Transcript+
Thank you for joining us today. We're excited to bring you a brand new show from the On Ramp Media umbrella. Wake Up Call is a weekly show that will be streamed live on LinkedIn every Monday morning. To catch the premiere of each episode, follow On Ramps LinkedIn page and add Wake Up Call events to your calendar. After the live premiere on LinkedIn, we will distribute each episode across On Ramp Media's podcast channels and YouTube page. Wake Up Call aims to educate financial professionals on the merits of the Bitcoin investment thesis, how this asset represents both a threat to legacy financial service businesses and an opportunity to differentiate oneself and retain and attract new clients. Hosted by Mark Connors, Onramp's Head of Global Macro Strategy, and Rich Kerr, Onramp's President of Managed Wealth, this 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. Mark and Rich bring a combined 60 plus years of experience across traditional markets and financial services and will share their unique perspectives and how their peers and colleagues can approach the realm of Bitcoin. Wake Up Call will feature guest from various backgrounds and industries. Will also share their own journeys to Bitcoin and how others can get up to speed. Now time for the show. Well, good morning everyone and welcome to Monday's wake up call. Today we are joined by our Co host Mark Connors and then of course we have Ralph Gibran who is the managing partner of On Ramp. Mina And Ralph, we are delighted that you're joining us from the United Arab Emirates. So welcome back from your long travels to Canada and glad to have you today. But before we get kicked off, I think maybe we'll kick it over to Mark because there's been some really interesting developments that we'd like to kind of hear some of his early thoughts before we kind of dig into some of the interesting things that you're working on. Ralph. Yeah, it's a pleasure to be here. You bet Ralph, as as Rich said, we're very excited to hear what comes from your travels and just your home base there in in representing on ramp and Mina because today's, you know, headlines are global. We are definitely US focused for a good reason. Only 6% of population, but over 42% of the equity valuation and probably even higher when you look at bonds and all securities and assets. So but it's about China. So the Chinese equity market, the CSI 300 is up as much as 8 1/2 percent today unopened. Now the the AD Rs in the US steel trading China's close obviously up 25% Ralph and Rich on the week. Imagine if people woke up and said the S&P or the NASDAQ is up 25% in a week. I'm not sure that people would be happy. I mean, some people would be, I'd be a little nervous about how and why did the valuations or prices or earnings go up that much. And so that a little bit of a tease question, a little lead up for me to say we all know why it happened. We talked about a little bit in our roundup. China entered into a stimulus in a series of steps over the past week that we haven't seen since 08. And you know, we're not fear mongers. We don't drop stuff to get clickbait that is relevant. One of the major reasons the EU global economy survived O 8 was because of the expansion of China as a trade partner. Their GDP grew from, I don't know, 1.3 trillion in O2 when they entered the WTO World Trade Organization to I think it's over 17 trillion. If I'm give or take a trillion, don't call me a liar for a trillion guys. But that's slowing. And in dollar terms there like flat over the past year, you know they're up 5% in yuan terms, but they have put in a couple 100 billion / 150 billion into the banking system to support it. They have all but ripped the need for the banks to have reserve ratios. You know, we all know that banks don't have your dollars. They keep 5 or 10% of them and lend the rest out. The amount that the banks in China are supposed to hold I think was cut in half. So there's a problem there. And they're trying to accelerate the economy by making it easier for banks, which is risky because now banks have less collateral. They're injecting money. And what they did also, which is very like O 8 in the US, is they took these short term loans that that people have with the government overnight and they pushed them out. They then made them medium term notes and if you remember in O 8 when the whole front end commercial paper everything was collapsing because of these, you know, silly asset backed things that were not really that were vaporware with bad mortgages. The government said, OK, we will guarantee corporate debt out three years. That's what we did for the first time. They, you know, you had investment grade companies not able to issue debt. But the government said anything up to three years is like an agency. We'll we'll guarantee it just like a, a government agency, you know, implied full faith. That's what China did. That's why it's like O 8. Their system is in disrepair. So what are people doing? They're they're putting their money into equities. All this excess cash is a safe haven. That's all it is. It's a safe haven trade. It's a debasement trade. So that's China just stepping back to more update. I mean, upbeat things that are out there. We know that BlackRock put out a, a piece last week, maybe the middle of the month, 9 pages, just like the Satoshi white paper. I don't know if that was a wink to, to the white paper, but it was on, on bitcoins unique qualities. And