Transcript+
Welcome back to another episode of Wake Up Call. Before we get started, please like, share and subscribe to on ramp media channels to receive the best Bitcoin education and content in the industry. And also be sure to check out our latest research report titled Bitcoin the Emergent Asset class has arrived. This is a three-part series aimed at introducing important Bitcoin centric concepts to the institutional allocator world. Part 1 available now and LinkedIn. The show notes explores Bitcoins volatility and why it is a uniquely desirable characteristic of the asset that can boost returns and dampen volatility in traditional portfolios. Wake Up Call aims to educate financial professionals on the merits of the Bitcoin investment thesis. How this asset class represents both a threat to legacy financial service businesses and an opportunity to differentiate oneselves to retain and attract new clients. Hosted by Mark Connors on Ramp's Head of Global Macro Strategy and Rich Kerr on Ramp's President of Managed Wealth, this weekly show seeks to provide financial professionals the wake up call they need, prompt them to have an open mind with respect to Bitcoin, rethink their prior assumptions, become more educated on the topic, and learn from others who are already farther down this path. Wake Up Call is live streamed on LinkedIn every Monday morning and the recording can be found across on RAMP media channels. Now time for the show. All right. Well, welcome to Tuesday morning's wake up call. I think we're really excited today to be joined by Kristen Stroud, who is the founder of Digital Tax Council, who works with all sorts of clients and especially kind of focusing in on the family office space. And and then we also Speaking of family office are are joined by Matt Mcclintock, who is the founder and and executive managing director of Bespoke Group and they have a registered investment advisory, bespoke advisory. So we couldn't have two more distinguished guests to to join us on a post election show. Couldn't be more thrilled to have you both. So welcome and thank you for joining. US. Good to be here. Yeah, Yeah, it's great to have you. And, you know, this is a very, very exciting show and we were having some fun in the green room prior to launching the show today because obviously we've got, you know, significant news that has come forward over the course of the past week with a, you know, the 2024 election results starting to finalize. I'd say starting to finalize. I think we've still got some, you know, things that we need to suss out and make sure that everything is what it what it's looking to be. So Mark is going to talk a little bit about the post election results and how on ramp is thinking about things. But at the same point in time, we had a spectacular weekend in Bitcoin and it was really quite fascinating to watch. I was lucky enough to to have a little vacation with my family and and, and of course, both my daughters and my and my wife were just thrilled to be watching, you know, the Bitcoin price discovery as it was unfolding. And yesterday was quite a quite an interesting day for those who are joining us on the show. I'm sure that you were having similar experiences as as our family. So without further ado, I just kind of kick over to Mark. Mark, get us started here and and then we'll let Matt and Kristen, you know, be the stars of the show that they are. Perfect. Well, let's go pick up where you just left off about the weekend, the price move. So today's Tuesday. We haven't had a full week of digesting the Trump presidency wins, but for the next two or three minutes we're going to talk about about Bitcoin, it's price, it's adoption as if the election didn't even happen, but it did. So we think it pulled through some of the price action that we expected prior to the election. What you're looking at here is the on Ram terminal. And this is a pretty big wake up. So this is the biggest dollar move, as Rich alerted me in Bitcoins history was yesterday. It was about a 10/10/12 percent, 12% move. I think at one point intraday. But just to let you know, on Sunday night couples were talking and it moved up to 80,500. And I was like wow, this is really what we call price discovery. We may be moving in an area where people are exploring what the next level is and commodities always enjoy this. Well, that was Sunday night at 10 o'clock 80,600 it it waked up to 88,000, I think 500 yesterday. So yes, a lot is afoot. The game is afoot as as we like to say. But let's go back to Terra Firma. Prior to the election at the beginning of the year, I put out a report and my previous firm when we said let's look at 2024, to me, 2023 was about a changing of the guard. We called it from cargo shorts to federal courts. SPF is out. Judge Rowe's decision of August 29th set the foundation for the SEC to be forced effectively to allow the Bitcoin ETF. So three things we're going to drive price in 2024. According to many people, including myself, the Bitcoin ETF, it was a lock given Judge Rowe's decision on August 29th. And still, even though we've had a strong opinion was going to happen. We didn't know that Fidelity and BlackRock would have ETS that would get to $10 billion within months, 44 days and 73 days respectively, versus the previous fastest of 10 billion was the JP Morgan iShares, not iShares, JP Morgan Trust. It took 2 1/2 years. So things happen faster. And then now last week we just found out that the I Bid ETF has more assets in it than the Black Rock I Shares Gold ETF that was launched almost 10 years ago. So this is happening faster than we expected and we're still digesting and this is really kind of even without the election. And the second one is about the halving. The Bitcoin halving happened in April and we are just in that sort of convex part of the of the curve where it takes off, you know, in that kind of 6 to 18 months after to having Jesse Myers, a colleague here at Onramp Richard, my colleague wrote about it last night. That has nothing to do with the election. It is Bitcoin blockchain specific and that is incredibly important because Bitcoin was built to be outside the system. So that's why we're belaboring the point about Trump and what's going to happen, which we will speak to. But the groundwork was laid for Bitcoins price appreciation and adoption, regardless of who took office. And the last one is about Fazbee. So we have the crowd here to answer these questions on tax and and and compliance. But the Fazbee allowing fair value accounting was something that we thought was going to be big. We all know Micro Strategy took advantage of that to the tune of a 440% gain on the year by adopting a Bitcoin standard on their book. But Micro Microsoft is also entertaining it. So this is a whole point about from cargo shores to federal courts. We've gone from kind of the grifters to the adopters to the institutional engagement. Microsoft is considering adding Bitcoin to their balance sheet in the form of a vote next month. That