Bitcoin at All-Time Highs: Is It Too Late to Invest?

Daniel: If you dollar cost averaged since the start of Bitcoin you'd be up 10000%.

Rory: There's a few of the guys in the office that have been seriously orange pilled, very bullish.

Daniel: Very bullish.

Rory: On the bitcoin.

Daniel: This is good. This is good. And so for the folks at home orange pill means that you've you fully swallowed the Bitcoin pill.

Rory: Any investment whether it's crypto or housing or whatever it takes conviction.

Daniel: And conviction should come from education.

Rory: Get educated so you actually believe in the product yourself rather than your mate telling you this is a great investment. The proportion of high net worth families that are into crypto is different from the rest of world.

Daniel: They are embracing it.

Rory: The best time to buy Bitcoin was five years ago. The second best time is today.

Meeting Paul and the Crypto Journey

Daniel: Paul, CCO from Easy Crypto. Thank you so much for joining us on the podcast.

Paul: Thanks for having me, guys. Really looking forward to it.

Daniel: No, mate. It's a real treat to have you on. 'Cause you'll be aware as financial advisers, our industry has come from your standard assets. Your shares obviously property for myself.

Rory: So Rory and I are so excited because, there's a few of the guys in the office that have been seriously orange pilled, very bullish, very bullish, on the bitcoin. This is good. This is good. And so for the folks at home, orange pill means that you've you fully, swallowed the Bitcoin pill you believe in cryptocurrency and you want to have it as your part of your holdings.

Daniel: So that's what it means. But I wanna tell a quick story. 'Cause we've met once before.

Paul: Yes, we have.

Daniel: It was at a event in November, 2022. And it was with a group of people representing different asset classes. So you were there for crypto? We had a guy there for mortgages like myself, property.

Rory: Yeah. Then we had a guy there for precious means like gold. And then we had a guy there for shares. Each was talking about the challenges, you know, each asset class was facing at the time. 'Cause I mean, to give some more context, it was a pretty turbulent time.

Paul: Yeah. I mean, we were just coming out of COVID and heading into or in the recession. It was pretty, pretty grim.

Daniel: It was very grim, and we had some, the news was just not looking good.

Paul: No.

Daniel: And so there was a lot of gloom and doom in the room. The world was depressed. Massive. It actually was.

Rory: And it's interesting, because, Darcy Ungaro was there and he was talking about, you know, how sort of the recessions he'd been through and how you know, you know, people, especially with property, they wanna make people feel sick about property to sort of tame the market, which is the point that we were at with interest rates and all the negative things that were happening.

Daniel: But out of that, you literally left your job and started a company.

Paul: Yeah, that's right. Yeah. That was the message for you.

Daniel: It couldn't get any worse than this was the, I'm already not making any money. But kudos to you, right. I'm a huge proponent of people who are adding value to our economy and creating jobs and work, and it's really brave.

Paul: Oh, cheers, Paul. So kudos to you for doing that. Really, really impressed.

Daniel: Nah, it's been an awesome journey and, you know, Rory's taken the leap with me and, yeah. I think, if you believe in something and, and you basically be brave and you put something out there. Just like with your investing, over time it's, you know, you can't fail. Pretty much.

Rory: I wanna talk about, you know, price charts and where things were at the time because, you know, you might be a bit smug right now. You said sitting here when Bitcoin had gone on a massive dump.

Daniel: So we'll put the price charts up for people to see, but at the start, '22, we had a big pump. We had an all time high there at start of '22.

Paul: Yeah. And then just the whole year was absolutely plummeting.

Daniel: Grinding down.

Paul: Absolutely. We call that crypto winter, and yeah, it's not the best time to be in the industry, but it kind of, it's that natural reckoning where all the over-leverage, all of the bad ideas just get crushed out. And we clean up, you know, it's like spring. And then we come through and ironically it happens in a really predictable way in our industry, and so, it's kind of almost pure capitalism in that way. There's no bailouts, there's no, I'm gonna mint more money. It's just like grind it out and you see businesses that didn't have their product market fit or their propositions or the ops model. They're just gone, just get smoked and just kind of gets cleaned out.

Paul: And we start again and rejuvenate and so, it's painful, but you know, ultimately pretty healthy for the sector. We is kind of how we think about it. And if you've been doing it for a while, it probably becomes less painful. I'm now at a point where I'm like, bring on the next one, you know?

Daniel: Yeah. 'Cause we're at all time highs.

Paul: So the asset's expensive. Correct. I'm waiting for the next winter and I wonder, I mean, no one knows if it's gonna be the same as past cycles because of what's happening now, but I tell you what, if it drops significantly below a hundred thousand dollars USD I'll be very happy.

Paul: It's a great question whether this cycle, given all the institutional flows and you know, now governments holding on their balance sheet will be different. So we, you know, we just dunno the answer to that question, but traditionally, people who have been through some cycles, you know, start their investment patterns, they kind of sell out at certain parts of the market and start buying back into a certain part of the market.