you know, given the fact that CPI is supposedly going lower, it's not because we know that the, that the rental part, you know, the shelter, etcetera, is still up five to 7%. So people are living a costly environment, even though the government's saying no CPI is 2 1/2. Everyone's life is more expensive, Rich and Ralph. I don't know in in where if you're feeling any type of increase in rents or standard cost of living where you are or is are the Emirates in a 2% environment rate? Well, no, in general, across the board globally, things have gotten more expensive. Now the ironic part when they say prices are going down, they fail to tell people that CPI is a percentage increase. So when CPI goes down, it doesn't mean prices are going down, it means the rate of increase of those prices is slowing down. South life is getting more expensive. You would need to see a negative number to actually see price go down. So as a metric, as you mentioned, you know, they take out conveniently everything that you need to actually sustain yourself, especially shelter, housing. And then, you know, numbers go down. Great. Everyone celebrates. And well, not everyone, only those that are issuing those numbers. But yeah, Mark, in general, everywhere the UAE has witnessed over the last two years a tremendous rise in property prices and in rental prices. Now, one of the advantages here though, is there's no income tax. So we actually keep all the profits you make, which allows you to have a better real return, right? Because they don't take taxes from your gain. So you end up with more than what you you originally would have in the US or in Canada, for example. But yeah, I would tend to agree with that. In general, life across the board is getting more expensive. But what's unique about the UAE, for example, is their debt to GDP ratio, which is nowhere near as high as the one in the US You're talking about 35 percent, 40% on average, maybe even a bit less. So they are much more constrained in terms of their fiscal and monetary policies. OK, so the costs are going higher, but they have a structural advantage versus taxes here where we know they're popping up like like weeds on your front lawn. Their new taxes. It's like, no, your tax rate in your property is fine, but now we have a new assessment. Whenever you go mail a letter, try to get your, you know, house reappraised. So there are there are new taxes in the US that are coming in to grab value, making the house not as good as, say a Bitcoin investment trying rich. I'm just scooting through what we had talked about before here and on any more news as far as as far as to the to the audience. And I think, you know, the only other thing maybe just look at is unemployment and then I'll kick it back to you. It's coming out Friday. I think it's going to be a non starter. The Fed is going to take any, if you see a revision lower, which they hope on, on, on claims, you know, that there were less claims and or more claims and less unemployment for previous months like that big August 817,001 year revision. Like talk about a bank error not in your favor. Like who does that type of miss? You know, that's why people aren't trusting the data. But unemployment will be there. And I think the, the, the reason this call focuses on the money printing in the debasement is because we think we're at a pretty big inflection point. The Fed for the first time in two years has gone into now or M2 is now growing again. So for two years we went into a tightening by the Fed that brought M2 down to the lowest levels in retracement that we've seen since 19341937 period when the Fed was again trying to figure out how the heck to deal with with a very unique period like we have now. But now we're going higher. That's why we think that asset prices are again going to be going higher. Why we think what Ralph's going to bring today to the forefront about why how Bitcoin can help absorb some of that loss of buying power. And so rich back to you. That's the news. Everything points to, you know, number go up on Bitcoin because there's only one tool the Fed and everyone has and that's printing to deal with all the issues. There's so much going on these days and and, you know, we won't talk about everything, but, you know, there's some there's some cool things that are happening in the world and even over here in the states, Ralph, you know, Louisiana, I believe, became the first state to to officially announce that they would accept Bitcoin for state services. And so that was kind of a cool little nugget in my mind and worth just kind of flagging. You know, the adoption of Bitcoin is starting to kind of become more ubiquitous. And so I always try to pay attention to, you know, those types of elements. But that being said, one of the big reasons why we have you here today 1, you know, because as Mark said, you know, you bring them a global perspective, right? Often times we're thinking about things in a very myopic way and what's happening in the United States. Everything's about the United States and we kind of get stuck in that framework and we like to break that because I think there's some really interesting things happening all around the world with Bitcoin. And you're kind of in a unique space, right, being over in the Emirates and, and, you know, having a perspective of, of how that is affecting the Middle East or North Africa areas. And, and so maybe you can share a little bit about your business