was not on anyone's bingo card, as the kids say. So we've talked a lot about what was happening without the election, but now we're going to switch it to say the election does change everything as well by having the House likely and the Senate and a Republican presidency. Some of the bills that are put in place, like Senator Lummus doing a strategic reserve can happen. So I'm well through my 3:00 to 5:00 minutes. Rich, thank you for not giving me the hook. But I just wanted to say the election matters. It's a it's a advanced tailwind, but holy moly, we had a lot in place without it. Are you ready to secure your future with Bitcoin? At Onramp, we're revolutionizing how you can save for retirement. Onramp has just launched the industry's first Bitcoin IRA product with multi institution custody, designed to give you unparalleled security, transparency, and Peace of Mind. With Onramp, you can verify your assets on chain and protect them with the support of three independent institutions, reducing risks and enhancing security. At Onramp, we believe that Bitcoin is the most important asset of the 21st century. The hard part is securing it right. There are shortcomings with keeping your coins on an exchange, but also with setting up your own self custody arrangement. Onrep solves for these concerns. Our multi institution custody solution maximizes security and minimizes counterparty risk, ensuring that your Bitcoin remains securely in your possession and provides built in inheritance planning to ensure your family is protected as well. Onrep provides Peace of Mind for your Bitcoin journey, whether for your whole stack or for part of it, as a complement to your existing self custody setup. For more information about our services as well as our new Bitcoin IRA product, check us out at onrampbitcoin.com. So I'll kick it back to our stars here. Matt and Kristen to say on your side, what do you think any of the potential tax or compliance or wealth management issues have changed with the election and which ones are are not affected unless rich you want to sort of hand off there because you're. You're you're better at. Splicing the two. Maybe we'll start with Preston. What are? What are some of your observations and thoughts? Oh, so this is going to seem like I'm being pessimistic. And in light of all of this new and, and good news, I, I certainly don't mean to seem cynical, but I think as we discussed this, we need to keep in mind kind of an underlying premise that it takes a while for things to happen in Washington. And even with a unified Congress, presumably that's what we're going to have. Like, I don't think that that's happened since maybe 21, the first Biden's first term, even with a unified Congress and, and the president being, you know, of the same party, it things, tax regulations don't just get formulated in a dated overnight. And so while I think it's very important to think about these things, just keep in mind as we're talking about them that I think President Trump made a lot of proclamations of what he wanted to do. And given what we think the House and the Senate will look like, that is a reasonable possibility. But will it get done in four years? I mean, four years is a relatively short of time, but I do think that it's very encouraging. He is pro Bitcoin. It's interesting. I eventually saw this morning, for all the accounting nerds out there, the AICPA National Tax Conference is going on right now. And Maya McGinnis is the chair of the What is it Committee for Responsible Federal Budget, I think. And so I had not heard this take yet, but she said tax policy may not be as high on the Trump administration's priority list. So that's kind of an interesting take because I really thought, you know, given a unified Congress and this is a green light for him to get some stuff done. So we'll kind of see where that goes. I think everyone expects that. Yeah. Let. Me. Let me, let me let me interrupt, interrupt you real quick because I think you're that's an interesting I, I that kind of surprises me too. Yeah. You know, largely because I think that, you know, if you, if you were to pay it, have paid attention to the campaign messaging that had come along, right, The no tax on tips, the no tax on overtime, the no tax on on Social Security benefits and things on that nature. It seemed to me that that there was an illusion or he was alluding that there was going to be a fairly significant, you know, tax reform in some way, shape or form. So I'm somewhat surprised by by that, you know, nugget that you're sharing. Yeah, And you know, I don't want to speak out of term because obviously I'm, I'm not at the conference right now and I did not. I'm just reading this from the tax advisor. But I think she was also a little bit surprised. And I think we all expect that. So TCJA, the Tax Cuts and JOBS Act that was put in place in 2017 when Trump was in office previously. I think most people, most tax practitioners expect them now that he is president elected, a lot of those provisions that were going to expire will be extended. And and so I certainly that, you know, I don't think that anything has changed with that. It just I think one thing that that he may run into is this pressure of the, you know, the tax cuts are going to add to the deficit and we all already know that we've got this astronomical deficit. And so, yeah, I, I think that it will be interesting to see how much he he can get done in, in, in four years. But, and I don't mean to be pessimistic. I just want to, if people think that, oh, you know, January 1, things are going to change. I mean, obviously that's, that's not that, that you all think that, but I think that there are some people who think, yeah, let's go. It's going to happen immediately. Yeah, I think I agree with that. Kristen, couple of thoughts here. I mean, first of all, nothing happens in Washington quickly. And I think that is a feature, not a bug, frankly. The the reality is he doesn't have, they don't have, the Republicans don't have four years, they have two. That's right. Because in two years the entire House is up for re election, 1/3 of the Senate is up for re election. So that means, you know, with, you know, assuming that the Republicans have locked in the House, which I haven't checked the numbers, but it seems like that's where we're going. We've got it. There's a two year window where the Republicans will control both chambers of Congress and the White House. They've got to get a lot. And you know, if you look at Trump's wish list from the, if you look at his list of promises, the his list of priorities is as long as my arm is, you know, it's, you know, everything is the top priority. You got to pay for that stuff. And we see runaway deficits, runaway debt. You got got to pay for this stuff somehow. I, I do agree that we're, I, I think we will get some type of tax extension. I don't know that it's going to be just a carte blanche extension of the 2017 Tax Act. I think there's going to be some stuff