Paul: Kind of classic Warren Buffet stuff, you know? When there's blood in the streets, I'm buying. We have the analytics, the on chain analytics to see wealth transfer in action. Like you do see people who are unsophisticated, who are emotional selling when they shouldn't be selling and buying, when they shouldn't be buying, you know, transferring value to people with a plan.

Paul: If you've listened to most of my stuff, it is do your research, have a plan and try and be disciplined about that stuff. The emotion of the market can wipe you out at the same time.

Daniel: Yeah, for sure. It's a maturity thing. I think like, my guess is, and the theory would be that eventually there will be stability and you won't have the wild volatility.

Paul: Well, this will blow your heads off, but if you look at Bitcoin's volatility this year, well it might have changed, could've been ripping the last week, but up until about two weeks ago, Bitcoin was less volatile than S&P.

Daniel: Wow. So over its incredible life.

Paul: This year. Oh, just this year.

Comparing Asset Classes

Paul: So it, you know, as you're saying, it's starting to happen. Yeah. In terms of the band, the bands of its volatility are kind of compressing. It's starting to kind of play out the way you are thinking about it, I guess.

Daniel: Fantastic. Incredible. I mean, looking at these charts. So I've got five year charts here and we'll go through three each asset classes to see what's changed. Obviously Bitcoin, I mean, you don't have to be a checking the prices every day to know what's happening. It's in the news. We've had a massive pump. There's been huge developments like you said.

Daniel: Government adaptation, holding on the balance sheet, and so we've pumped. So I mean, Easy Crypto's very happy about that. I'm very happy about that. Rory's a bit stoked, you know, which is cool. We'll move on to the rest of them. So we've got the S&P500, like you said, a lot of volatility this year.

Daniel: And more volatile than Bitcoin, but we've had some steady gains, so we did have that recovery you can expect from each market cycle, which is good. And then gold. I think interestingly enough, gold has absolutely pumped, and you mentioned that it's got a lot to do with, the big players like China and obviously Russia no longer holding US treasury bills.

Paul: Yeah, look it, it's you if you discount kind of the last 18 months 'cause it's been going since '24. Like gold was basically not even breaking even with inflation. Like it was probably a net investment. Something changed and the articles I'm reading are governments home and buying US bonds.

Paul: And if you are, you know, sitting on the other side of a trade negotiation with Donald Trump, you're probably like, well, why would I keep buying you bonds when I can buy gold? And, and I think it's having a great year, like it's up 40% or something like that, which really surprised me.

Daniel: For a commodity like that. But yeah, absolutely. It's having its moment and every asset kind of does. Because yeah, you're right. It had a sad since the two thousands, it had quite a sad little existence.

Paul: Yeah. I've said on another podcast, I don't get, I didn't get gold bugs.

Daniel: You take out inflation, your real returns were quite small, really bad.

Paul: Yeah. Except for the last 18 months. Yeah, exactly.

Daniel: Mm. Yeah. No, everyone's laughing, aye.

Paul: Yeah. And that's kind of the purpose of it essentially, isn't it? As a hedge against inflation. So if it holds its value, then it's kind of done its job, it was doing its job, but as an investment.

Paul: Like, no, no. So that was kind of my point, you know? The risk return was pretty negligible, I guess.

Daniel: Yeah. Yeah. Now this is a very sad, sad turn of the page for me, because I've gotta turn to New Zealand property. Okay. Very disappointing news. Obviously, you know, as a mortgage adviser, deep in property myself, since we caught up in November 2022, we've had a drop of I think it's about a 10% price drop there. This is average New Zealand house prices and then it's been completely flat for the last four years. So out of all the assets that actually talked about, property's the only one that's down even further.

Paul: Yeah. Which is, a very sad state for me being a property investor and, a mortgage adviser. It's probably not a bad curve though, if you drew a straight line and ignore the big mountain top there just steadily gained in the last five years, you know?

Daniel: Yeah, that's right. That's compared to buyers.

Daniel: I mean, first home buyers, if you look at 2020, 2019, we had all the gains up front, didn't we? And now we've gone flat, so instead of a straight line, we just experienced all the gains in that period. I think it goes to show, obviously as a property investor myself, mortgage broker, I definitely, I want Kiwis to strive for home ownership.

Daniel: I think it's really important to own the family home if you can. And if you've got the means to invest, I think that's really good as well, if you can invest in a second property. But I think, and why we want Paul on is because we are a big believer in diversifying. And at the end of the day, you've got the family home, but when you retire, you can't sell off a bedroom and live off that, right?

Daniel: You still gotta live in the house. So we need other means of diversifying our investments to make sure that, we've got the means that we need when we retire. And that's why, you know, these other assets, especially, talking about today, Bitcoin is really, really important. And the one thing that, Paul, you mentioned at that chat when it was really doom and gloom about crypto, you said, look, if you dollar cost averaged since the start of Bitcoin, you'd be up 10000%.

Paul: Correct. And you just said, look, make it, you know, five to 10% of your holdings and dollar cost average. And that's the same advice you've had through this whole run, which is just awesome to see. Like, you know, if you, that's the truth of it, you know? Yeah. The other part of that is, and I was talking to a guy last night at an event, like do have a dollar cost averaging out plan as well.

