A crypto enthusiast once wrote on Reddit. Bitcoin is like winning the lottery in slow motion. Hi, I'm Rob West. That might be a stretch, but one thing's clear, Bitcoin and other cryptocurrencies aren't going anywhere. Today, Mark Biller joins us to unpack how crypto is moving into the mainstream and what that means for investors trying to make wise decisions.
And then it's on to your calls at 800-525-7000. That's 800-525-7,000. This is Faith in Finance, biblical wisdom for your financial decisions.
Well, we always come away wiser when Mark Biller joins us. He's the executive editor at Sound Mind Investing, a valued underwriter of this program. Mark, great to have you back. Thanks, Rob. Good to be back with you.
Mark, I often tell people that Bitcoin may be here to stay, but their money might not be given its volatility. But in your latest article for the SMI newsletter, you all take a different approach, and I'm excited to talk about this today. It's titled Bitcoin and Crypto Go Mainstream. What you need to know.
So let's dive in. What do we need to know? Yeah, Rob, I would say there are really two big takeaways from the conversation today. First is that there's a huge distinction between Bitcoin and everything else in crypto.
So at this stage, Bitcoin clearly stands apart from the rest of the crypto industry. And that first point is crucial that listeners hear that, separate Bitcoin from everything else in their mind. The second main point is Bitcoin has reached critical mass. It appears to be here to stay. And that's really due to two major changes in just the past few years.
One is that the regulatory environment has completely reversed. It used to be very hostile to crypto and Bitcoin. It's become very welcoming.
So as an example, Rob, when I last wrote a deep dive on crypto for SMI readers three years ago, I said that regulatory risk was an existential threat to the whole industry. Was the biggest risk to crypto investors?
Well, fast forward to today, and now we've got multiple Bitcoin ETFs that have been approved by the SEC, and we've got the first openly pro-crypto president sitting in the Oval Office.
So, there's been a complete 180 turn on this.
Now, really importantly, that shift in the regulatory environment and the approval of these Bitcoin ETFs has opened the door for institutional adoption. And that means we've got big players with big money and influence that are now allocating to Bitcoin.
So, I'd say those are the two big ideas, and it's definitely worth unpacking each of those a little more. Excellent.
Well, let's dive in.
So explain for us why you say in the article that there's Bitcoin and then there's everything else. Why is that distinction so important? Yeah, you know, Bitcoin's the oldest and most recognizable name in the crypto space. It's been around since 2008, and its market value currently makes up about 60% of the total crypto universe.
So it's clearly the 800-pound gorilla. It's got a global fan base, institutional adoption, widespread regulatory approval, and so on. You go to the other 40% of the crypto universe, and it's fragmented. You've got thousands of separate projects, a lot of which are competing with each other for prominence at some specific task or niche. And it's probably worth pausing for a second, Rob, to explain that while people often refer to cryptocurrencies and Bitcoin does have Attributes of a currency, most other cryptos are not currency-like at all.
That trips a lot of people up in understanding what they're even dealing with. What most crypto projects really are, it's really a lot more like startup technology businesses.
So, if in your mind you think startup tech business, when you hear about most other cryptos, it becomes a lot easier to understand that space.
So, to kind of just simplify this, it's reasonable to argue that Bitcoin has arrived while everything else in crypto is still in this prove-it stage. A lot of these projects won't survive and are going to go to zero, and that's what makes Bitcoin and everything else kind of an apples and oranges discussion. Wow, yeah, that's really helpful.
Well, I'm excited to continue to dive into this and talk about Bitcoin as an investment, what's changed there. What about the generational tilt in this discussion? Also, is this just individual investors, or perhaps is this bigger than that? Institutions and even nations? Mark Biller here today.
He's executive editor at soundmindinvesting.org, and we're just getting started. Stay with us. We work, we earn, we save. But is that all there is? The book of Ecclesiastes gives us an entirely new perspective on money that impacts our day-to-day lives.
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So glad to have you with us today on Faith and Finance. I'm Rob West. With me today, my friend Mark Biller. He's executive editor at Sound Mind Investing and underwriter of this program. SMI has done an article recently in their newsletter called Bitcoin and Crypto Go Mainstream.
