Bitcoin Crash or Cash-In?: Crypto Strategies from a Decade Expert

Andrew Brill 0:00
Hello and welcome to Wealthion. I’m your host, Andrew Brill. Many of you have been asking you about cryptocurrency and how you can invest. We’ve got the answers for you coming up right now.

I’d like to welcome Brett Rentmeester back. Brett is the founder of our RIA partner with RockWealth Management. Brett and WindRock are the perfect guests to talk about how to invest in crypto since they’ve been doing it for over 10 years.

Brett, welcome back.

Brett Rentmeester 0:35
Thanks for having me, Andrew.

Andrew Brill 0:36
So 10 years, but crypto was in its infancy stage back then. What did you jump in? Because back then it was there weren’t a lot of people looking at it and saying, oh, yeah, this is the thing to invest it.

Brett Rentmeester 0:50
No, as much as it’s still the Wild West. And, and you know, skeptical in some people’s minds. Today. 10 years ago, it was truly a new experiment. What I’d say is out of the great financial crisis, we became concerned that the world was on a course of unsustainable debts and printed money. And honestly, we’re trying to look for things that could be a hedge against just all this money creation, knowing that over time, the more you create of something less value it has. And so Bitcoin came to our attention specifically. And it was interesting because it was somewhat of a hedge, in the sense that it had a limited supply that was going to be created. But it was an experiment, we kind of thought of it as the people do something and experimental phase of trying to launch something outside of the system. But as we got to know it better, we also understood a second component that it was truly a disruptive technology, based on blockchain that had a lot of applications beyond, you know, just what what Bitcoin was at the time. And maybe best stated, some people had called it a Swiss bank account in your pocket. So it was the idea that could people individuals directly connected to their money with no middleman, no strings attached, you know, peer to peer trustless system. So it was pretty powerful idea that more people have, I’ve understood over time.

Andrew Brill 2:11
Understanding that you can actually buy things with crypto these days, there are actually some athletes getting paid in crypto. But this is more of an equity at this point. It’s not something that I’ve heard a lot of people say, look, you’re not gonna go out and buy things with this right now. ventually, it could come to that. But it do you guys look at this more of an equity at this point to grow wealth?

Brett Rentmeester 2:33
Well, we kind of see it as dual purpose to the point in the earlier on on hand. At some point, this could be a hedge against a system of fiat currencies running into trouble, whether the dollar, the euro, the yen, etc. So it does have that characteristic, we might not be there yet. Currently, there’s still a lot of speculation it’s still correlates with equity markets and risk. So the second component of the investment is you’re invested in a disruptive technology with a huge network effect that’s growing. But it kind of goes through its natural booms and busts.

Andrew Brill 3:07
So we watch Bitcoin closely we watch a bunch of these cryptocurrencies closely. And look, Bitcoin went up to 74,000. And now it’s in the neighborhood of 62,000. When you buy, let’s say, one Bitcoin, and you break it up into Satoshis, and or any currency, a cryptocurrency and you break it up into smaller bits, at some point, it’s going to I guess, like the dollar, it’s gonna cost you either more or less to buy something, because the price of that will fluctuate.

Brett Rentmeester 3:42
Well, that’s right. You know, that’s absolutely right. Although, to your point about buying things with Bitcoin and make one comment, I think it’s Gresham’s Law that you know, bad money drives out good money. So I can only speak for myself but as an investor, I have Bitcoin I could spend, I have a Visa card that will convert your Bitcoin immediately on any purchase anywhere Visa is accepted. So So there are a lot of practical ways to spend it. But ask myself, why do I want to spend it I think a better money I’ll spend the dollar or the euro. So I think a lot of that’s going on, but But I guess the key is that the infrastructure is there, to make it practical, and use it for transactions if we ever came to that type of juncture.

Andrew Brill 4:23
I have Bitcoin and Solana theory and I have those all on my iPhone, on my stock charts. I follow them daily to see what they’re doing. What do people have to know before they invest at you know, right now Bitcoin, like I said, around 62,000 ether, which is on the Ethereum blockchain in the 3000 range. So Ilana around 131 40 So that’s a big range when it comes to those three I know there’s a bunch of different cryptocurrencies out there other than those three, what does someone need to know before they go and invest? Say, Okay, you know, I’m gonna put a chunk of money down, um, this particular cryptocurrency?