Daniel: Yeah. So dollar cost average in and have a dollar cost averaging out plan.

Paul: Yeah. Because trying to pick the market is just, you know, I'm in the industry and I'm too busy to do that. So do have a plan to make sure that you do have a de-risk, you do have that gain at the end of it.

Daniel: Yeah. My advice is the same, right. And all the research is starting to show is still the same. Have a small portion of your portfolio in crypto, the class. Hang on to it for a long time.

Paul: Yeah, absolutely.

Daniel: And because that's exactly what, Jono, our investment adviser talks about with dollar cost averaging out with your investments because yeah, if you hit 65 and then your plan is to sell on that day, you know what if you're in a down market, you're absolutely buggered.

Daniel: And all those projection calculators you look at actually aren't true. Yeah. You know, because you've just missed out on all the averaged the average gains. So what's the moral story of these graphs? Is that Bitcoin's the best performing, sell your properties and buy bitcoin.

Paul: That seriously, is it?

Daniel: Yeah. Bitcoin was the winner and I just wanted to share that with Paul. 'Cause I remember meeting him on the day and it was really like negative news about crypto and, it's played out exactly like he said. It is the purest form of capitalism because there is no fakeness or government intervention or the things that you get in our modern, like massive bailouts. Or fake stimulation. It's the purest form of a cyclical, you know, capitalism. And I don't wanna believe the stuff I read all the time, but that's what happens in our industry.

Paul: And I guess the other thing, reflecting back on that is that it's just a time horizon. That's right. Like we were in a point in the cycle and housing is at a point in the cycle, and if you invest on enough of a horizon and good quality assets, then, you know, and that's the point.

Daniel: Yeah. Trying to be a day trader, you're gonna get sliced up.

Paul: Sure. It's not fun.

Daniel: You're speaking from experience or...

Paul: Hey, hey, my wife might hear this. Just again if you're an investor, not a trader you have a horizon that sees past cycles like this.

Daniel: Absolutely. Because in any sector you will have it.

Paul: Yeah. And they just run on different timetables, like one of the traders I love watching online used to work for me. Well, occasionally he'll put up the gold chart, and the gold chart is like the Bitcoin chart. It's just hundreds of years old.

Daniel: Yeah. So it is just compressing timeframes.

Paul: True. And S&P is a lot faster than gold, and crypto is a lot faster than S&P. So it just, you know, that's kind of the cycles that we are, we're in. And so just understand where, what your industry is that you're investing in and what its cycles are, and have a plan that goes beyond those cycles.

Paul: 'Cause you, you're gonna have gain and pains and, you know, you gotta ride both. Absolutely.

Daniel: Yeah. And don't worry about being late. Like, you might look at charts now on S&P and Bitcoin and close to all time highs. Just start and get involved.

Rory: I asked ChatGPT, what were the earliest prices of Bitcoin?

Paul: And it told me 12 cents. Yeah. Oh, actually less than that. It said there were early, and I could be wrong, right? 2,300 Bitcoin for a USD, and then they went to an exchange at like 0.003, 3 cents.

Rory: Right? Yeah. But it was nothing then, right. It was almost a gimmick, right?

Paul: The tech was there, but it was just the adoption's the key. And it needed network effect and as you say, adoption. And it needed a whole bunch of things to wrap around it, to get to where it's gotten to. And you know, I'm personally, in awe of the people who were so early because they made it what it is today with a whole bunch of belief.

Paul: And, you know, when everybody's screaming at you, it's a con, it's a scam, it's a whatever. And they've just held on and held on and, and just the vision, eh?

Daniel: Yeah, exactly. Right. Yeah. For some people, it's really affirming that the more people that say it's bad and it's, they're like, no, it's actually, it says to me, the people who are saying that to me are the ones I think got it wrong.

Paul: And they stayed with it, which is awesome. Yeah. It's still polarizing, you know, there's still some credible people calling Bitcoin a Ponzi scheme and all sorts of other things in it. It's gonna go to zero eventually.

What Bitcoin Is and How It Works

Daniel: Can we just kind of ignore that for a second, but because that's out there, can you kind of just give us, like what is Bitcoin? Like, what's the purpose of Bitcoin? What does it do?

Paul: Well, it kind of evolves and it's different for different people. So it did start out as a money transfer service. That was the original white paper said that. But it was a generational one technology. So it hasn't really materialized as a widely adopted payment tech. Some people do that, but it, you know, in terms of widely adopted, you know, if you compare payments like Visa, or Stripe, it's not there. For other people it's a stored value. We live in a country that with political stability, despite what you see in the media, stable banking, you know, we know that if we have a hundred dollars in the bank, we can turn up just about any time we're gonna get it back.

Paul: If you live in Turkey, Argentina, right. That is not the case. People don't put their money in the banks, and their value of their local currency is deflating away so quickly. Bitcoin is a better store of value for them. So it's a different use case. Stable coins are also playing a role in that.

Paul: And there are people who do treat it as an investment class. Like it is just a thing that I want to hold, an appreciating asset. I can see that it's a long term channel that's going up into the right, which is a great news story for an investor. And yes, it will have volatile moments, but it's still going on the trajectory I want.