around the margins, but it's going to, it's going to happen inside of two years. At the end of the day, First of all, every, every tax reduction act must pay for itself within a 10 year budget window. So that means that no matter what happens, it will be temporary. It will be just like the 2017 Tax Act was temporary. If there is a 2024 act or 2025 act or 2026 Act, it will be temporary. The devil will be in the details and we have no idea what the time horizon is going to be. So I think that to a certain degree folks need to plan with this. I with the fact that the 2017 Tax Act will expire at the end of next month, I mean at the end of next year, sorry, the end of next year. So the end of 2025, the 2017 Tax Act just goes back, we go back to where we were in 2016. So the time for planning to take advantage under the of the opportunities underneath the 2017 Tax Act, that's like right now, like right now and the window is closing. Will will it be extended? I think probably, but the extension will be temporary and they've got two years to get it done. What are the, what are, let me ask the two of you? I mean, I, when I look at TCJA, you know, and what's about to sunset, there's obvious implications on the estate planning side. You know, that jumps out at me. You know, I think that the bonus depreciation component also jumps out at me. You know, will there be an extension of that to inspire small business and or incentivize small businesses things of that nature. But what what are the things that that are really on on the table from a planning perspective that people ought to be moving you know, on right now knowing that that sunset is 12/31/2020 five well. I'd like. To speak first from the from the high net worth into perspective. Yeah, I. Started saying this is Matt's. So yeah, this is kind of the wheelhouse that we inhabit, you know, all the time, especially in a world of $80,000 Bitcoin when there are a lot more ultra high net worth people today than there were this timeless actually in the Bitcoin space. But you know, one of the features of the 2017 Tax Act was to double the what's called the basic exclusion amount or the the amount of wealth that an individual is allowed to pass under the federal gift and estate tax regime without without paying tax. So that the number in 2016 was $5,000,000 per taxpayer plus adjustments for inflation. The 2017 Tax Act doubled that from 5,000,000 per taxpayer to 10 million per taxpayer, again with inflation adjustments. So that means in 2024 the number is 13.61 million per taxpayer. That means Kristen's got a $13.61 million exemption. So does rich, so does Mark, so do I. If we're married, our spouse has that too. So for from a gift tax planning or an estate tax planning, if we were to be so unfortunate to die in this year, you could you know, a married couple could pass up to 27.22 million to their heirs or to other non charitable beneficiaries free of estate tax or free of gift tax. The first dollar above that exemption amount is taxed at the rate of $0.40 on the dollar. So 40% tax rate of every dollar above the exemption amount. The number next year is 13.99. So it's almost 14,000,000 bucks starting in January. But like I said, the 2017 Tax Act will collapse under its own weight if it does not get extended by Congress and signed by President Trump. So that means that we, you know, with barring a new tax law, the federal estate tax exemption will revert from 10 million plus inflation for plus indexing for inflation back down to 5 million for plus indexing for inflation. There are a couple of Silver Linings in this deal. And first of all, what Kristen and I talk to our our friends and clients about all the time is that this tax exemption is called the basic exclusion amount. But this exclusion amount that you have is an asset that you need to proactively leverage while you've got it. That asset will be cut in half by the end of next year or at, you know, after the end of next year. So use that as an asset. That's, that's silver lining #1 silver lining #2 is that to the extent you shift value out of your gross estate from a tax perspective during your lifetime under the current tax law, if the tax law does revert to a lower exemption in the future, the the transfers that were completed before the tax law sunsets, those are free and clear. There will be no claw back for transfers that were made during this 2017 Tax Act window. So the exclusion amount that you have to plan with is an asset that you need to think about using strategically and use it or lose it. And you know, if you proactively use it, the IRS cannot later come back in and say, well, now the tax exemption is lower. You owe retroactive taxes on that. One thing that the the final thing I'd like to say before I kind of kick it back to Kristen for a second is don't be complacent about the planning process. You cannot get a lot of really heavy lifting from an estate and gift tax planning perspective. You can't get that all done in a weekend. You get it. It takes months, many months to get these strategies designed properly, documented properly, get the asset valuations done properly, get the tax returns done properly. And these strategies are often additive. So one of the things that we do all the time when we're, when we're designing strategies for clients, we talked about, you know, first you start with just an outright gift. And there are a lot of ways to structure those outright gifts. They get complicated, but you can but that, but they add leverage into the gift itself. But you start with the gift and then you can often follow that gift with subsequent transactions in the form of additional structures in the, in the form of potential sale transactions, things like that. But you can't do it. Boom, boom. You've got to let these things kind of mature, let these strategies season if you want to stand a chance to withstand a review in an audit by the IRS. There the law is complicated and the the cost of getting it wrong is draconian. So affluent people who are kind of on the brink or maybe beyond the federal estate tax exemption, they better be planning right now because we don't know what Congress is going to do in 2024 or 2025 and beyond. But we know what the law is right now and we know that this law will expire at the end of next year. They better be planning right now. Yeah, and and and and the one you just did a a group. I'm sorry. Go ahead, Kristen. Oh no, I just in I the one thing that I the one thing I definitely want people who are on the your audience to be aware of. Sorry my dog is like in here with me and you know the joy of a Home Office that I'll have my husband come get him. So related to these transactions and the immediate future, and we can come back to this in a minute if that's better, but is the unsexy Rev Brock 2024 Dash 28 for cost basis of digital assets and this looming immediate 1125 like when we're talking about you need to be planning stuff like right now, literally like today, you need to, if you haven't already