the show. What do you say about how to buy Bitcoin on his treasury? You know, the easiest thing for Apple to do, obviously, would be to by the ETF. But because Apple is Apple, I think that he has the chance to be the first, to be a historically prominent CFO by deciding what Apple does here. He can set the norm for the next hundred years of corporate finance. You know, you could argue Saylor has done that

Starting point is 00:25:43 and really move the needle. But again, the Orange Pill dictator type company, it actually, they can do their own thing. Like, they're renegades. That's cool. It's when Apple, what does Apple do? And so if Luca, I would tell him, get smart about this, buy some Bitcoin yourself. try to self-custody it. And then if I were you, what I would do is figure out a way for Apple to buy Bitcoin and self-custy it if they can. Like setting that norm for a corporation would be really crazy. If I just wanted to keep things easy for him, I would say just buy the ETF.

Starting point is 00:26:13 And then maybe he'd go somewhere in between and buy Bitcoin, but hold it with a third-party custodian. Luca, River has business accounts. Yes, yes. Of course I would try to show River and our proof of reserves, right? Hey, that's something I want to talk about. Yes. Yeah, on that topic. So this was another big announcement you guys had. And I think that this is huge. And I think this is an example for everybody else, every other exchange out there, this proof of reserve. So the common thing that I hear back from somebody when we talk about proof of reserves is you can't validate liabilities.

Starting point is 00:26:46 Talk us through how you thought through this and how you implemented it onto the site. Yeah. So the way we do proof of reserves at River is we prove. two sides of the balance sheet. We prove that we have a certain amount of Bitcoin in custody. And we do that by publishing our cold storage address and spending an amount from it that we can't control. It's sort of randomly generated from the blockchain. And then on the liabilities side, what we do is we take a snapshot at the beginning of a month. And that snapshot includes a list of all client liabilities, all account balances. And what we do is we anonymize that list. And we actually add some extra anonymization by actually splitting them all up so that you can't

Starting point is 00:27:24 see the distribution of accounts. And we publish that list. So everyone in the world can download this list of anonymized liabilities from River. And every River client can, using a unique key on their account and their email address. And what that does is it makes sure we're not like double counting accounts. You know, if one person has one Bitcoin in their account and another has one Bitcoin, by showing that this liability is derived from your email address, we're proving that we're not double assigning balances. And we allow you to verify that your account is included in this list. And you can do that locally in your computer with a little code script rewrote or you can do

Starting point is 00:28:00 it on our website. And the idea behind this is that if we were to game, we were to try to game this, we would try and hide liabilities, right? We would try to exclude liabilities from this list. But because every river client can verify that their account balance is included in the list, then they could detect us cheating. And so that's. That's the general concept.

Starting point is 00:28:22 Yeah. Yeah. Wow. That's awesome. Have you had other exchanges or individuals reach out to you as to how you implemented this or if you could assist? Yes. And I've offered my help to anyone running an exchange who wants to implement proof of reserves. And we've had one really big one that we've connected with and given some insights and a smaller one as well.

Starting point is 00:28:43 The smaller one said that they plan to implement it next year. The bigger one is still thinking through how they do it because their setup's a bit more complicated. And, uh, meaning they have other coins other than Bitcoin on the exchange. Is that effectively what that means? That's a big one. And just like different products, right? Not all in one place. And, you know, our business model at River is always obsessed with like keeping things as simple as possible so that we can build these things much faster than other people. And so this is one example of where that pays off. As we go into the bull market, what I suspect is

Starting point is 00:29:15 the bull market that's coming. We got all the big banks playing now. I don't know. Three weeks ago, there was SEC approved PNC Bank to be a custodian. This puts complete pressure on Coinbase, which seems to be one of the only custodians holding all these coins on behalf of the ETFs with Fidelity. There's a couple others that aren't. But for the majority, they're all custody at Coinbase. So now that PNC Bank, which is a major, major U.S. bank, too big to fail bank, in my humble opinion,

Starting point is 00:29:47 I don't know the staff, but I would imagine they are. What are your thoughts on custody moving to traditional banks? Is this a good thing? Is this a bad thing? What does it mean? Well, I think it's a good thing that the regulations are changing to make this easier. I think that Bitcoin is going to play a very fundamental role in the future of banking in the United States. So I'm glad that the doors open there. And I think it will actually be good for us as well. Now, the thing is, unlike running a banking operation, custodying traditional assets, the core competency required to properly custody Bitcoin isn't financial expertise. Yeah.