Paul: It has numerous kind of use cases, it's as material as the S&P 500, you know, the S&P 500 is an index, which is constructed of, you know, value numbers of 500 companies underneath. What is it? Yeah, it's a number. And ultimately Bitcoin is you know, a cryptographic number in that regard.

Daniel: So it functions a lot like a share on equity in that regard. There's multiple use cases and you can obviously use it as a means of exchange. And that, like, as you said, that was its original use case. It seems to be morphing more into that store value aye that principally, and there's perhaps other cryptocurrencies that are gonna pop out and do that job.

Paul: It often gets compared to gold. And a really interesting analysis, I read just last week when, you know, a lot of the Trump tariff turmoil was coming in, Bitcoin kind of half responded like a share and half responded like a store of value. And that just says to me that people believe in it in different things. That they're believing it's a different thing and that's cool. Like it's completely cool that they're doing that, but it's gold-like but not gold. It's share-like, but not shares, it's a slightly different thing in its own right.

Paul: And you know, my former employer often talked about cryptos as its own asset class. 'Cause it's got attributes of this. It's like a hybrid. I think that's kind of coming out to play. So it's an interesting, fascinating thing when you look at it and compare it.

Paul: Sometimes it's correlated, sometimes it's de-correlated, but in general, it's not particularly correlated with equities and shares and stuff like that. So it just does its own thing. I think, you know, back to your other bit, that's kind of what upsets people because it's like, how do I categorize this? Does it fit my mental model.

Daniel: Who's the issuer? Is a classic question.

Paul: Yeah. It's like, it's who is Satoshi, who is, we'll get to that I'm sure. Is he Elon Musk? So it doesn't fit the established mental model for a lot of people and a lot of things, but that's part of the challenge of it as well.

Daniel: A hundred percent. I think it's FUD that it's going to zero. And someone made a point, recently I listened to, was there, there's never in history being something with a market cap of $2 trillion, which I think Bitcoin's surpassed that by a fair bit. Now that's gone to zero.

Paul: If we were talking like hundreds of billions that's happened, but in the two trillions that doesn't disappear. So if it did, it would be the first time in history.

Daniel: So it seems that argument's kind of losing a bit of traction.

Paul: I agree. Like there are, I don't know if they're still doing it, but there were people who were literally plotting on the Bitcoin price. The amount of times it's been called, it's gonna go to zero and it's just, oh yeah. You know, it's forever. Forever.

Daniel: Yeah. In the early days it possibly could have, but it didn't. And it hasn't. And as you say, it's an economy that's bigger than many nations now.

Paul: It's a big, big asset. It's bigger than Google. It's bigger than silver. It's here to stay. That's great. My opinion.

Daniel: Awesome Paul, we were just talking before a bit about how the government and the IRD specifically are reacting to this wave. We're keen to get your thoughts. Obviously, I'm not gonna put you in any hot water, but we just wanna know, like, do you see it moving in the right direction? Do you see things with crypto going well, because my opinion on the tax laws, you know, compared to other asset classes, I've written the word draconian here, so yeah, we just, you said that?

Rory: That's a buzzword and a half mate. Set the tone because, you know, I've recently sold some Bitcoin to invest into a property. Bought new family home. As I was, you know, as that was happening, it wasn't a big amount, but I just thought, you know, the tax that's eligible in this.

Rory: For all of the pain I had to go through, you know what I mean, compared to another asset class, like if I had sold shares was pretty crazy. I was being taxed on my income tax, you know? And that's, I know that it's different in other countries, especially Europe. They look at it a lot differently.

Daniel: But, you know, I mean, what are your thoughts? Like, do you see things developing in that space? Not just tax, but overall, government view?

Paul: So the way I look at it is if you look at what President Trump's done and the leadership that's now coming outta the US compared to last year. I think that will force governments to rethink this at a regulatory level.

Paul: I should preface that we're saying that the regulators in New Zealand are incredible. Like I met two of them last night in the event. The access we have in New Zealand is incredible and we're in good, safe hands, the ability to get in and speak to them is unprecedented.

Paul: You just don't get that in other markets. And in my experience, they've always been willing to engage, really open to learning. You know, they have rules and all that sort of stuff that they have to adhere to. I think we are a little bit, laissez faire, I guess, in terms of what other markets are. And what I mean by that is got some guidance, sometimes we could do with some hard rules. There are countries who have, you know, gone deep down their taxonomy. So, you know, different coins do different things and are treated different ways.

Daniel: Oh wow.

Paul: We're not there. And I think we probably would benefit as a sector from being there. There is some work going on in a few of the departments around some of the emerging technologies. So tokenization, which is how you take a real world asset like a house and fractionalize it and have, you know, investors in that, whether it's commercial property, gold.

Daniel: Oh, incredible. Whatever.

Paul: Yeah. So that's a really big topic inside of crypto, and it's starting to be an emerging topic inside of the regulators. And 'cause it looks a lot like a financial product and it should be. They are certainly engaging in that and we've, we as a business have always tried to be acting like it's a regulated product.