and what you're focused on. And then we can kind of transition into the heart of this, which I, I think we want to focus on a, a paper. I don't want to call it a rebuttal because I think in many respects you really agree largely with the, with the, the core themes of what BlackRock had produced in their nine page paper. But you're going to be producing a, a document or a paper that that is an addendum, you know, to maybe cover on the things that BlackRock neglected to talk about. And so we'll hit on those two major areas, But maybe let's just kind of start with what what it what are you seeing over in in your side of the world? And, and how Bitcoin is, is, you know, advancing not just from a, you know, an investment standpoint, but you know, what, what, what's intriguing you over there in the Emirates? Yeah. So the Emirates and the general GCC area is quite unique. So when it comes to Bitcoin adoption, we are extremely early. What's positive is that the vast majority of people here are crypto owners or crypto savvy, so there is a very high level of sophistication when it comes to understanding the technical aspects of Bitcoin, but where it is lacking is the monetary aspects of Bitcoin. Now, the governments in certain GCC countries have been extremely forward-looking and have adapted regulatory frameworks to facilitate the flourishing of this new industry. So we are one of the few, if not only Bitcoin only advisory and educational platforms within the region. And we're looking to import some products from the US as well. We can touch on that later, such as multi institution custody. We feel that a product like that would align extremely well with the cultural aspect of the MENA region. So it has the highest concentration of Muslims within the region. And I don't know if you watch our podcast, The New Frontier with my Co host Harris Irfan, He's the expert with regards to Islamic finance. And the way he breaks it down is that Bitcoin is the hardest money and that, you know, Muslims should look into Bitcoin as the best form and the most halal form of money that there is. Just from a moral point of view, ethical point of view, it's worth just looking into Bitcoin. The market here when it comes to understanding the monetary properties of Bitcoin is still in its infancy. And that's why we're here. We're here to breakthrough the noise to showcase Bitcoin as not just a ethical asset but also a incredibly useful asset to own within your portfolio. Overall adoption of Bitcoin is present, especially in the developed countries here like the UAE. However, in certain other countries, Bitcoin is used more as a lifeline, I would say because some of these countries have witnessed hyperinflation, unofficial bank capital controls, and the only way to actually move capital within these countries is through some form of digital asset. Now there is a ongoing debate between Bitcoin and certain stable coins and the only reason why is because when you are in an environment, whether a conflict environment or a total economic collapse, it's more about a high time preference mindset. So you're looking to survive. And so the volatility of Bitcoin, even though we view it as a positive thing and as a feature for the individuals in such areas, it is a bit more nuanced. So you can't just say just use Bitcoin. They need, you know, some form of stability for day-to-day purchases, for day-to-day needs. So that's just a holistic lens of the region. So there's a bit of everything, developed countries, non developed countries, countries under conflict, countries suffering from economic turmoil. And it's funny because you see Bitcoins variety of use cases all within the GCC or the overall MENA region. For example, in Nigeria, a country suffering from hyperinflation, Bitcoin is the most used cryptocurrency. The people there rejected the central bank digital currency, the Nero, in favor of Bitcoin. And one of the reasons is because it's decentralized, it empowers them, and it allows them to move capital, you know, extremely fast and relatively cheap prices. Yeah, that's a that's an incredible recap of, you know, everything that's going on in in your side of the world. And we appreciate kind of a lens into that. You know, I I teased at the beginning, Ralph, that you have this, you know, report that's being released. It's a it's going to be released here in the United States, I think later today, if I'm not mistaken, which I think is, is outstanding. And everybody can get access to that. And we'll be, you know, sending that out through it out LinkedIn, so you can see that or you can visit on ramp Bitcoin and be able to get that report. But it's really a, a, a beautiful report in many respects because I think it it, it highlights the agreements that you that we have with the BlackRock 9 page report that Mark was referencing. It's called BlackRock, a unique diversifier and in which they kind of go over four major themes is as to why it's a unique diversifier and why people should, you know, potentially explore including Bitcoin into their portfolios. But you also kind of take it a little a step further and, and, and talk about the unique nature of Bitcoin and, and, and what's missing in the report. But maybe we could start just kind of highlighting or talking at the three of us with the audience about the things that stood out to us inside of the Black Rock report that that we do agree with that we do find interesting. So, you know, I