Starting point is 00:30:26 It's engineering and cryptography and computer security expertise. There's no finance involved, really. Your job is to secure a private key. And so when you're keeping Bitcoin with the custodian, you're going to choose the custodian-based, you know, of course, financial health of the custodian is important. but largely it's their technical competence. And so I think that's where we're going to see some interesting dynamics play out. Because like is PNC Bank good at cryptography?

Starting point is 00:30:52 Like, you know, like when I'm thinking of word about my Bitcoin, like, who's running that? You know, like, so I think what we'll find is the market will probably prefer the companies that specialize in this. But that said, banks have low cost of capital. They can lend against it. I think realistically what we see is the banks partnering with existing players in the space who really have the expertise to custody. securely. Yeah. Sounds like you're open for the phone calls. Is that? Yeah, absolutely. Absolutely. I am. Okay. That's awesome. Okay, you have a big announcement laying on us. What's the big announcement? Yeah, speaking of banking. So, and sort of arcing back to the Apple Treasury conversation.

Starting point is 00:31:28 So one of the things that we've learned about our clients is that as much as they love Bitcoin, they still have substantial dollar savings. Most people and most businesses have savings accounts and treasuries in dollars because they're conservative and they want to make sure that they have a certain amount of months worth of cash runway for their business or their personal lives. And that cash is sitting in bank accounts where even if it's a high yield rate, it is losing to inflation. And so what we're launching at River is a high yield cash account that pays out interest in Bitcoin.

Starting point is 00:32:02 And what this allows you to do is save your cash in an FDIC insured cash account with a bank powering it behind the scenes. And your interest is paid out in Bitcoin. And so if you look at how that would have performed over the last four years, your effective interest rate would have been in the teens because you're accruing a hard asset. You're accruing a scarce resource, but you're keeping your principal. Your cash savings is safe and unchanged. So you have $100,000 in the cash account. $100,000 will be there day after day, FDIC insured, but you're accruing your interest in Bitcoin. And that's what's really cool about it. And so we're so we're super excited to launch this, and I think that people are going to love it.

Starting point is 00:32:42 Yeah. So can I pay bills? Let's say I have, you know, I have a business account with River. Let's say I have an expense that's Fiat denominated. Can I pay that expense right out of this cash account at River as well? Not yet. So at first, it's just going to be cash in and out to your normal bank account. You would still pay bills from your normal bank account, but you can very easily cash out of River and send the cash back any time you want. It's pretty convenient from that perspective, but we are building towards being able to do all of that stuff in the future. And how long would it take for me to cash it back out into a cash account that I can make those payments in?

Starting point is 00:33:20 It would be next day. Next day. And we're working on getting it to same day. What day does this roll out? So, you know, hopefully by the time this podcast launched, this will be live. We're planning to launch the week of October 21st, 22nd. Yeah, we're really excited. The product experience itself is very simple.

Starting point is 00:33:38 but it's been a ton of work behind the scenes because we have to partner with a bank. And it's effectively a bank account behind the scenes. And there's a lot of work and accounting and regulatory stuff to unlock that for people. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up. And customers now expect proof of security just to do business. That's why VANTA is a game changer.

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Starting point is 00:37:18 Or is this something that I'll be auto enrolled into? You'll be auto. Well, the minute we launched this and you open the app, you'll just have to accept our new terms. Okay. And we'll perform one check behind the scenes. And assuming that goes smoothly, you'll just be auto. enrolled and start accruing interest. And you accrue the interest daily and we pay it out, we credit to your account monthly. But you actually earn, you know, you get, you accrue the

Starting point is 00:37:40 Bitcoin every day. So you can see how much Bitcoin you're stacking every day. And that'll credit to your account at the end of the month. And the interest rate today is going to be 3.8% and, you know, we're hoping we can keep getting that up. Okay. So I'm just sitting here. We're recording this a week in advance and I just want to, you know, roll it out today. I guess I have, you know, I mean, any business has a working capital account and like this is just changing the game. So amazing. I'm kind of lost at where I'm at and my question.