Paul: We are on the FSPR, but it, we're licensed, but we're not regulated. And there's a distinction there. So we think it's good for the industry. It'll give, you know, investors certainty and all of the stuff that comes with it. We're also saying that along the way, why don't you fix up a few things like our custodial laws on that are just, you know, at odds with other nations and things like that as well.

Paul: Yeah. In terms of tax, like that's a really hard one. Having looked at stuff globally, it's clear that some nations view tax as a strategic tool and are open to using tax to attract talent, wealth into their nations. You know, Portugal's a classic example.

Paul: New Zealand doesn't seem to be on that bandwagon, and I think that's possibly a missed opportunity. You know, we've got golden visas, but that's not a tax incentive. It's like a come in and invest thing. I do think that's possibly the area where if it lined up with where a visionary government wanted to be or could really be a good lever.

Daniel: Yeah. I think having tax that treats this asset class the same as other asset classes would possibly be a good outcome.

Paul: Yeah, I agree. Reduce complexity and help understanding and all that sort of stuff, we've got a guy called Tim Doyle who looks after us as a company, but he also runs a business just helping crypto owners understand their tax because it's complicated.

Daniel: Yeah. It is very complicated.

Paul: And he's doing a stellar job of educating the market on that, but it's hard. And it's possibly too hard. I guess is the question, is it a challenge? No, it is really hard to do yourself. Because like you mentioned, you know, if your dollar cost averaging into an asset, you would have to, you know, just calculate your profit or the taxable amount on that.

Daniel: You'd have to go back each point the amount records on every transaction. Yeah. It's a quite a big hefty obligation.

Paul: Yeah. And look, there are softwares out there that can do that, and they can track your wallets and give you decent reports. Some of those are better than others. I think Inland Revenue will be clear that you can't rely on that stuff as well.

Paul: But again. It's just hard. And I don't think it has to be.

Daniel: Yeah, I agree. And it might actually be a good thing for now 'cause people are more reluctant to sell, you know? So it's good for the price. It's good to see there's adoption though. There's obviously some regulations around what's happening in KiwiSaver and Koura. You know, allowing holdings. There's another, there's a way you can get a hundred percent holding as well in KiwiSaver with a minimum balance of $50,000.

Daniel: Which, I can't recall the name of that one, but, do you see more of that happening in the KiwiSaver space? And what are your actual thoughts on ETFs and things? 'Cause it kind of breaks some of the principles of self custody, and not your keys, not your crypto.

Paul: Yeah. My personal view is if you come back to where I was talking about like if you can have some crypto in your portfolio, it's a great thing. So I'm really, really stoked that Rupert's been brave enough to do it. He was the first one, I believe. There are others out there, where you can, you know, they have some exposure to crypto now. And so, as an asset class, like I said, it's got a good Sharpe ratio, which means risk return is good.

Paul: It's semi correlated to de-correlated. So when other markets ying it doesn't yang, it's a good thing to have in your portfolio and you can just get outsized returns. And little insight, we're about to release a paper that looks at what ultra high net worth families are doing.

Paul: The key difference between them and everyone else is one, time horizons. They think intergenerational wealth. Like that's how long they think, which is get your head around that. And two, their allocation to alternative assets is quite high versus the rest of the market.

Paul: So alternate assets are things like private equity. So they're investing in companies and those are big checks. But they're investing in gold and they're investing in crypto and in relatively high numbers. Still in the 10% range. But they're into it.

Paul: And when I say high numbers, like the proportion of high net worth families that are into crypto is different from the rest of the world. They are embracing it at a level that's higher than the rest of the world. That tells you something. Back to wealth generation, which is kinda what KiwiSaver is about, it's about, you know, us generating wealth so we can live happily in our retirement.

Paul: Like, I think it's a great thing to have into the portfolio. Again, I've gotta be responsible about it if you are bullish enough on crypto to do it, go a hundred percent. You can do it through us, right? You can have an entire portfolio and self custody in the wallet, or however you wanna do it.

Paul: My view on ETFs, I think it's opened the asset class up to a bunch of people who are never gonna buy it. The complexity of a wallet or signing up to an exchange and they just weren't gonna do it. Is it an artificial wrapper? Yes. Do the purists hate it?

Paul: Yes. But you know, it's good, it's good for everybody overall aye.

Daniel: In the last two weeks, I think they've taken $8 billion, like $8 billion of Bitcoin has been taken out of the market. Just on the ETFs.

Paul: For the ETFs? Yeah, for the ETFs. Like it's, wow. It's helping the native holders, and a price mechanism.

Daniel: Yeah. You know, back to favorable tax, there is a point in time on the FIFO rules where it works and then there's a point where it won't work. Because if you get paid on the 50K threshold, you need some serious tax advice.

Paul: True. Exactly. Yeah.

Paul: I think, at a net level, it's just another way of getting exposure to it. I'm kind of pragmatic about that stuff. I know there's purists out there that hate it and good on them. You know, they're the ones who've got us to where we've gotten to. But I just think if you can just sit back and say, is the next 50 million people coming into crypto gonna get exposure via an ETF?