kind of push, push that to you, Ralph, maybe to 1st, you know, kick us off. You know, what were some of the things that stood out to you? Yeah. So I'll just start off by saying the way I view this report isn't really a rebuttal, but I would view it as kind of like the fine print footnotes in your insurance contract. So the part that most people don't read. So that's that's just how I view it. I'll just put it that put it out that way. Now, what was fascinating to me when I read this report, it sounded like it came from a native Bitcoiner. A lot of the points that we truly believe in Bitcoin being uncorrelated to traditional assets, being decentralized, you know, being a solid store of value, All these things, you know, are table stakes for your average Bitcoiner. But what was really fascinating for me, and the part that I found the most interesting, is when BlackRock basically called out all other asset managers and basically told them that you have to look at Bitcoin through a different lens. Your previous models, especially the risk models themselves, don't typically apply or can't really be applied to this nascent and new asset. So that for me was the most interesting part about the report, because all the other stuff are pretty clear. But for an institution like BlackRock to come out and say that analyzing and studying Bitcoins risk the traditional way doesn't work. So it's a paradigm shift. So the models that were used beforehand to, you know, analyze risk for equity, stock, real estate, whatever they may be, cannot be applied to Bitcoin, and new ways of looking at Bitcoin should be developed. So that was the part that was most fascinating to me, to be honest. So, Ralph, when when you jumped, when you saw that, Thanks for Let me jump in here, Rich, was that something, how do you think the audience will take that? Because it's hard to say, you know, this time is different. That's kind of, you know, the the road to investment Hells paved with that statement. People would say. So when they said that, what were some of the attributes that that you said? Yeah, I I agree and I've seen it. How did they relay that? It's a regime ship and you can't use old models. Yeah. So I think they didn't say it bluntly. They just hinted at, you know, a paradigm shift in the way we review Bitcoin. But I think what they were trying to say and there's something I agree with. So Bitcoin in some form of ways is a risk off asset, especially when you look at the world and the way it's headed. There are uprisings everywhere. There are issues politically, geopolitically everywhere, all around the world and everything is interconnected to the current monetary system, which is the US dollar base system. Now, why is Bitcoin risk off? Even though some people would think of risk as, you know, just price action, But there are a variety of risk dimensions. And this is really prevalent in areas such as the West and Europe where people view the world in a more stable lens. But if you grew up in a more, you know, unstable environment, which is really 90% of the world, I mean, in terms of percentage of population, the West is just a fraction of the actual world population. So most people live under, you know, less stable situation. So they view the world in a in a different fashion. Now, when you look at Bitcoin from different risk dimensions, one of them in particular that makes it a risk off you is that is outside of the US dollar monetary system. Whether there are a variety of free floating fiats. At the end of the day, the system is based on the US dollar as the reserve asset of the world and is based on the Petro dollar to fuel the economies all over the world. So there is a very high level of interconnectedness across all asset classes. It doesn't matter. So they're all connected. Your house in Canada might be affected by an interest rate shift in the US because of the interest rate differential. So countries have to compete on interest rates to make sure their exports and imports are in line. So there's full integration there. So Bitcoin is a risk off because it for the first time ever, you can actually disconnect from that system and basically hide a portion of your wealth outside of it. It cannot be manipulated, it cannot be controlled, and most importantly, it cannot be debased. So sure, price volatility for some people is a problem, but the end goal is to not sell the Bitcoin, is to hold it for the long term to store your wealth. And if history has shown us is that it's been very successful at doing that. And the reality is when you have an asset that is not interconnected to the world, well, some people would go to gold, right? But gold is the bearer asset, which is like Bitcoin. And what people would do to disconnect it from the world, they actually buy the physical bars and hide them in their backyard or somewhere that no one knows about. But the reality is, you know gold is problematic in a world where you know there might be a war, or you might have to leave, or you might have to evacuate real fast. Well gold's hedge goes to 0 because you cannot actually move it across borders using it to purchase stuff. If you have gold bars, first of all, how are you going to break them into pieces? Second of all, if people know you have a gold bar in a war-torn country or in a hyperinflating country, then you're literally putting a target on your back. So Bitcoin alleviates all these risks. So it is really a risk off asset for