What you need to know.
You know, this is a topic we get so many questions on. And so we're excited to take another deep dive into this topic with Mark Biller. We did one more than a year ago, but a lot has changed as Mark shared. And before the break, he said, Really, you've got to make the distinction between Bitcoin and everything else. And Bitcoin really is that investment opportunity we're talking about today.
So let's dig a little bit deeper into that, Mark. How are investors viewing Bitcoin these days? Yeah, the easiest way, Rob, to understand Bitcoin is to think Of it as digital gold, and we have to go back a little to explain that for the first decade or so of Bitcoin's life, that wasn't necessarily the view. A lot of early fans of Bitcoin really hoped that it would become an independent currency that you could use kind of outside the normal government money system to buy and sell things. And that view isn't completely dead, but I would say it's mostly dead at this point.
Instead, what the current view of most Bitcoin investors is, is that like gold, Bitcoin is a store of value that can protect your purchasing power against the debasement of government currencies.
Now, I realize it may sound crazy to call an asset that routinely drops in value by 50 or 75 percent a store of value, but the key here is that Bitcoin has scarcity built right into it, so there's A strict limit of how many bitcoins will ever be produced, and that scarcity gives it appeal to investors that are watching this continual debasement of fiat currencies by governments and global central banks.
So, today's Bitcoin investors like it for a lot of the same reasons that older investors have always liked gold: mainly that it's a separate asset class that can resist this debasement and hold its value while other forms of money become less valuable over time. Yeah, really interesting. There is, though, Mark, a generational tilt to this discussion, too, isn't there? Oh, absolutely.
So, when someone starts thinking about Bitcoin through that digital gold lens, it's a little easier to understand why Bitcoin holds a lot of appeal to younger investors for the same reasons gold has always appealed to older investors. They both see the potential dangers of currency debasement and they're looking for ways to insure against that. When you look at younger generations, younger investors, they're just more comfortable with digital assets. You know, they've grown up on the internet, transacting within video games and app stores and all that kind of thing.
So, it's not that uncomfortable for them to do the same thing with their investments in an online investing account. And let's face it, there is still a speculative aspect to Bitcoin that appeals to younger investors. What I find really interesting, Rob, is that the correlation between Bitcoin and gold has really dramatically increased. Increased over the last three years. And I think that that kind of confirms the shifting store of value use case.
And it also suggests that institutional investors are becoming bigger players in the Bitcoin space. Yeah, and that's really interesting. I know the article makes the point that it's not just individual investors driving these dynamics, that there's a shift happening even in the global reserve system. I'd love for you to break that down for us. Yeah, sure.
So, you know, at the same time that inflation has kind of pushed this currency debasement to the forefront of individuals' minds, the 2022 Ukraine invasion and then the subsequent freezing and then confiscating Russian reserve assets really sharpened the focus of foreign governments about the safety of continuing to rely on U.S. Treasury bonds as their primary global reserve asset.
So, a lot of governments had already been shifting reserves away from dollars and treasuries, but 2022 really created a new sense of urgency.
So, this voting with their feet dynamic has shown up pretty vividly in the price of gold, which has doubled since late 2022. And the old relationships that used to kind of govern the gold price with factors like interest rates and things like that, those have really taken a back seat. And we see See, government buying of gold through their central banks has really taken over as the primary driver of gold. And that's the context in which Bitcoin's acceptance by a growing proportion of global and especially younger investors as digital gold is important.
So it's true that central banks may not be buying Bitcoin in an effort to diversify their foreign reserves, at least not yet. But more and more investors who are longtime fans of gold are starting to diversify a little bit of that money into Bitcoin as a way of potentially skating to where the puck is likely going as opposed to where it is today. Mark, I know we could spend a whole show on this, but just quickly, how concerned are you about this rotation away from U. S. Treasuries as reserve assets?
I'm not particularly concerned in the short term, Rob. I think that some of that is natural. I do think that there could be a tipping point at some point in the future where that could be a problem. You know, right now, there just is not a great alternative. To the dollar for sure for transactions.