Paul: Does that upset you? You might not think about it. The way they are, I guess. Yeah, that's right. And there's just a large portion of the market that that's how they invest. And it's the thing that I wish they understood more is it means if you are the Canadian Pension Fund, one of the biggest funds in the world or the Norway Pension Fund, they have rules.

Paul: And buying Bitcoin isn't on the rules, buying ETFs is on the rules. So suddenly, a whole bunch of investors who were kind of shoehorned out of it are now eligible to it. And so that's a good thing. And then if you look at, say, Michael Saylor's Strategy company, that's about to go into the S&P 500.

Daniel: So you're gonna have exposure to crypto anyway if you have an S&P 500.

Paul: Yeah. Coinbase is already in there. Well, you've got some exposure to crypto already. It might be negligible, but you're getting there. And there'll be more and more companies like that. There will be, and they'll just have it on their balance sheet or have it like they're just becoming, Circle, which is a stablecoin provider.

Paul: Like they're, going gangbuster, like there's a good chance they're gonna make it into the S&P500 as well. So more and more crypto companies will start getting in there anyway so, you know, even those index funds, you're getting a slight exposure.

Daniel: Yeah, I didn't even think about that.

Daniel: Strategies are sort of a wild Bitcoin success story, eh? And they are going into the S&P aye? I read that they just had to have a couple of quarters of profitability, which based on their balance sheet should be happening.

Paul: Yeah. Or has happened. Well, it's a fantastic business model.

Paul: So, you know, if you don't know them, they're a software developer. They went, oh, AI's coming. We're probably gonna lose that game. But they had a few billion dollars on their balance sheet, and they started buying Bitcoin and then they started issuing debt to buy more Bitcoin. And he's just been doing that and, debt and stock.

Daniel: And stock. Right. Yeah. It's still fairly experimental. We should be very candid about that. It's a high risk strategy.

Paul: Yeah. To say the least. But they are now one of the bigger Bitcoin holders on the planet. Those guys. And about 3% I think.

Daniel: Yeah. It's significant. But their performance has been rewarded. It's cool. And just hopefully they're all set up for the next potential winter, if there is one. You know, they've got the right safety mechanisms in place. That's the biggest question. Can we stay liquid?

Paul: Yeah. What happens when price goes down?

Security, Self-Custody, and Getting Started

Daniel: I wanna know who's gonna move in New Zealand? What public companies are going to bring this into treasury? You know? 'Cause Strategy was the first, Micro Strategy when they started it. And now, you know, over a hundred companies in the US and around the world.

Paul: I think a couple in Australia that I researched. I dunno about the big companies that are talking about, like, I really don't, but I do know that some small businesses have been doing it in New Zealand for years. You know, I was fortunate enough to talk to a client of ours who was in a really hands-on industry like painting and, you know, that sort of stuff.

Paul: Been accepting Bitcoin as payment since 2013.

Daniel: Wow. Brilliant.

Paul: And I don't know if he or she has been hanging onto it, but it's like pretty cool if you were.

Daniel: Absolutely. So in a way, I think there are companies out there, well I know there are companies out there that have been doing that.

Paul: And so in a way they've been doing the Strategy strategy for a while and that's incredible. Almost like the retail market, which is the backbone aye, so it's, yeah interesting.

Rory: I wanna take a second, Paul, to talk about, like self custody and how you see that evolving over time. 'Cause for me, you know, as a smaller portion of my portfolio holder. That's always a big concern of mine, you know, of how to actually self custody safely and what is the best method. So I got given a Trezor wallet from my friend about five years ago. Just use that since, worked just fine.

Paul: Yeah. So look, hardware wallets, which is what Trezor is, a more secure cold store wallet than a hot wallet. So hot wallet's always kind of online. So think of the apps on your phone. They're always online. And that just carries with a little bit more risk because you could be hacked. Could be hacked. Someone could take over your phone. Or the screen share. Get your passwords like it's possible.

Paul: Yeah. Whereas these encrypted devices, they're offline. You only put them, they only liven up when you plug them into your computer or however you're doing it. And they do the cryptography there. So, self custodial does come with responsibility.

Daniel: Absolutely.

Paul: Great power, great responsibility. And okay, Uncle Ben. So, you know, you do need to have a think about your processes and how you store your seed phrase, the passwords. All that sort of stuff. And, again, if you're thinking intergenerationally, there's quite a bit of thought that needs to go into that.

Daniel: That's right. Yeah. What if something happens to you?

Paul: Correct. Yeah. How do you recover that? And there are some good advice online on how to do that. In terms of, you know, you can, you got a 24 seed phrase, ones you get six to this friend, six to that friend.

Paul: You don't tell 'em obviously. And or you can use wills and trusts and all that sort of stuff.

Daniel: That's right.

Paul: Yeah. There's an interesting company in New Zealand called Everlasting Liquidity who, working on estate planning for people. So how you can when you unfortunately part ways with the world.