a risk on world. At On Ramp, 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. On Ramp 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. On Ramp provides Peace of Mind for your Bitcoin journey, whether for your whole stack or for part of it as a compliment to your existing self custody setup. For more information, check us out at on rampbitcoin.com. I think that's spot on on that on that and I agree that BlackRock allude to the fact that, you know, you may want to have something that's outside the system. Jeez, like that's a big statement and and it's something Brian Kubelis, our chief of strategy, was chatting with us before the call. And he's like, hey, Mark, remember, you know, that's something that Zoltan, you know, wrote about in March of 22. I think just how we're going into a commodity market. Russia's sick of being on the SWIFT system. They're, you know, having their assets taken. There are charges to it. You know, banks charge 4% unbalanced just to move money around and and he said we're going to go to a commodity base and Bitcoin may be part of it. So it is there in the system. But rich, you know, this is a call for advisors. Does that message, which we think is happening, BlackRock is giving you more than a wink that this is an attribute that you should consider? Is that one of the things that advisors are considering or are they still looking at from just an investment opportunity? Yeah, I, I think we're early, Mark, you know, in, in conversations with advisors, they're, they're, they're really just gathering the education, right? And, and, and distilling, you know, their point of view around what is Bitcoin And, and you know, to the black rocks point, right, BlackRock was trying to nudge the advisor community saying, Hey, you, you really need to be paying attention to this. And, and you know, you knew, you need to consider changing your framework on the way that you're thinking about it. And and so, you know, this report that BlackRock produced, I really loved it in many respects, right? Because, you know, to Ralph's earlier point, it speaks to the things that we've been trying to talk, you know, to our friends and family and clients and you know, everybody about for a very long time. And it does a really nice job of, of framing, you know, why it's a why it's a risk off asset. You know, there's a, there's a beautiful chart and inside of the report or a table maybe is a better way to say it. That really describes, you know, S&P 500 gold Bitcoin, you know, all up against, you know, the, the, the most frequent or the most recent geopolitical events and how it responded in a 10 day move, you know, 10 day return basis and then a sixty day return basis. And, and how important, you know, or, or how relevant Bitcoin became, especially as a 60 day, you know, event horizon, I guess, you know, post the event, right. So US, Iran escalation, Bitcoin was up 20%. You know, 60 days after COVID outbreak of March 11th, 2020, Bitcoin was up 21% Gold only three, S&P 500 only two, right. So, you know, if you, if you keep going down and they cover off on, you know, the 2020 US election challenges, they cover the Russia and Ukraine invasion, they cover the US regional banking crisis. So they, they do a nice job of outlining how well Bitcoin performed and it and it really is a risk off asset in those scenarios. But I think to Blackrock's point, they're saying, Hey, you got to change those models. What they didn't say, I guess in, in in some regards and and Ralph really drove, drove this point home was, you know, if you're willing to change your model, right for risk on risk off you, you can't cherry pick what, what what you're going to do. It's not just that you're changing the model, but you also have to evaluate how the, you know, how the asset is held as well. And so, you know, I kick it over to you, Ralph, you know, to kind of, you know, just highlight, you know, that that missing element in what Bitcoin or what BlackRock, excuse me, was articulating. Yeah, for sure. So that was the funnest part about the report because there's like this big elephant in the room that's not discussed throughout, which is something we're used to in the traditional finance world. I mean, when you buy stocks or bonds, you never really ask who's the custodian. You never take a look at the custodian holistically and then study the custodian to make sure that you know there's no risk there. Because in stocks, bonds or whatever, even if the custodian were to go down, at the end of the day, they're just holding a digital record that says, Rich Mark, you own X amount of shares of XYZ. If the custodian were to go down, I mean, they could recreate that digital record relatively easy. And there's no concerns there on your platform. You're just going to see your, your stock. It doesn't matter what the custodian, you know, is doing in the background. But with Bitcoin, it introduces a new layer to asset management, which is the custody aspect, because before Bitcoin, you couldn't really decide how you wanted to custody your equity, your stock. So the paradigm shift isn't just a digital asset that's hard capped at 21 million, a hard form of money, but also it opens up this whole new industry or field, which is the custody aspect. Because Bitcoin, unlike almost anything else, can be held in a vast variety of ways. It's a spectrum and you can choose what you're comfortable with between 100% relying on yourself to 100% relying