talked to your clients about this, you know, or for your own personal investments. People have US taxpayers have historically been allowed to use the universal method for accounting for their digital assets. And so without going into a lot of granular detail, there wasn't a affirmative like permission to do this, but it just wasn't prohibited. And so for in terms of planning out your gains and tax planning, you were allowed to not, you didn't have to adhere to FIFO, for instance. And I don't want to go into a ton of financial accounting and bore folks, but it does come into play and it is very important in terms of, you know, planning your gains for the year, planning losses, etc. And essentially the universal method allowed you to pretend that all of your assets were held in like one account and you could kind of specifically identify and specifically allocate certain units or of basis to certain assets when you had a transaction. And that's going away as of 1/1/25. And so if you've heard people talking about cost basis and FIFO and you're not going to be allowed to specifically allocate, there is a safe harbor provision that Rev Proc 2824 provides for, but you've got to get that on that now and you've got to do it before. But you know what, where are we now? November 12th, I mean, so less than 60 days to get that done and that will be treated as irrevocable. And so in line with what Matt's saying, there's this slightly longer term planning for next for you know in 2025. But then this is something, if you're going to take advantage of this safe harbor and this, I think, I mean, this has been in place for a while, I think since like June, but people just aren't talking. It's not sexy. People don't want to talk about it, especially when we got Bitcoin at, you know, 85 K. But but that's all the more reason that call one of us, call your financial advisor, call your tax advisor because you don't have much time to get that safe harbor election in place. Yeah. I think it's interesting that you mentioned that, Kristen, because you know, when you and I first met, gosh, what was it 4-6 weeks ago, you had mentioned that and I was like, I don't know that I had even heard anything about that. So you're right. I think it is a little bit under under the radar, if you will. So thank you for sharing that with the with the audience. And if, if you don't mind, could you repeat what that is called so that everybody can kind of take a look into that and make certain that they're they're doing well by their clients and and making sure that they're aware? Yeah. So it's, it's revenue procedure 2024 Dash 28 and you'll hear it referred to as like the safe harbor for the accounting method for digital assets and happy to share resources in that regard. And I've had a lot of clients recently reach out. You know, ideally, and I probably should have given this background before, I have historically done more compliance and I do a fair amount of consulting more, but I've historically done a lot of compliance and particularly international compliance because when I was in BIG4, I did all international. And so I'm easing into the like sexy world of Matt Mcclintock and the and planning, right? That's the stuff people want to hear about. But if you need help with like compliance or the nitty gritty or, you know, that stuff that I'm still doing, trying to kind of phase out of that. But right now it does become important. And you know, you got to get you can't plan without knowing what's going to be on your return and what you want on your return. And so the, the not the unfun portion, you can, you can come to me for that. And you know, I mean we really are kind of running out of time with it. But I have been doing someone off ad hoc analysis, basic basis analysis for folks. Ideally it would be part of your larger compliance, but given the short time frame, if you need just someone off discussion we can do that. Yeah, I think it's, I mean, here's the other side of that too is like $85,000 Bitcoin does make it kind of an attractive sale price for some people. You know, I get that. You know, it's like people who have low basis Bitcoin, you know, look, this is $85,000 per token worth of gain. I mean, that's some gravy. And I don't, I mean, I'm not selling right now. My clients that I'm aware of aren't selling right now because we can't understand where we are in the cycle. At least we where we think we are in the cycle. But you know, somebody's selling because a lot of people are buying. So there's their tokens moving, volume is high. And so there's a lot of, there's a lot of churn in the market right now, which is a sign of a healthy market. But to the extent they're individuals who are the owners of the tokens that are moving, they need to be doing a couple of different things. They need to be talking to people like Kristen to make sure that they're being intelligent about how they're allocating basis, which again, not sexy, super difficult to talk about unless you've had a whole lot of coffee on a Tuesday morning. But the other side of it too is they need to be thinking strategically from a tax mitigation perspective. It's like all that gain is going to be taxable income. They need to be planning to offset with some deductions. Either they got some losses to harvest and if they're in Bitcoin, they probably don't have a lot of losses right now to harvest, but they might have some other losses to harvest. Or they should be getting charitable. They should be starting to get some philanthropy planning and on top of their wealth. And that's one of the most exciting things we get to do with a lot of our clients in the family office space. I've got the privilege of working with some ultra high net worth bitcoiners, people who have, you know, high 8 figures to high 9 figures worth of Bitcoin. And they've become most, some of the most philanthropic people I've been privileged to know in the course of my almost 3 decades in this business. And it's, you know, to a certain degree, it's just, it's in their economic best interests to generate charitable deductions to help offset their gains. But really much more gratifying than that. Bitcoiners that I get to work with, they, they, they placed a bet early. They, they got into Bitcoin because they believe it's a better form of money. They believe it's this truly beautiful way of disintermediating financial transactions among free people. And it just so happened that they got in in 2010 or 2011 and they were mining it with a GPU on their laptop and they ended up with thousands of Bitcoins. It's like, holy cow. Then Bitcoin did what Bitcoin does and it mooned. And now they say, well, jeez, now I'm worth hundreds of millions of dollars. This is not, I mean, what am I going to do with that kind of money? I did really, what do I, what do I want that kind of money for? I don't want to give it to my kids. I'm not going to consume it. And so a lot of people that we get to talk to say, how can I make the world a better place as a result of