Starting point is 00:38:09 That's really exciting, dude. Okay. I want to talk about stable coins. So I think that would be the next question that somebody would have when they hear this and like, okay, so what's going on here, Alex? Are you doing things with stable coins or like, how am I getting this yield? Talk people through this so that they understand what's actually happening. happening. Yeah. So, you know, I think some people might be a little nervous when they hear yield and

Starting point is 00:38:31 Bitcoin in the same sentence. You know, to be clear, we are not putting your Bitcoin to work. We're not touching your Bitcoin for this product. Your Bitcoin is still one to one in the vault full reserve. It's the cash that's being put to work behind the scenes. And so the question is sort of like, how is the cash generating the interest? Well, that's done through a banking partner. And this banking partner, we have a very close relationship with. And the cash is held at the Fed or in cash sweep accounts. So it is very conservatively invested. And there's no stable coin stuff happening here.

Starting point is 00:39:04 We actually aren't, we don't have any stable coin things in the works. And the reason for that is as much as I think stable coins are very useful and valuable globally, Americans don't have a huge need for stable coins because they have US bank accounts. Stable coins are most valuable to people who don't have US bank accounts. And because we primarily serve the US, that's not really in demand from our clients. at the moment. I think I heard you say earlier, Alex, that the cash that is deposited is FDIC insured. So the FDIC insurance goes up to, what, 250,000. So any amount that's under that would be FDIC insured at River, correct? Correct. Wow. Okay, amazing. All right, I want to

Starting point is 00:39:45 transition gears. I want to learn more about Alex Leashman, the person. So, Alex, I know you like the box. I know you like to work out that way. What is something we don't know about you that you do in your free time that has nothing to do with Bitcoin? Well, something recently that this year is I've been taking Spanish lessons. I've been really trying to level up my Spanish skills. And there's a number of reasons for that. I really like Latin music. But I also have been spending a lot more time in Argentina.

Starting point is 00:40:16 And I really love Argentina. It's just such a fascinating country with their new president, with Miele. I think that, you know, they're sort of a breath of fresh air for just, global politics. So yeah, that's like kind of a hobby of mine. And you know, my Spanish is improving. I'm not fluent yet, but I'm getting there. Even with AI and how powerful it's becoming, you can just talk into your device and it can translate and do everything for you. You're still going old school. Oh, yeah, it's not the same. It's not the same. You know, and it's, it's kind of interesting. You know, as a kid, I kind of discounted the value of foreign languages, but when you're

Starting point is 00:40:49 speaking at a different language, you also just have different emotions and you kind of almost a little bit of a different personality. Like, the language you speak very much defines, influences your personality. And I found, like, to be a fun phenomenon. Yeah. Yeah, I don't speak any other languages. It's really sad. And I've tried.

Starting point is 00:41:08 I've tried. And it's just, it's a disaster. Okay. What's one of the best pieces of advice you've ever received and who gave it to you? Well, I think my dad, when I was a kid, he always told me, you know, and I think people a lot of people for this advice, but you always miss their shots you don't take. You always miss the shots you don't take. And I really, really took that to heart. In my entire life, I've always just thought, okay, what do I want out of life? And if I actually want something,

Starting point is 00:41:36 I'm just going to actually go for it. I'm going to just actually do it. It's kind of incredible how that could, you know, work in your favor if you actually just do it. Yeah, I love that. I think back to the first Bitcoin bull run that I experienced. For me, I got into Bitcoin around 2015. The 2017 bull run was mind-blowing. And it was to the point where I was having trouble sleeping at night because everything was just so crazy and there's so much volatility. And so I guess my question for you, because I think this coming year, year and a half is

Starting point is 00:42:10 going to get pretty interesting. What's your advice to newbies that are coming in and maybe buying Bitcoin for the first time and experiencing this insane volatility, maybe similar to what I saw in 2017, what do you say to a person like this and how do they stay grounded? How do they think about adding more capital? Just walk us through the mindset of the person who's just showing up right now and how they can kind of handle what's coming. Absolutely. And I think I have maybe a bit of a unique take year. My advice is never sell your Bitcoin. So buy Bitcoin at an amount you can afford. Don't over-extend yourself and buy a responsible amount of Bitcoin. Now, that's said. There are certain lessons that you

Starting point is 00:42:51 can't really learn by reading about it. You just have to experience it. Most people are going to try and gamble on something that's not Bitcoin. They're going to try and swing for the fences with something their friend, some coin their friends talking about, things like this. You're probably going to get wrecked. But if you're going to do that, just say, like when you go to a casino, No, say, I'm going to take this amount of money for the crazy thing and no more, right? And do the crazy, funny business stuff that isn't just buying and holding Bitcoin, but don't touch the Bitcoin. Go have your fun.