on a third party like a custodian, which is what the ETFs are doing. So the ETFs, almost 80 to 85% of the US ETFs are currently custody by one single entity, just Coinbase. And you know, when they talk about risk models, how can you not factor in the huge concentration of Bitcoin under one single entity? Just take a look at what happened with Mt Gox. When Mt Gox went down, it took ten years of litigation before the owners of the Bitcoin received back their Bitcoin. And they only received, you know, 8070. I don't know how much it is they, it was a haircut, right? They couldn't fulfill the entire 100%. Most recently FTXI Mean FTX said it had around 100,000 Bitcoin on the balance sheet when it went bankrupt. It turned out they had zero. And so you can't just recreate a digital record saying you have this much Bitcoin. Oops. Right, Right, Ralph. Oops, exactly like oops. And people were like, what? So what happened? It took two years for these, you know, investors to get back some of that value. And they got it not in Bitcoin. They got it in U.S. dollars, and they got it when Bitcoin was close to its low last cycle, meaning they've lost 3X to gains on those holding. So what's common in this little story is that in centralized custody, you always end up with less Bitcoin. And that's what history has shown Between Block Fi, Celsius, anyone who promises that they can hold your Bitcoin forever and extremely comfortably is not being 100% genuine because the entity at the end of the day involves other humans. There's mismanagement, there's mischievous activity, there's fraud, there's hacks, and these are all single points of failure. So that's something that BlackRock doesn't mention and doesn't factor into its analysis. Because when you point a light at the custody, you realize as more and more Bitcoin are found under one entity, well, the risk is actually higher than what they're saying. So I'll stop there and see what you guys think of that. But that's that's that's one of the little footnotes that they forgot to mention. Yeah. So in in other words, you can model the risk of the asset, but you also have to model the risk of how the asset is held. Exactly. You got it. That's spot on. Yeah. And they, and as you mentioned earlier, Ralph or maybe it was Rich, one of the highlights of the report is that they talk about the risk off the safe haven nature of it is from that it is outside the system. So they bring it to the table. They just don't put the food in front of you on the discussion of custody and how it should be in the asset because as you said, Bitcoin has rails that have never existed before. If you, you can own gold to safe haven, but you can't move gold on the, on the same rail system that the little that the, you know, the Gremlins did underneath, you know, Harry Potter's castle when they held all the gold down there, it was on the rails. Bitcoin has a rail system. It's the first one to have that. And you know, I guess that is maybe report #2 for BlackRock, maybe that'll come out later. But we don't have to wait for that. It sounds like sounds like you're going to have one coming out. This week, yeah. So on our side of the world, it's coming out tomorrow. And I believe in the US it's coming out later today during your time it's evening here. But yeah, that point, Mark, just to to develop a little bit more on that. So what I found interesting is that all these positives are attributed to Bitcoin and the BlackRock report, which is great. It sheds light, it brings in a lot of traditional finance player to better understand Bitcoin. The only problem with that, you know, they even mentioned decentralized, but that decentralization means nothing if the entire Bitcoin are centralized within the custodian. And on top of that, a lot of the, you know, like you said, risk off components of Bitcoin, which are what make it fascinating and provided with such utility, especially in certain areas in the world, like, you know, the ability to be extremely mobile, the ability to be, you know, 100% against the basement. That's problematic with the ETF because you cannot check whether they're using that Bitcoin for other purposes. Recently, Black Rock enforced or amended an agreement with Coinbase so that they would settle on chain transactions within 12 hours. You must think, why? What happened? You know, and it's kind of funny as well. Every time the Bitcoin price goes up, Coinbase acts like a circuit breaker. The platform stops working altogether. You can't withdraw, you can't buy, you can't do anything. So you start to question the integrity of the Castilian. I mean, Coinbase, when you really look at it, it hasn't been around for more than, I don't know, 12 years Maybe that's being generous compared to, for example, BNY Mellon, which is getting an exemption to custody Bitcoin. So you start to question why are they making exemptions? Why is a 200 year old institution now getting into the Bitcoin custody business? But the problem is you're still using the same model for an asset that you know is considered a paradigm shift in the way you hold it. So even that, you know, personally, I think will not work because at the end of the day, there's only 21 million of them. If BNY Mellon acts irresponsibly with the Bitcoin, you're going to have the same situation with FDX. You're going to have to, you know, go through litigation and then pay your the owners some form of Fiat currency, which by the time you get it has