the wealth that I've built? And we've been very fortunate to work with people who are making the world a better place directly because of Bitcoin through philanthropy to help generate charitable deductions to then offset their gains. It gets complicated for sure, but that's what groups like Bespoke is all about is trying to simplify that process and streamline it. And we work with people like Kristen all the time to kind of create like a, like the true, like a what, what operates like a single family office within the realm of a of a multi family office. Yeah, yeah. What a privilege, right? To be in the roles that you, you both are. I'll say this, I spent 33 years in traditional finance and, and I loved the work that I had the opportunity to to do to the best of my ability. But the one thing that I have to say is there's really something special about Bitcoiners as I've come to know them. They're very similar to an RIAA in many respects. They're very altruistic. They're principled in how they approach things. They're purposeful in their intent and to have that type of individual at the core as a client, I think is really, really powerful. And I don't know that many of the RIA competitors yet have fully woken up to who these people are and and what really drives them and why did they find Bitcoin? You know, what was it about them intrinsically that allowed them to find Bitcoin? Because they're really, really phenomenal clients. And we all, all four of us get a chance to share in, in, in meeting these unique people. And they're great stories. And, and, you know, to be honest, I think in many respects, they're underserved in the marketplace because people don't understand the complexity. Maybe that's a piece of it, but I think it's also recognizing that, well, geez, just because you have Bitcoin doesn't mean that your planning needs go away. In fact, they're amplified because of the return characteristics of Bitcoin itself. It's much more than that too though, Rich. I mean, it's like it's not just the asymmetric dollar denominated return value of Bitcoin. Bitcoin is a complicated asset. It's difficult. It's a bearer asset, which means it doesn't have a title, it's digital, it doesn't exist in the physical realm. It's infinitely portable. It's almost not quiet, but almost infinitely divisible. It's part of that divisibility is how it scales so beautifully, you know, down to the SAT. But it's it's really complicated and we are still, you know, look, Bitcoin itself is 15 years old. It's only 15 years old. And and really, as we were talking about in the green room, Bitcoin kind of in this current kind of in this current season of social awakening, if you will, it's four years old. Bitcoins Bitcoin whipped down below $4000 in March of 2020. So it's like to a certain degree, a lot of you know, and I've been in this game since 2017. So I, you know, I, I was, I came in right after the block size wars, right after SegWit. And so I've, I've been kind of around long enough to know some of that history. And I bought Bitcoin every week since that point. I bought $18,000 Bitcoin. I bought $3000 Bitcoin and then I bought like last week I bought $80,000 Bitcoin almost yeah. But the as far as becoming part of the social fabric now or the Overton window and then Jesse talks about the Overton window shifting quite a lot. The the Overton window is now wide open on Bitcoin. But traditional like professional service providers like Cpas and attorneys, financial advisors, family office folks, they're just now starting to wake up to what Bitcoin is. And unfortunately, they're waking up to it in terms of an $85,000 spot price. They say, holy cow, we've missed out on all these great returns. And now they're interested because they see the dollar dominated value of it. It will be a while before many of them understand what what is fundamentally different about Bitcoin and what is fundamentally different about Bitcoiners and what are their needs from a planning perspective. And that's why people like Kristen and frankly, people like me and my team who have been in the Bitcoin game long enough, ideologically, through the UPS and the downs, it's like we, you know, we get it. We've been here. And the, you know, the JP Morgan's of the world, the Goldman Sachs's of the world, they're going to ape in because they're going to see, they're going to see a market opportunity. But it's going to be inauthentic. And it's going to be, it's going to be poor service. Yeah. Yeah, it's interesting. I, I spend a lot of time speaking with various custodians, traditional custodians and they're they're, they're really struggling in many respects to try to understand their role in Bitcoin. You know, one, how do we serve this client 2, How do we talk about this asset intelligently? You know, 3, how do we monetize, right? You know, what do we want to be in this space? And I think that they're completely, you know, disoriented from one week to the next trying to figure out what is it going to be? Are we going to open up a casino here and you know, or are we going to get specialized and, and really kind of understand and have a point of view, a deep point of view to share with clients and help them? I find the asset management side. They're obviously moving into the ETF direction and rightfully so. And I'm glad that they're there and participating, albeit I don't think it's the ideal solution in terms of how to access it. But then there's companies like onramp, right, which we kind of look at Bitcoin to the points that you brought forward, which is this is a very complex asset. And it, it requires a not only a way to enter the asset correctly, but it a way to secure the asset properly. That allows you to mitigate against single party failures, to allow you to mitigate against counterparty risk because they're going to be all over the place. And so to the very best of your ability, how do you take those risks and, and mitigate them as best as you can? And you know, and that doesn't even cover off to what you were talking about, which is the jurisdictional risk. You know, how do you disperse the jurisdictional risk in a, in a digital asset? So there's so many really complex things that live in this space that the people you know that are listening to this show, they, they need to seek out guides and trusted people to actually have conversations with. And that's one of the reasons why we're delighted that the two of you are here because you've done the work and you have figured out, I think in many respects, ways to stand out singularly with your voice in the Bitcoin community, let alone traditional asset community, which you guys are obviously are very, very well versed in. So. Rich, I wanted to just jump in on the, on that note about what Matt and Christian are doing and highlight we kicked off about what the Bitcoin ETFs did and how it gave access to a broader group of people, even though, you know, we think there are better ways to own it for, for reasons we've shared. Fidelity started