Brett Rentmeester 5:02
Yeah, well, let me just give one quick disclaimer as we jump into some of these names that you know, this is not to should not be construed as investment advice, and everybody ought to talk to their advisor, or if they’re looking for like minded advisor and they like this message, you know, reach out to WindRock. We’ll be using some of these coins as examples, not recommendations. So let me start with Bitcoin just out of the gate in the lead to the others. I mean, I think the first thing for people to understand is, Bitcoin blockchain is a revolutionary technology. It’s not a fad. It’s real. Just take Bitcoin, for example. The estimates are hard to get but but if I told you, there was something that was able to do over 700 million transactions globally over the last 15 years, and I had no CEO, no employees, no Corporation had never been hacked. Now individuals have been hacked wallets and exchanges, but the Bitcoin code has never been hacked, that would seem pretty remarkable, like an ecosystem that’s just flourishing on its own. And yet, you know, that’s what Bitcoin has done. So that that’s point number one of what people should know, this is this is real, it’s here to stay to, like other technologies going through an adoption curves. So you can go through, you know, your your innovators, to your early movers to the early majority, and we’re probably somewhere approaching the early majority, which you could say is where the internet was in the late 90s. But this technology is moving quicker. And third, if you look at the market capitalization or size of the market, you know, at about 2.3 trillion by some estimates, you know, the whole category would be a top five enterprise in the s&p 500. So the space is getting rather large. And then if you go beyond that, Andrew, before we get into the specifics on coin, you’ve got some countries starting to adopt it, the basket case countries, the ones that have really suffered under hyperinflation and depreciating currencies, El Salvador being maybe the best example. But there’s a lot of minefields. I mean, this is still new technology. So it’s uncertain, there are a tremendous amount of fraud there, simply because people aren’t knowledgeable and they’re trying to reach out to others to help them navigate. In the last thing I would just say, that people should understand is, there’s all sorts of terminology that’s complicated. It can range from NF Ts to RW A’s real world assets to defy to a term called Hottel H O DL, which hold on for dear life. The reason that’s become a thing in crypto, is because there’s extreme volatility that the average investor who hasn’t been in the space just isn’t used to. And so when things are going great, there’s this FOMO, or fear of missing out, bitcoins going to be a million dollars. And when things go down, there’s this panic selling. So you wrap all this together, it’s real technology, it’s here to stay. But it’s a complicated, fastly evolving space with a lot of danger that people just have to go in eyes wide open.

Andrew Brill 8:00
How do you, Brett, how do you coach someone through their volatility? Obviously, people want to see their money grow. And it’s going to be peaks and valleys. But it seems Bitcoin, you know, 50,000, and then it was at 14,000. And then, and I keep using Bitcoin, because it’s the most popular one. So I know that there’s a lot of different cryptocurrencies out there. But how do you coach someone through that volatility, when they want to, obviously want to have to hold on to their money and watch it grow?

Brett Rentmeester 8:28
Yeah, I mean, part of it, Andrew is education, what we’re doing right now, it’s if people understand the long term thesis and where this is going, they’re much more able to close their eyes and kind of weather a storm. That being said, I think the second piece of that is due to take some profits on the way. So if you had a certain amount of money, it’s up to the four or five times take some off the table periodically, when everything seems great. And that gives you a little more resilience, you know, to go through the cycle. Other than that, I think it’s sizing it properly and not getting yourself so deep in it, that you’re panicked at every, you know, daily swing.

Andrew Brill 9:04
So what is the proper mix, if you will, between equities and bonds? You guys do this for a living you. You have private equity stuff, you have all these different things that WindRock What’s, what’s the mix? Is it 1% 2%? And does it vary by person?

Yeah,

Brett Rentmeester 9:24
Yeah, I think first of all, it absolutely varies by person, because this, this is a high risk category. It’s a category we think even more conservative people should consider a small portion. Without putting numbers to it. Let me give you what we normally tell people put enough in that if it went up 10x 10 times your money, it would be meaningful to you, but not so much that if it got cut in half or more never recovered, lifestyle. So for some people, this is a play money experiment a little bit and let’s see what happens. And for people that are more knowledgeable or maybe a higher risk tolerance younger a longer horizon, you know, yeah, it a couple of percent of portfolio on up is starting points for discussion for sure.

Andrew Brill 10:08
So, what are the complexities that investing in the choices in investing in crypto?