I think the bigger risk is with treasuries as the reserve asset. And that could be a problem if we continue to put in place policies, which include a lot of different things from tariffs to our deficit spending and so forth that make our treasuries less appealing. The impact of that, Rob, would be that we'll end up having to pay higher interest rates. And if we have higher interest rates on treasuries, that ultimately impacts individuals as they pay more for mortgages and car loans and so on and so forth.
So it's definitely something we need to keep an eye on. I don't see it as like a near-term kind of one day we're going to wake up and we have a crisis, but as kind of a slow-motion problem, definitely something we should be paying attention to. Yeah, that's really helpful. All right.
So tying a bow on this, who should consider having big Coin in their portfolio and who should probably stay away. Yeah, largely comes down to risk tolerance and then position sizing.
So if you are looking through that gold lens and you find gold as an attractive option for your portfolio, then it might make sense for someone like that to consider diversifying a small portion of that into Bitcoin. But that's where you want to keep the sizing small because Bitcoin is so much more volatile than gold.
So nobody needs to have Bitcoin, but if someone does want it and can handle the risk, the way to do that would be to potentially have a larger gold allocation with a small piece of that. diversified into Bitcoin. All right, and none of that is true. As you said very clearly earlier, for the rest of crypto, that still has the serious go-to-zero risk. By the way, you can check out the SMI ETF for some of this exposure to Bitcoin alongside the rest of the investment strategy provided by the team at SMI.
Mark, thanks for being here today. Always a pleasure, Rob. Go to soundmindinvesting.org, read the article, Bitcoin and Crypto Go Mainstream.
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Great to have you with us today on Faith and Finance. I'm Rob Wass. Looking forward to taking your calls and questions today. The number 800-525-7000. Again, that's 800-525-7,000.
All right, we want to know what's on your mind today.
So, if you have financial questions, this is the program for you. We want to help you process those through the lens of biblical wisdom. You can reach us at 800-525-7000. We've got some lines open. Our team is ready.
The calls will fill up, so don't wait.
Now's the time to call with your financial questions. Again, 800-525-7000. You can call right now. Let's dive in. We're going to begin in Harrison, Georgia today.
Hi, Thomas. Go ahead. Hey, Rob. I currently have an Agra 401 with a major financial institution. We're approaching probably about a million dollars in value.
Yeah. I would like to know if I can move the current funds into another custodian where I can get guaranteed interest rates. And resume contributing to my current employer 401, where I can take a much higher risk with my. ongoing investments. Yeah, it's a good question.
Generally speaking, Thomas, you do have to wait until you retire or separate from service in order to roll that out to an IRA.
Now, you may have some options within that 401k where you could, at the very least, you could take the portion that represents what you've already put into this point and get a lot more conservative with it, if that's your goal, and then continue contributing. And for that portion that is considered new money, you could certainly begin to direct that toward the more aggressive investment options. But you likely, and you would confirm this with your plant administrator or HR department, you would likely find that until you separate from service, you are not able to move that 401k out. Gotcha. I thought that was probably going to be the answer, but I figured let me talk to an expert.
Absolutely. All right.
I appreciate it. You know, what is your age, Thomas, if you don't mind me asking? And how far are you from separating from this employer? No, so I'm about five years from retirement.
So, you know, looking at 55, 56, so five years. Maybe a little bit stronger and helps. I'm out great company, but time to move on.
Okay. Yeah. I mean, so typically we would say it used to be the rule of 100.
Now it's 110 because people are living longer.
So if you take 110 minus your age, that's at least a starting point for what you might want to keep in stocks and then the rest in bonds.
So in your case, that would be 55%.
So 110 minus 55 is 55. 55% in stocks, 45% in bonds or fixed income. That would be at least a good starting point for what does it look like to begin to get more conservative and increase that fixed income portion over time, maybe add a little bit of precious metals. But keep in mind, I mean, even at 60, you still have a decades-long need for this money to last. I mean, you need to plan for this money to last well into your 90s.