mining in 2014. They did the work. They built their own custodian. Operation they then you know, and then BlackRock, same thing. BlackRock spent time writing a white paper that no one looked at speaking about the asymmetry that you Matt highlighted. So the returns were there, but the institutions that are in it for the long run and for their own benefit, God bless them, they did the work to create the runway to support a business so they could all of a sudden have the fastest $10 billion ETF, which they got this year with Bitcoin because they created it. And what you folks are doing is allowing the individual and the mini institution to then get on board with this next phase of adoption and price appreciation as awareness increases. To your point, we're only four years into the public awareness of Bitcoin. So, yeah, what you're doing is analogous to what the institutions did and they're they're benefiting from that investment as well. Yeah, and I think, Rich, I think the point that you're making about the ETFs is an interesting 1. You know, I think the ETFs trying to find the right analogy for them, but it's like the, you know, maybe it's the gateway drug for people. I don't know. I mean, Bitcoiners understand that there's a fundamental difference between owning the asset and simply owning a pledge against somebody else's asset. So you have a paper claim or you have exposure to the price. I will tell you that we have a nuanced view of, of the ETFs. You know, it's like we own the underlying because we we want to own the asset. We're long that asset. We're also opportunistic about the market price appreciation pathway that least I perceive for Bitcoin. And so hopefully we can disclaim this. And this is not like financial advice or whatever, but you know, I liquidated a pretty successful position in a publicly traded equity Midsummer. I just, I got lucky and found that found NVIDIA early, exited NVIDIA around the top and I just went to a cash position on those holdings and I didn't know what to, didn't know what to put it in. And so it's like, well, I'm just going to sit on cash for the next 1218 months and kind of ride out the, the Bitcoin cycle or this, you know, the post halving cycle that I was anticipating and we maybe we're at the eve of now. But then I said, you know, that's kind of dumb. Why would I sit in a depreciating asset like cash at 5% when I think, again, not investment advice, but I think that Bitcoin is going to do better than 5% over the course of the next 12 months. And so I took that cash position and I went, I just put all that cash in the, in an ETF, in a Bitcoin ETF. And I was telling my wife yesterday, it's up 35% since I put that cash in there Midsummer. It's like, that's a better position for me than cash. I yes, I'm long Bitcoin for sure, but I'm also over allocated to Bitcoin by most reasonable standards. And so it's like, you know, I can rotate out of the ETF, I can rotate out within a trading day. I will not rotate out of my Bitcoin itself. And even if I did want to, it's a bigger hurdle, you know, to take it across an exchange and do all that and move the tokens around. I think that I'm just, I'm just long, I'm long beta on Bitcoin. And that's that's great. But, you know, the ETFs are an interesting opportunity for people who are new to the Bitcoin space, want to at least experience the volatility for all of its ups and downs, literally. And then hopefully that becomes the, the pathway to say, you know what, it's been cool having price exposure to Bitcoin. Now I want to own the Bitcoin. I don't want to rent my house anymore. Now I actually want to own 1, you know, and, and hopefully as the Bitcoin ETFs continue to gain traction and we hear micro strategy adding more to the books, we hear Microsoft maybe adding to the books. We see sovereign funds adding to the books. We see Argentina central bank mining in the lobby of the central bank building. We see pension funds buying Bitcoin. People are going to say, well, you know, maybe there's something to owning the asset beyond just owning a stock ticker that is correlated to the asset itself. Yeah. Yeah, you know, my biggest fear, Matt, is, oh, I'm sorry. Go ahead, Kristen. Well, I just, the one thing that I really would and I, I know probably many members of your audience already appreciate is this goes to the core of of on ramp and I think why I have such an appreciation for you guys. There are many ways to hold Bitcoin right as, as we've all been alluding to and referencing and as people come in and as there is more mass adoption, I think sometimes there's this, you know, they're certainly Bitcoin Maxis, right? And, and I would not consider myself entirely a Bitcoin maxi, but there's kind of this OG way of thinking among a lot of Bitcoin Maxis of, you know, not your keys, not your coins, and has to be offline and has to be in cold storage. And I think what Matt and I have talked about too is that there is certainly a place for that, right? But as you're doing the type of planning that Matt and his team do and that I am also doing, that might not be the most feasible means of, of, of holding Bitcoin. And I, there have been times and I think Rich and you and I and Mark have talked about that maybe Bitcoin Maxis get a bad Rep, right? Because it's like there's maybe inflexible in terms of custody and storage and things like that. And as more people come into the space and adopt the asset, I want them to understand that there it doesn't have to be all or nothing, right? And you don't have to, you can diversify even in terms of your custodial solutions, right? That's where on ramp definitely comes into I. Want to push back on this? I want to push back on this not your keys, not your coins narrative, by the way, because Full disclosure, I'm a sovereignty maximalist. I mean, I believe in sovereignty above everything else. Personal human sovereignty, but not your keys, not your coins, which was pounded into my brain in 20/17/2018. Look, that's cute and that was quaint. It rolls off the tongue. Not your keys, not your coins is a fun thing to say when Bitcoin is 10,000 bucks per coin. Maybe. It's certainly super cute when it's 500 bucks a coin. OK, that's great. Because now we can, you know, when we're, when we're using this as a medium of exchange to buy things on the Internet or to swap with each other for goods and services or whatever. That's, that's fine. But now when Bitcoin has transitioned, it's, I think Bitcoin has elevated from a, from a medium of exchange level of money to a true store of value form of money. And it's, it's not that, it's not that a hard money is all of its features at any given time. It's, it kind of follows a path. It starts perhaps as a medium exchange, then as more people are using that as a medium exchange. The design of Bitcoin is such that it will appreciate over time because of its scarcity, because it's because of its finitude. When the dollar is completely devaluing based on its its production rate, Bitcoin is going to continue to