Brett Rentmeester 10:16
Yeah, well, there’s a couple, there’s the vehicles, and then there’s the coins themselves. So it’s, we couldn’t maybe just start with the vehicles. I’d say, with the advent of the Bitcoin ETF, and the SEC basically approving it, it’s made it a lot easier for the average investor, just go on a Schwab account and buy it. Okay. So that is one way to do it. It’s the most simplistic but it kind of is Bitcoin centric, I’d say. The other way, that a couple other ways, there still are some vehicles that we refer to as closed end funds, things that own cryptocurrency, but issued a fixed number of shares, such that there are times where the price of what they own varies from the price that what you can buy it in. So a good example is greyscale had some funds, and Bitcoin a theory and some of these things were out of favor, and you could buy their fund and at one point, Buy Bitcoin at a 50% discount to what the fund owned. So there are still some opportunities like that today. The third would be we have an ability to go buy direct cryptocurrencies in the name of a client, you know, specific purchases of the kinds of names you mentioned. And the fourth, if people are looking for exotic, more complex things, like I want early stage coins that are launched, or NF T’s and those kinds of things. There are some private funds that are out there. Happy to talk about some of the coins and differences, but I’ll let let you take it here.

So

Andrew Brill 11:45
So those discounted funds, let’s say someone says, oh, you know, what, if I can get bitcoin and half of that is what in right now? Would they have to go through someone like WindRock or?

Brett Rentmeester 11:54
No I mean people can do a lot of this on their own? I mean, the honest truth is a lot of this can be done at the individual level. And I’d say, Andrew, one interesting comment is the true crypto believers want crypto to be separated from the system, right? Cryptocurrency was always meant to be this peer to peer trustless system where you didn’t need middlemen, what’s happened is Wall Street’s kind of getting its tentacles around crypto. And it’s pulling it all back into this centralized system where, okay, you’ve got Bitcoin, but you don’t really have control of it. It’s sitting in a fund and the funds sitting somewhere. So you know, that’s just a dynamic that’s going on as it relates to the space and how you access it.

Andrew Brill 12:37
You talked about coins, and and crypto currency, what are the different coins? And what is a coin?

Brett Rentmeester 12:45
Yeah, well, I’d say, you know, when the space began, it was Bitcoin. And bitcoin is kind of a monetary experiment. And then the second major coin was a theory and that you mentioned and that was kind of the first look at Hey, how do we take blockchain and make it applicable to businesses and be able to do business type things, so called smart contracts between people and things that will self execute of certain positions. And that opened up a whole new realm of how much you operate. And from there, we’ve gone down, you know, many verticals, that that would be beyond the scope of today, things ranging from real life, or real world asset kind of applications to decentralized finance, things that used to be done in the banks, that can now be done lending, borrowing options that can be done in these decentralized exchanges. So I mean, it’s a pretty wide range of applications at this point. And that’s part of the issue. There are at least 10s of 1000s of cryptocurrencies at this point, maybe more. So it’s changing, it’s evolving. It’s such a dynamic ecosystem. So it requires staying on top of it. And it’s hard for a lot of people to do that. And I think the risk is people kind of chase the hot thing, and don’t step back and have the right framework and how to approach you know, the space,

Andrew Brill 14:06
Which with each different coin, using its own blockchain, is there a way for these blockchains to talk to each other? Let’s say, I invested in Etherium and else is invested in Bitcoin and I want to peer to peer purchase something from them. Can these blockchains talk to each other or do business with that person?

Brett Rentmeester 14:29
That’s right. Well, yeah, it’s a great question. It’s this is very analogous to a lot of technology role rollouts. Historically think of cell phones, there was a time where all these little cell phone networks all over, you know, you were traveling and he had to roam because he had ATT or Verizon, but they didn’t talk to the little network in Michigan where you were driving through. So over the years, cell phones, cell phone networks did exactly what you said they found a way to connect and be interoperable that is under way to currency. So not perfectly. But there are technologies, there are platforms that are solving that issue. And there are ways to so called move from one Chain Bridge from one chain to another. It’s not quite as seamless as it will be in the future. But I think that’s the vision for the space.