lost purchasing power or the price of Bitcoin, you know, has ran away and you're just stuck with a fraction of what you would have had have you held it correctly. So the way I view it, we need to decentralize custody. It is a decentralized asset and that custody needs to be decentralized. We need to erase what we've are accustomed to, which is OK. We need a huge vault, a bank where we put everything in it and just we surrounded with security guards. And then we pray for the, you know, for the best with Bitcoin, you can alleviate first of all, the cost and the risk by using something called multi institution custody, which is on the cutting edge of custody models. So we mentioned earlier on one extreme of owning Bitcoin is self custody where if done properly is extremely secure. However, there's an inherent risk and it is yourself. So you bear the entire risk. Your counterparty is yourself on the far right, you have these third party custodians like Coinbase, potentially BNY Mellon. So in this situation, what you're doing, you're putting 100% trust in an entity that just sees you as a number on their screen. And in the middle you have something called multi institution custody. I know you guys talk a lot about it, but multi institution custody, just for those who are not very familiar with it, basically is a middle ground where you don't. Have any responsibility and nor are you putting all the responsibility on one single entity. The counterparty risk is spread out across 3 separate entities. And if you want to take it further, you can even geographically distribute these entities and reduce geopolitical risk. And in the world where geopolitical tensions are rising, that might be the most ideal way to hold Bitcoin. And I personally believe that's how you scale Bitcoin adoption to the institutions. And they might be late to understand that, but personally, I think it's coming. Yeah, I agree, I agree. And and it remains on on the Bitcoin rails, right. And it, you know, and and that's one of the interesting things, you know, with the ETF is look, government, I don't know anybody that would disagree with this statement. You know, I know it's an interesting time and we're very polarized, certainly over here in the United States. But that being said, you know, there is a level of hostility by the government towards the people and you know, you have to look at that with an honest lens. And, and so, you know, the portability of Bitcoin, it empowers the individual in many respects, right? You can, if you don't like the terms of, you know, how you're being treated by your government or whatever, you can take your assets and, and, you know, move them to other economies. That being said, it, you know, you can't do the same thing with an ETF, right, that you lose some of those beautiful benefits of, of, you know, the Bitcoin design and how it's architected. And, and so in many respects, I think, you know, that's a that's an important thing. But with multi institutional custody, your, your Bitcoin is on chain. You can see that and every custodian, right, that you know, is in a quorum, you know, has a, a trust minimized nature, right? They, they, they play one specific role and that one specific role is to safeguard that key and based off of your instructions to turn that key right, that doesn't move the assets right. And that's the, the beauty of of multi sig, you know, structure, which is native to Bitcoin. And and so it is kind of a cutting edge technology and solution that that makes it that much more empowering for the individual and and better to secure ultimately their holdings over a long period of time and minimize that single party failure of the counterparty risks that you described. Yeah, and, and pulling on the whole looking the whole custodian thing, it remember a friend of mine bought his first house NE when you're in the Northeast, Ralph, you need a snow blower because you're not going to get your car out. So he did the right thing. He bought a house, got his family there, bought the snow blower, did that, that's great. But he didn't do the third thing, which he forgot because it snowed and he couldn't get his car out because there was snow in the driveway. He forgot to put gas in the snow blower. So he did two out of three things. Well, and that is reminds me when you were kicking through Bitcoins like you got to know Bitcoin, not crypto. Good for you. It's one you got to buy Bitcoin Bitcoin and then you got to custody it, right. So you need three out of three. You can't do the meatloaf. Two out of three ain't bad. Two out of three is bad. Unfortunately, in Bitcoin, you got to do all three. And, you know, just like back to the, you know, this story about my friend, whenever we do something new and we haven't done it, you're going to have to, you should really need speak to someone who's done it before because you're going to miss something. And like all those folks who left their coins on the exchanges, think of that. They were in Bitcoin early. They bought it, they did the right thing. Everyone thought they were, you know, an idiot in their community. Maybe I'm telling my own story. You know, rich, I don't know about you living around. If your neighbors think that you being in Bitcoin is, you know, is something that they can't comprehend, it's changing. But the point is they did the work, but they didn't play the long game by custody and correctly. And that's something that being in, you