Starting point is 00:43:23 Go learn your lessons the hard way. But do that with a, like, specially reserved amount of cash that you're willing to risk. And it's just sort of like the fun gamble. And just hold the Bitcoin and don't let anyone get it. Love that. All right. How about the volatility? What's your advice for people with dealing with the volatility?

Starting point is 00:43:40 Is it go back to this idea that don't bite off more than what you can chew? Because I think that's one of the things I think people struggle with the most is just dealing with a swing of 10% down on the day. Maybe some of that is, and I'm curious, do you think some of those swings are gone? Or do you think some of that's still going to happen despite all the derivatives that are on top of it now? I think we'll see it happen. Look, you just got to deal with it. That's why you don't put in more than you can handle.

Starting point is 00:44:05 Just view the dollars you're putting in as Bitcoin as dollars that you're not going to touch, right? So if that Bitcoin goes down, if it goes up, you're not touching it. And so if you go in with that mindset, this is a long-term bet. I'm going to let this thing do what it does. It's a crazy honey badger that's going to run in each and every direction. It's unpredictable. If that's your mindset, it'll be a lot easier to handle those swings. Don't risk more than you feel comfortable that happening with that amount of money.

Starting point is 00:44:32 Yeah. Last question for you. You've written a lot on the Lightning Network and its adoption. I'm assuming you're still very bullish. We're going to have a conversation with Roy Scheinfeld here pretty soon, and we're going to go into a lot of depth on his thoughts on lightning. But I'm curious where you continue to stand. Is there anything that's changed since the last time we've talked or something that you're

Starting point is 00:44:51 excited about or kind of worried about? What's your overall thoughts? Yeah. And by the way, Roy is a super sharp guy, so he'll have way better insights here than I do. Yeah, you know, I would say that my perspective has not really changed so much as just become increasingly pragmatic. There have been some big wins in the past year. Coinbase has added Lightning support, and apparently it's actually a non-negligible

Starting point is 00:45:13 percentage of their Bitcoin transfer volumes. Oh, wow. I think that the Lightning Network, you know, in my opinion for a while, has been, will predominantly be a sort of hub-to-hub way to move Bitcoin around. So I think that we'll see Lightning continue to grow in its role as a really great rail for moving Bitcoin between custodial institutions and custodial wallets because of the nature of how the Lightning Network works. I think that Lightning has struggled to see uptick in the self-custody part of it where consumers have a self-custody Lightning wallet because of the way that

Starting point is 00:45:48 lightning channels work and the complexities there and sort of the capital efficiency or inefficiency of having to run nodes that power those types of wallets will continue to see challenges there. So I think we're seeing some really great things in sort of the institutional or sort of like custodial adoption of lightning. And there's also something potentially on the horizon with stable coins coming to the Lightning Network, with Taproot assets, which could really sort of send things to the roof for the Lightning Network. So overall, I think there's some very powerful tailwinds when it comes to custodial wallet adoption of Lightning and potential stable coins on Lightning.

Starting point is 00:46:22 Wow. Love it. Alex, anything else you want to highlight for folks before we wrap it up? 2024 was a crazy year. I'm hoping that 2025 is even crazier. You can't learn too much. It's important to understand yourself, understand. your emotions, stay calm, think clearly. If a bull market really is coming, there's a lot of people

Starting point is 00:46:42 who do well in bull markets and then get emotional and start getting greedy and making mistakes, don't let that happen to you. Yes, yes, that's some great advice. River.com, that's the exchange I personally use. I can't speak highly enough. Every person that I talk to that uses it, just raves about how simple and easy to use it is. You got proof of reserves, you got interest, FDIC insured on cash now. I can only imagine what you're you're going to come up with next. Alex, thank you so much for making time and coming on the show. This was a pleasure to chat with you. Thanks for having, Preston. Thank you for listening to TIP.

Starting point is 00:47:16 Make sure to follow Bitcoin Fundamentals on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only, before making any decision consult a professional. This show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - BTC205: Bitcoin Interest on FDIC Insured Cash Accounts w/ Alex Leishman (Bitcoin Podcast)

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