Andrew Brill 15:15
And I guess at some point, they’ll have to come up with the exchange rate, much like we do with money right now. Because look a few rooms at 3000 bitcoins at 62,000. Obviously, one to one correlation is unfair to somebody. So they’d have to come up conversion rate,

Brett Rentmeester 15:30
That’s right, although keep something in mind. I mean, the beauty of crypto markets is they price every second every day and never sleep, right. Whereas our stock market closes, you know, certain times and opens at other times crypto is going all night long. 24/7 There’s always a price. So when you’re if you were converting from say Bitcoin to Aetherium, there’d be an exchange rate at any, any second of any day. Any holiday any weekend. So I mean, that is kind of the brilliance of the whole system.

Andrew Brill 16:01
Is now, Brett, a good time to get into crypto. You got in 10 years ago. And we’re looking at the prices now it was a good time to get in, although not a lot of people thought that is now a good time to get in?

Brett Rentmeester 16:13
Yeah. Well, I mean, certainly we have to acknowledge that Bitcoin as an example of the space as a proxy for the space has moved a lot, as you mentioned, right, we hit low 70 Some $1,000 recently, last summer, we dip down to almost 15,000. So that’s pretty good, pretty good move in a short period. That being said, I mean, history is only as good as you know, being a guide, it’s not perfect, but so far, Bitcoin in the Kryptos have gone through a pretty distinct kind of pattern that has revolved around Bitcoin in this the so called halving of every four years, the inflation rate of new Bitcoin released getting cut in half. And historically, one of the best times to be in crypto is in that 12 to 18 months, broadly speaking, following the halving, we’re right at the halving, I mean, within the next week, perhaps. So by historical standards, the answer would be yes, you haven’t missed it, this is still a good time. But on the other side of the token, we certainly can’t ignore the big run up, that’s happened. So I think with everything, there’s a little caution, and maybe it’s you get in in waves instead of just getting all in at one juncture. And then you look for weakness. But as I said earlier, with the Hodel, hold on for deal that life, even in bull markets, and crypto 20 to 30% corrections are not only, you know, not only happen, but they’re common in the stock market. If you have a stock that falls 30%, you think the story is over, and it’s dead. But crypto requires a little different thinking because these things are just, you know, more mainstream. So yes, we continue to be advocates of including an in portfolios. But as it gets more expensive, we’re a little more cautious and a little more diligent and how we enter the market.

Andrew Brill 18:00
So with the halving event, Brett, I understand that it’s it has to do with the number of transactions that are added to the blockchain, over a given period of time, and when it reaches a certain number of transactions, they cut the production of the coin in half, as more and more people use Bitcoin. It those having events will be more frequent, other than for years, right?

Brett Rentmeester 18:28
Yeah, potentially, yes, potentially. Yes. Although, I think of it in kind of layman’s terms, that whenever the halving is occur, essentially, you’re reducing the inflation rate because even though there will only ever be 20 million Bitcoin, they’re not all released yet, there are still some that gets slowly released for the benefit of the people maintaining the system, the so called miners. So I like to think of it as whatever is out there is out there, and you’ve got this small inflation rate that periodically will ratchet down and inflate less and less. And again, compare that to currencies in the world, where we’re going to keep printing, printing, you know, so they’re kind of one is the inflation rates, decelerating, coming down, which should be good for value, the other the currencies, we just keep printing, and it should be more inflationary. So, you know, from a big picture perspective, that’s how I look at it.

Andrew Brill 19:19
All right, so let’s get back to WindRock, and I come to Brett and I say, I want to buy some bitcoin. How are you helping me through that? Or I want to buy some cryptocurrency How are you helping me through that?

Brett Rentmeester 19:32
Yeah. Well, listen, I think I think most people come to us looking for an overall strategy and cryptocurrencies fits you know, piece of that strategy. So you start with the big picture and kind of get down based on risk tolerance and a variety of other things to do cryptocurrencies have a fit and if so, how much and then you know, it is about the individual the simple solution is shirt go by the Bitcoin ATM at Fidelity or Schwab. That’s an easy solution, but not always the best. I mean, there are ways to own it directly, which, again, I gave you the example of the hardcore crypto, people want to own it directly in their own private wallet or custody, nobody else. People can still do that. But you’ve got to be tech savvy and make sure you don’t make a mistake or lose your password or your keys, so called keys, but you’re in trouble. So a lot of people don’t feel like they’re at that level, they want to be in the system, but they probably want to do something a little more than just owning the Bitcoin ETF. So that’s where a typical client might own some of these funds that are trading at a discount. And if they have enough money that they want to put in the space, we might open an account where we’re buying individual cryptocurrencies in their name, through a third party custodian, but held in private wallets for security for that client. So it could be you know, that whole range of options.