know, in the investment world, we're just not wired for, you know, I'm 35 years doing, you know, stocks, bonds markets, as you said, Ralph, just stick them in Bony. They take care of it. It's not the case here. As, as we say often inside of our company circles, you know, the risk of Bitcoin price going to 0 isn't the risk, it's that your Bitcoin position holdings go to zero and it's, and that just amplifies the custodial implications. And I don't know that the broader community has really got their understanding of where the real zero risk comes from. It's how it's held. It's it's either your own error because you're not, you know, comfortable with, you know, the technology of, you know, securing it correctly, or you lose your pass phrase or, or somebody you know, you know, comes in and and forces a threat upon you and you know, whatever right? Or the, OR the flip side, which is, you know what Ralph did such a nice job of describing, you know, the malfeasance or human error or whatever it might be in terms of, you know, the custodial risk of, of a single exchange or custody. So yeah. Yeah. And just to add to that real fast. So when you get, like you said, you nailed it, rich. Price exposure is one thing, but price exposure, Even if Bitcoin did 1000% it means nothing if you don't probably secure a Bitcoin. And I don't want people to get me wrong. I mean self custody is good. You can have a variety of flavors of custody, but each has its purpose. If you're looking for long term gains, you really want to alleviate yourself from holding that responsibility. You have people, and people need to humble themselves as well. Because you have people who are developers who've worked in tech their entire life, and all it takes is one mistake and their whole OPSEC goes to 0 and they've lost the Bitcoin. It's not, as you know, simple as you think it is. You might have spent 100 hours learning about it, but at the end of the day, you're human and and you know, one misplaced key or you know, something were to happen in natural disaster and something were to happen to your keys or whatever it is. I mean, at the end of the day, we need to diversify our custody. And if you're looking for institutions visors, you know, hide out with individuals, it's unrealistic to expect them to, you know, manage a 12 to 24 seed phrase or, you know, using a plastic device. I mean, especially that type of audience, they're looking for some form of white glove service. They don't want to deal with the technicalities. They want to know that they actually own it and they have control over it if they choose to move it. And they'd rather still trust institutions. But the key here is not one institution, but to spread out that trust across 3 institutions. Hence, it's a step forward in the way we custody because we are reducing the risk of custody by, you know, almost three times. And that, that trust piece is important, right? It's defining specific and limited roles of the custodian, right? And, and, and I, and I emphasize that because it's not the delegation of, of total control, very, very different things. And I think that you need to kind of, you know, do your work. If you're listening to this and understand the, I guess the beauty of, of multi sig and in more importantly, trust minimization and just defining limited roles that that are being played by a custodial partner inside of a larger quorum. That being said, we're kind of coming to the the close of our conversation today and we'll let everybody get on with their work weeks. But I have to say, Ralph, I really love the piece that you that you penned. Like you said earlier, it's not a rebuttal in many respects. We agree wholeheartedly with with much of the content in which BlackRock is brought forward. In fact, we're grateful that they did. That being said, it's an addendum. It, you know, it's, it's, I guess as we said, you can model the risk of the asset, but you, but you can't cherry pick it. You have to model, you have to model the risk of how the asset is actually held as well. And so that being said, we're really looking forward to the release of that report. And if people are interested, regardless of where you are, you know, if you're in the United States, you can go to on rampbitcoin.com. But if, if you're looking forward to that piece, please make sure that you see in, in the MENA region of the world, please make sure that you see Ralph's LinkedIn feed when he produces his report, I believe tomorrow. So, Ralph, we're grateful that you took time this evening away from family to join us. I think it's probably closing in on what, eight, 9:00 at night? I don't know. Yeah, it's almost 8, but 8. Almost eight, yeah. So there's no, you know. There's always time for Bitcoin. Yeah, there you go. There you go. Well, we're grateful to have you and, and, you know, gain your insights, you know, of Bitcoin and, and you know, speak about some of the work that you're doing. And, and so thank you so much for for taking the time this evening and, and joining us and for the rest of you in the audience, we wish you all a, a very productive week. And if there's any way that we can help you in your efforts, you know, don't hesitate to reach out to any one of the three of us. So thank you. Thank you for having me guys. Yeah, Ralph, pleasure having you. Thanks guys. You bet. Take care guys. 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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