And I think for that reason, you know, we want to outpace inflation. If inflation's running 2% to 3%, we're going to need to do better than you can do in CDs, at least based on the long-term historical trend. And so I think that's why you could make the case that you still want perhaps half or more still in stocks, even though, yes, there's a prospect of recession. And could we have some bumps in the road? Absolutely.
We likely will. We typically do. But the long-term trend, despite all the problems, the Great Depression and the market crash to 29 and Black Friday and the tech bubble burst and the 2007, 2008 financial crisis, despite all of that, the market has always moved to new highs. And so I think that does make a case for, okay, let me keep a reasonable amount in stocks inside the investments available in my 401k, perhaps as much as 50 to 55%, and then start getting more conservative with the balance. Does that make sense, though?
It certainly does. And one of the reasons of moving it to an outside with a little bit of safeguards is I was fortunate enough that I do have a pension also. I'm probably one of the last few or the youngest that's still got a pension, but I do have some pension out of that.
So it's kind of like I do have a little leverage there.
Well, that's great. Yeah. And I think that's even all the more reason not to get ultra conservative because between Social Security, whenever you decide to take that and your guaranteed pension, if you can establish a base of income that covers your lifestyle, and this is really money that you know can continue to grow, that would be there for an inheritance or maybe long-term care down the road, something like that.
Well, then you have the ability to take a little more risk because your bills are covered.
So, something certainly to consider. We appreciate your call. Thanks for being on the program, my friend. God bless you. Let's quickly go to Ohio Alyssa.
I have just a moment left, about a minute. Go ahead. Hi.
So my husband and I live with my father in law, and we need some repairs done on the house. And he offered to loan us the money, like because we're going to start paying for all the costs of the house. And he offered to loan us the money from his own retirement account. He's seventy years old. But the concern was if we have to pay back taxes because He makes about fourteen thousand a year from like retirement and or Social Security from his wife who passed away.
And he said if he takes out like thirty grand For us, then we would have to help him with the taxes on that, if that makes sense. It does, because there is no loans from IRAs. And so he would have to take a distribution, which means every bit that he takes out would be added to his taxable income. And so what he's saying is, because I'm going to have a bigger tax bill, because I pulled this money out and gave it to you, I need you to help me pay the taxes. Yeah.
So is that going to be a better rate? I know I feel silly, but than like getting like a loan to pay for the repairs that we need? It just depends on how long the payback period is. The problem is, I mean, let's say it's 20% in taxes.
So let's say we spread that 20% out over a five-year payback. How long are you planning to pay it back over? What period? I definitely would not want to do longer than five years, hopefully less than that. All right.
And is he going to charge you any interest? I don't believe so.
Okay. So you'd have a big bill on the front end, but it would be better over time because if you spread that 20% worth of taxes, you know, out over five years, it's going to be likely below the prevailing interest rate you would have pay on the amount that you borrowed.
So, you know, you'll pay probably, let's say, 7% a year, five years.
So you're going to end up paying 7% every year for five years.
So 35%. And then, you know, versus let's say 20% or less for him.
So I think it's going to end up coming out better on paper. I think the other side of this is just it's going to change the relationship because now he's your lend, you know, he's your lender. You're the borrower. The Bible describes that as a master-slave relationship.
So what if something goes sideways and you're not able to pay it back despite your best efforts? Is that going to damage the relationship?
So I think it's going to be better for you on paper, even if that upfront bill is. As you can cover it, but you've got to think about the implications on the relationship if something unexpected happens. Does that make sense? Yes, thank you for mentioning that.
Okay. All right.
God bless you, Alyssa. Thanks for calling today. Hey, we couldn't do this without our team each day.
So grateful for my producer, Devin Patrick, for our call screener, Sandy Dickinson, and helping me with research today, Mr. Jim Henry, plus the entire team here at Faith Phi. I hope you have a great day. Lord willing, we'll be back to do it all over again tomorrow. We hope you'll join us then.
May God bless you. Bye-bye. Faith in Finance is provided by FaithBy and listeners like you.