go up in dollar denominated terms. Bitcoin moves has moved by and large from a medium of exchange level of money to now a long term, long term store of value form of money. Gold is not much of a medium of exchange anymore. Gold is more of a store of value. Bitcoin is just that, you know, on steroids really. So now when we're dealing with an asset that has generational wealth impact, not your keys, not your coins, that doesn't work anymore. Because if if you are your own bank, that's the other adage is be your own bank. OK, that's great. When the Piggy Bank, when the total value of the Piggy Bank is maybe 100,000 bucks, that's great. It's fun. You can try, you can cross international boundaries with all your magic Internet money, that's great. But now what if it's 1,000,000 bucks? What if it's 5 million or 10 million or 100 million bucks? You don't want to be your own bank because then you know how how reliable is your transfer mechanism of the keys to that bank. If you are the only one who has keys to that bank and you have a stroke at an inopportune time, or you go down in a plane crash or you just get old and die, well, guess what? Nobody else is getting in that bank. So things like on ramp where you can have decentralized institutional supported multi signature control, so you don't have a single attack vector that can put the family wealth at risk. That is a huge natural evolution of key maturity in the Bitcoin space. I would make the argument that if you have more than call it low to mid 6 figures worth of Bitcoin single sig doesn't work for you anymore, you are no longer that's where your sovereignty will begin to break down. And the other thing I want to make, the other point I want to make, which is a lot of what we say in the family office space, especially around the estate planning context, is if you, if you have not done a intentional, legally defensible privacy oriented estate plan, you are not sovereign. Because when something happens to you, you have that stroke, you have a car accident, you die, whatever. If you haven't opted out of the probate process, the people that you love are going to be dragging you down to the County Courthouse to get a guardianship appointed over you. And some judge is going to bury your laundry in a public proceeding, and it becomes even more public after you die. So you might be a bitcoiner. You might be all about your sovereignty when it comes to the key material. But if you haven't thought through a process that ensures privacy for your family, you are not sovereign. Matt, I got work to do. I got work to do. You got me all fired up here. That's my gospel, man. Yeah, you're killing it. I'll share one more thing to the Bitcoin maxi conversation. Obviously I feel that I'm somewhat of a Bitcoin maxi, although I probably tone down the language a little bit because I one of my goals is, you know, in life is that everybody comes on board. You know, I want everybody to understand what you're talking about, Matt, which is, you know, truly being a sovereign individual. And you can't do that without sound money. And you know, one of the things that that that I think that a lot of people lose sight of when they are a bitcoiner is you have a responsibility to get other people coming over. And you know, as a human being, right, you have that responsibility. But if you believe so strongly in the network and you don't care about people, you still need those people to come on board. Well, I can tell you flat out with working with hundreds of thousands of clients, millions of clients at my prior firm, there is no way that those clients are going to come on board and operate a very, very small hardware device not. And I know that people will say, well, they will be, they will be forced to learn what they're going to deny that as long as they can, because it's not, it's not that it comes down to three, three things, right? Time to learn and understand Bitcoin, time to learn and understand those devices, inclination. Do I even want to learn about these things? And then, you know, ultimately time, inclination and competency, you know, and that's, that's the final piece of the puzzle. And so if we are stuck working with the devices and that's the mode that you have to be in order to secure this asset, well, you know, obviously you've got significant, you know, risks that, that Matt just spoke to, but let alone you, you, you've got people that are going to deny it for the next 5 years, you know, if not longer. And so why would you want to begrudge people that? The other piece is, you know, we now have retirement plans that are coming online and, you know, should we really be owning and I Kristen smiling and nodding, I see. But, you know, should we really be, you know, controlling these devices that have these assets? And there's some question and debate around that. And, and, you know, do we have a proper arm's length distance over those over that control? And, and, and frankly, let's be honest, what are the chances of losing that device? You know, and well, yeah, you can go and buy a new one, but what if you lost the the 12 or 24, you know, seed phrase? Or they malfunction. I mean, I have a just leisure retire to say this. Yeah, like a yeah, it won't power on sometimes. So I mean, it's not, yeah, it's not about scaring people, but it's about thinking through a little bit deeper, right? Everything needs to be thought through a little bit deeper. And that's, you know, part of the beauty of, of, of the Bitcoin journey on my side is I feel like, you know, what I thought was, was true, you know, a few years ago. I've come to learn and evolve my thinking. And that's a beautiful thing. Bitcoin is all about personal growth in my mind because I think that it inspires us to explore and that's part of human nature. That being said, I I know that we're kind of up against the the hour and I know that both Kristen and Matt are very, very busy people. I'm going to close by asking one question of each of you. If Bitcoin is indeed sound money and if it ultimately becomes viewed as true currency, is there the possibility that you know that we ultimately might see no capital gains on Bitcoin here in the United States? I know that other countries are moving down those paths. What is the catalyst that gets us there? I don't. I just don't know what that looks like. I've gone back and forth on this and I'll tell you, you know, for tax purposes, Bitcoin and digital assets are viewed as capital assets. And I think I have an issue with the IRS reading digital assets as capital assets when it's convenient and currency when it's convenient and you can't really have it both ways. And there are times when I think this is we're our, I don't know that we're ever going to get to a point where we can truly use it as a currency. And I know that's probably an unpopular opinion just because of transaction costs and speed and things like that. And there are other, I mean there's Litecoin and there are ways, but I guess I don't know that we will