Paul: How you can pass your crypto wealth on. And so it's an active area at a lot of people are working on. That's really cool. Part of the answer sometimes is this thing called a multisig wallet. So that's having multiple people being able to sign a wallet. And you need say two of three to be able to sign it and one can be your lawyer, one can be an independent trustee, and one can be you or a family member or whatever it is. And so it's just another way of kind of reconstructing that sig, that password, the safety net. So that, you know, should something happen to you, your family can benefit from your toil, basically.

Daniel: Absolutely. Yeah. And why, for that obligation, obviously you've got your hot wallets, like you said, but are we gonna see, you know, any other custodians, third party custodians come into the market? Like, is that something you guys are gonna do potentially or?

Paul: Yeah, look, in April we got acquired by an Australian company called Swifty.

Daniel: That's right.

Paul: Yeah. And they operate a custodial model.

Daniel: Oh, brilliant. And that's an offline one or just a, they're unprotected.

Paul: They're a custodian. Cool. When you trade on their platform, they're holding the asset for you. I think, in the early days of crypto, that was a high risk strategy.

Daniel: Yeah. But on the wallet, on the exchange.

Paul: Yeah. But the hacks don't happen at anywhere near the frequency that they used to have. So that custodial model is becoming a much more acceptable way of doing it. And you know, businesses are getting better at it and all that sort of stuff.

Paul: So I think over time that the balance between security and ease of use will skew towards probably ease of use. 'Cause the user experience is still I would argue that the hardest part of crypto, like, what is this? What is this seed phrase? And you know, do I need to keep it? Well, yes, you need to keep it.

Rory: Yeah. Just the fear, right? I mean, there's a lot of fear behind, you know, if something happens, that's my whole, you know, good chunk of my net worth gone.

Paul: Correct. Versus, you know, you just feel like you're, obviously it's the safest it can be, but with your main banks throwing your cash there, you don't have to worry about it.

Paul: Correct. And so, you know that stuff's evolved incredibly in the last three to five years and yes, there are still hacks, but they're just like bank hacks. It's social engineering. They're not breaking our software.

Daniel: Give me your password.

Paul: Well, yeah, people are being fooled through, you know, LinkedIn ads or whatever it is that's going on. And that's no different from banking, right?

Rory: Yeah, it's an important conversation. I like, I'm sort of newly into Bitcoin. So I've just moved my KiwiSaver to Koura. I've got my 10% allocation.

Daniel: Rupert will be stoked.

Rory: Yeah. And I've got a Ledger and it's, you know, we're talking about security. It's sitting in my laptop bag. There's not a lot of crypto on it. It's still on the box and the seed phrase is in the box.

Daniel: You're waiting to be robbed.

Rory: Yeah, well if anybody tries to pull me up after this, you know, I can defend myself.

Daniel: It's so, it's important aye, and as you start building it and it becomes a bigger allocation regardless of the allocation, you don't want lose this stuff, you know?

Paul: Well, you need to, again, you need to think about that stuff and separate the device and the pin phrases from the seed phrases and I can't even be under the same roof.

Daniel: I was thinking about a fire. Yeah fire's a big risk.

Paul: Yeah. Sadly, this is a problem that has come up a lot and has been thought about, but you can get, I don't know what the name of it, but they can get these steel things, those little canister things. We need canisters or steel things that are etched with the seed phrase in so could survive a fire and they've tested it, you know, and bury that six feet deep.

Paul: Basically, and then, you know, there are people who use private boxes. What are those? Safe deposit boxes, you know, they put the seed phrase in like in a vault effectively to do that.

Paul: And yeah. But again, if you've got a few hundred dollars, not really a problem, but no. If you've got a few million, you need to think about that stuff and only you can. It's the answer for me is how much could you live with yourself losing. And if you get to that point, you probably need to have a plan around how you store that stuff.

Daniel: A hundred percent. Yeah. And again, we live in a world of AI where like, you just AI, how do I, gimme a plan. True. Yeah. And it'll be able to do that for you. Personal security and how you store that stuff is a big part of what you need to do.

Rory: Don't take that advice. David. One of the financier advisers here we call him a bit of a doomsday investor. And he bought a bunch of silver about five years ago and he buried it. Just cracked me up thinking about him digging a big hole. You know what I mean? Just, I love that idea, you know, for intergenerational and bury your seed phrase and a little treasure map.

Daniel: Yeah. Wouldn't that be exciting? Yeah. There are people who've done that, like it's a thing.

Paul: Yeah. Paul, I think one important thing I wanna talk about before we shut off is touching back to when we first met and our obligation as financial advisers. This is more about education, right? Than pushing a product. And Easy Crypto's really big on that. You guys have got a platform where you educate and you let people do their own research before they actually buy something. So, you know, it's good to make a disclaimer here and a message to all our listeners or our clients or potential referral partners.

Daniel: It's all about doing your own research because that's what's gonna help you, give you the confidence to hold long term. You know what I mean? Get educated so you actually believe in the product yourself rather than your mate telling you. This is a great investment. You know what I mean?

Paul: Yeah. Look like that's a great way of saying it. Like any investment, whether it's crypto or housing or whatever it takes conviction. And conviction should come from education. Hundred percent. So do research it up on Easy Crypto. We've got a place called the hub, hub.easycrypto.com. Which is kind of a knowledge base for, you know, what are wallets, how to do that, what's Bitcoin?