Andrew Brill 20:46
I want to ask you about the ETFs, usually, when we think about an ETF it’s a it’s a fund with a bunch of different equities in there. And when you talk about the Bitcoin ETF, can you explain what’s in there? Because it seems like it’s just Bitcoin?

Brett Rentmeester 21:01
It is just Bitcoin. It is just Bitcoin. And I think a lot of this Andrew is the result of regulators really around the world scrambling to try to keep up with this crypto innovation, right? I mean, in a perfect world, we’d all be able to trade all this stuff, everything would be tokenized, there wouldn’t be all these restrictions. But the regulator’s are behind the curve on all of this. And they’re kind of lashing out to attack certain things. And there are a lot of fraud thing, fraudulent things, so don’t get me wrong, there’s reason to put investor protection. And but because it’s been so slow, the only one that’s kind of met the muster, at least in the eyes of the SEC so far has been Bitcoin now Aetherium is up for debate, and people are putting an ETF application. So we’ll see what happens there. And then you’ve got, you know, like I said, 10,020 1000, maybe 100,000 or more other tokens that that could fit. So right now, I think it’s right to think of those as almost private investments, things that are kind of off the radar. The SEC doesn’t know exactly what to do with them. There’s still kind of infighting between the SEC and the CFTC the commodities exchanges of well, what is a cryptocurrency? Is it, is it this or is it that so as long as we have that regulatory uncertainty, it’s going to be a little slower than true crypto enthusiasts want to have the options you’re discussing.

Andrew Brill 22:19
You think that there’s a regulatory element to this, because the beauty of crypto was supposed to be peer to peer with no other interference. We agree on a price. I know how much it’s going to cost me in this particular coin. And I just go to you and we make a transaction. Do you see a regulatory role in all of this?

Brett Rentmeester 22:42
Well, I think the regulators do, because at the end of the day, I think that would be a great thing for humanity, that idea of we’re talking about two worlds, a centralized world, and a decentralized world. I think the future, the future of humanity, the future of freedom, a lot of things will be more of a decentralized world, the reason we have all these centralized institutions that are paying under control is because in the old days, we didn’t know how to trust each other doing transactions. So we needed a middleman, we needed a bank in the middle or a regulator in the middle. But this technology gives us a peer to peer trustless system. I don’t need to know who you are. Andrew, I know that if we transact and I release Bitcoin, and you receive it, the transactions done. I mean, it’s a different paradigm, but it is a very big threat to the financial system as we know it. And you know, maybe even the dollar in the Euro and the yen, as more people adopt this. So I think the big experiment to watch are some of these countries that are, you know, accepting bitcoin and other things. And to kind of see where that goes.

Andrew Brill 23:46
Well, you can find him at WindRockWealth.com. And I know that Brett, you have a lot of research on on crypto, you’ve been doing this a long time, you know, since 2014, I believe you guys first dipped your toe into the crypto world and there is a bunch of research on your website. And you can go to WindRockWealth.com. And there’s an actual tab that says cryptocurrency that you can click on right.

Brett Rentmeester 24:10
That’s right. That’s right. So that’s a great resource for people to not only learn a little more about us, but also cryptocurrencies from the basic 101 version to a little more sophisticated discussions on on the future.

Andrew Brill 24:23
So I think, you know, we all thank you for joining us and explain to us how do you invest in crypto and, you know, obviously, you got to be a little bit careful. And you can’t just go whole hog and say, Here’s my life savings and put it into crypto right now because it is a volatile asset at this point.

Brett Rentmeester 24:41
That’s right. That’s right.

Andrew Brill 24:43
Brett, thanks so much for joining us. You can find him at WindRockWealth.com. And, you know, thanks for being here.

Brett Rentmeester 24:50
Thank you, Andrew.

Andrew Brill 24:51
That’s a wrap on another discussion here on Wealthion and thank you for joining us if you need helping financial resilient please head over to Wealthion.com sign up for a free, no obligation consultation with Brett and WindRock and remember to follow us on social media for the latest news and information to help you invest wisely. And if you could like and subscribe to the channel, we’d greatly appreciate it and don’t forget to hit the notification bell so you can find out when we post new videos to the channel. Thanks again for watching and until next time, stay informed, be empowered, and may your investments flourish.