get to that point. So obviously, you know, I think, I think it's going to remain being treated as a capital asset and I think there's going to be a capital gain. And if it is a store of value, which I certainly think it is as opposed to a more traditional currency, then perhaps that's not inappropriate. You know, I'm all about minimizing and mitigating taxes, but I don't see that going away. I don't see the capital gain treatment going away. And and maybe it should. Maybe we should just figure out ways to creatively minimize. My my perspective on this is, I don't know, maybe, maybe a little bit different, but probably end up in the same place as Kristen on this deal. I think that I think that the path to Bitcoin really becoming a currency, I mean, now we're talking truly unit of account, medium exchange. I think first of all, just the algorithm itself, it runs counter to that narrative because of the scarcity built into it, you know, because of the halving cycles. And we're on this asymptotic path to 0 new Bitcoin, you know, by 2140 or whatever it is that that inherent increasing scarcity automatically lends itself to an asset that will appreciate in Fiat denominated terms over time. Why is that? Well, that's because Fiat is an inflationary asset, not a deflationary asset. And so I think, you know, to a certain degree, if we if we truly had a Bitcoin standard and Bitcoin did become a unit of account and a medium of exchange as a currency, then I think we're in Jeff Booth's world where the price of tomorrow becomes cheaper over time in SAT denominated terms. You know, we get to a disinflationary or deflationary cycle. I mean, I think to a certain degree that's like market utopia, which is aspirational. I just don't think it's realistic. I mean, we, you know, we are, it's not just the United States, It's not, it's the, you know, the consuming public is addicted to debt. The governments that we all inhabit are addicted to debt. Our society is run by debt. That's I just, I think that we will, at least for the duration of my career, probably the duration of my life and maybe that of my kids, we will live in an environment where Bitcoin will be subject to capital gains tax because the, the appeal of governments to be able to collect tax revenue on an asset that appreciates like Bitcoin has and like Bitcoin probably will, it's, it's addictive for these governments. And so you can't fund wars with Bitcoin, but you know what you can do? You can fund wars with capital gains tax collected on Bitcoin. And so I think that's the probably cynical reality, but that's my, that's kind of how I think about how from a policy perspective, how Bitcoin will be taxed. And of course it's subject to estate tax when you die, not just at the rate of 23.8 from a capital gains tax perspective, but at the rate of 40. So the the IRS would just as soon you not sell your Bitcoin, you just die with it. Yeah, Oh my goodness. Well, we can plan for that. I have to say, I could sit here for hours and just pick your brains because I just really think so highly of of the the work that both of you are doing and, and the knowledge that you have accumulated across your careers. Cannot thank you enough on behalf of Mark and, and on Ramp, thank you for joining us today. And if somebody is listening to this, whether they are a high net worth individual or family office or another advisor, how, how might they reach out to you to pick your brain on, on, on what it is that you do? And, and love to hear. Just closing thoughts on that, Matt, start with you and end with Kristen. Well, I mean, first of all, I'd be remiss if I didn't just give gratuitous thanks to you guys for what you do both, both of you, both of you individually, but also the work that you do at On Ramp. I mean, I've been a long, long time fan of On Ramp and its founders since the beginning. I followed that story. I've known those folks for a long time and really respect everything that you guys do in the space and the stuff that you do through the media to educate other people is, is powerful and is compelling. And I'm, I'm beyond honored and humbled to be able to share your, your spotlight. So thank you for that. There's a couple of different ways to get a hold of me and follow what we're doing at Bespoke Group. First of all, our website is simply www.bespokegroup.iobespokegroup.io because I'm a grizzled old Gen. Xer. I'm also on LinkedIn. You can find, I don't know exactly how you find me, but you just Google Matt Mcclintock at Bespoke Group. You'll find me on LinkedIn. I'm also on Noster at at Mcclintock. That's just A at and then my last name, which is on the screen here. And then I'm periodically on Twitter. I refuse to call it X because I think that's just dumb. I'm on. I'm on Twitter at Mcclintock under Score M and I'm somewhat active there. How about you, Kristen? So I'm a young Gen. Xer. I guess I'm technically a millennial, but I mean, my husband's 10 years older than I am and definitely identify with Gen. X. So I don't have a website. We've talked to the, I've talked to Mark and Rich about this. I still don't have one. I had a guy that was helping me and he kind of dipped out and so now I'm in the market for website development. So if you have any suggestions let me know. But I haven't really needed one honestly. I've just a lot of my work comes from word of mouth and so LinkedIn, I'm on LinkedIn, Kristen Stroud, Digital Tax Council and then I am on Twitter a fair amount. It's just the crypto tax lawyer. If you go over there and you see some true crime stuff mixed in, that's, that's still me. That's just my other kind of sad passion because I used to litigate back in the day. So and then Telegram, it's I'm also the crypto text, like I'm on Telegram. So yeah, thank you guys so much for having having me and and it's been phenomenal and very much appreciate all you're doing. Thank you both for sharing your expertise and everybody have a great week. I'm sure that who knows, maybe next week when we come back, Mark, we might be, we might be north of 90,000 and it would be shocking. It would, it would be enjoyable, Rich. But as I said, even before the election, we had a nice 110 base number for the end of the year. I think you're on. I think you're. On mute. Mute Rich, but we want to hear you. I, I just said, well, you know, we're all striving to become Kristen and Matt's next clients, you know, so we'll just keep pushing and. Including Kristen and Matt. Yeah. Including. That. Exactly. All right. Thank you so much everybody, and we'll see you next week. Thanks guys. Take care. Thanks for listening to this week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show notes inside your podcast app. Before we finish, a quick reminder that On Ramp Media is for informational and entertainment purposes only, and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. Visit on rampbitcoin.com/contact to schedule a consultation with one of our private Client advisors.
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