Paul: FAQs. Basically. And you know, as much as we can in a fast evolving space document, like we do that. Because we want our customers to be informed. And you know, it's not without risk. If you bought a house in, at the peak of 2021, you're probably a little upset now.

Daniel: Yeah. A bit gutted.

Paul: Similarly, you know, parking the last sort of six months, if you bought Bitcoin in the same time, you were probably a bit upset. So do your own research. Invest wisely, invest what you can. And again, just have a plan.

Paul: And that's for me the one thing I would really wish New Zealand's financial literacy was better around just having a bit of a plan around this stuff. And I'd love it to be crypto, but please don't, that's not an exclusive thing. You know, have a, don't sit in default KiwiSavers.

Daniel: Yeah. Don't, you know, do some research. You have to be, as a nation, we're a little bit passive around some of that stuff, I think.

Paul: Yeah. And we just need to be a little bit more active. Do a little bit of a legwork and it's harder, but staying poor is really hard.

Daniel: It's way hard. And I'm a father, I want this nation to be successful for my kids' sake. And so that, this is the kind of stuff it's gonna take.

Rory: Yeah. I remember us catching up how you were just getting your, I think it was your son into crypto. Yeah. He did pretty well.

Paul: Yeah. Awesome. Yeah. Has he sold, as he still surely. No, he, no, he did sell out. 'Cause he's going to university, so he sold his bits and he's investing in his education.

Daniel: Someone's investing in his education. So, you know, but that was part of it. And he'd done some research and, you know, he chose his coin and, you know, it was a big part of it.

Paul: That's fantastic that, you know, I think he was 17 at the time. He's experienced that now. And so for him, he's already kind of made the first leap and the next, the barrier to doing it again won't be as high. Exactly. You know, if the first time you do anything, whether it's buy an equity or buy a crypto or whatever, it's always a little bit freaky.

Paul: And then once you get comfortable with it, be responsible. You can buy for $50 on our platform. It's not a high barrier to entry. It's not like having, you don't need thousands and you still get the same gains. Right.

Daniel: Bitcoin goes up 10%, your 50 bucks goes up 10%. You'll experience that.

Paul: So, start is the, you know, I guess that's the one thing, and I know as financial advisers, you guys are doing this as well because it's fantastic. People reach out to you. But you've gotta start.

Daniel: Yeah, exactly.

Paul: Yeah. And so just start, do your research, have a plan, both in and outta the markets, and have a horizon that's appropriate. And you know, the lessons from the ultra rich are really clear. The lessons from the analysis are really clear. If you've got enough horizons under your belt, you're gonna do well as long as you're buying quality assets.

Daniel: Absolutely. Yeah. And, you know, take it from there. Awesome. And, yeah, horizons are really cool if you believe in the Bitcoin, $1 million a coin.

Rory: Oh, Michael Saylor.

Daniel: Michael Saylor or more than that even on some talks. Then although the market looks like an all time high right now.

Rory: Yeah. You're actually buying at the bottom if you can actually imagine. What's gonna happen over time. And if you believe in that concept, then you are buying at the bottom today.

Paul: Yeah. Correct. And there's a, it's a really flippant statement, but, in crypto, and I'm sure it applies to other assets. The best time to buy Bitcoin was five years ago. The second best time is today. Because, again, it's in a channel that keeps moving in one way over time. Over enough time. And that's the bit that, as someone who's an investor, that's the bit that matters to me.

Paul: And so will it duck and weave? Yes, it will. But, it's part of it. Expand that horizon. Volatility is actually a good thing. 'Cause it means the asset is moving. And it's got scope to go up and down. Correct. As an investor you don't want an involatile asset 'cause it's not keeping up with inflation, stagnant.

Daniel: Our psyche in New Zealand's a little bit scarred. I think, 1987 was probably a defining moment in terms of New Zealand investment history. A lot of people got wiped out and all of those shares and equities and all that sort of stuff.

Paul: Yeah. My mum was exactly the same.

Daniel: She's like, I'm never touching that stuff again. Just property. Just property.

Paul: Right. Yeah. And good for people like you. But times are changing now. Times are changing. Well, but again, like as a psyche, I just think we as a nation need to be better educated around investing.

Paul: If you go to places like Singapore, US, that's what they talk about. And we don't. It's really noticeable. And so having people become more aware of what the opportunities are, alternate assets, how they can do it, funds, housing, even housing funds. Right. You know, they get exposure to a sector.

Daniel: Yeah. So, I think that's part of the, what we do on a daily basis and just try and make people aware of the opportunities that exist.

Rory: Yeah. Awesome. Brilliant. Well, Paul, thank you so much for your time, mate. Your insights have been just really terrific and we look forward to hopefully having you on maybe next year and the year after that and just do an annual review aye, and just see how the business is ticking.

Daniel: Pull up the receipts. Yeah. Nah, thanks again Paul. Really appreciate it.

Paul: Alright. Thank you for having me along.

Daniel: Cheers, mate. Cheers. Cheers, cheers. Appreciate it man. Cheers. Thank you.