Crypto, Crypto, Crypto! | Series 4.1

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Welcome to the EnjoyMore30s Family Finance

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podcast. The only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out, and distract our focus

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from simply enjoying life.

Joseph Okaly: 00:00:16

Hello, and welcome to the fourth series in the

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EnjoyMore30s family finance show. Should be a lot of fun, at

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least as much fun as finances can be. And it really includes a

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little bit of everything this season. What makes me most

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excited about the season, though, is that it has really

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universally applicable concepts. If you're joining us for the

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first time, we've already covered a number of different

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areas in the first three seasons. Series 1 was Your Money

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Mindset, where we covered a lot of those overarching concepts to

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help you getting your mentality on the right track and how you

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approach money, why you're even working so hard in earning it to

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begin with, what direction it's going in and what you need to do

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to protect your family in the process. Series 2 Your Money

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Multipliers built on that, diving into easy simplified cash

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flow techniques and other opportunities to kind of further

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maximize and secure your situation. Series 3, we

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completely change gears going to Your Parent's Money Mindset,

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where we tried to help you be able to converse better with

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your parents about money and take potentially huge steps

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forward in avoiding headaches, and some case taxes and maximize

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not only making life more enjoyable for you, but your

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parents as well, which is really fantastic to be able to go

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through.

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That brings us back to the fourth series here, which is

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titled Your Major Money Misnomers, topics that me as an

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advisor, I see come up time and time again, that people have

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incorrect assumptions and approaches about obviously, you

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know, in my opinion, at least. So today, we're going to start

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off with one of the most popular ones crypto currency. I pushed

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this episode all the way to the top this season because we've

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been seeing a growing trend of similar questions from clients,

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and seen some not necessarily best actions in regards to

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crypto and I really felt the need to be more immediately

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attended to. So today we're going to cover what you need to

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know about the origins of cryptocurrency, the reasoning

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for that creation, and what you can do with that understanding

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now when you see the headlines. My wife and I have a couple of

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really good friends going back to our college days. Unlike us,

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they very much enjoy cooking. And as we had kids earlier, have

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many times come up and made some really great meals for us. One

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limitation, though, that our kitchen imposes is that we don't

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have some cooking tools and you know, whatnot, that let's say

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more culinary inclined people tend to have. I don't have a

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zester or a pasta maker or open bowl of coarse salts to kind of

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pinch in, add in as needed. Not not exactly us. I also don't

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have one of those meat tenderizers, which to me, I

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would just call you know, a hammer. So this wonderful couple

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came up to visit us make dinner for us all. I didn't have this

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meat tenderizer we're trying to find an alternative, and I wound

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up getting them, you know, a small frying pan. That seems

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like a good work, right? It did work as well enough, I guess as

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far as I could tell. But later I noticed it was most definitely

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broken, the handle had cracked right through. Now unless

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they're listening to this, they still won't ever know which is

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great, because the meal was wonderful. The pan was cheap.

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And it was all definitely worth their graciousness, and

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providing a great home cooked meal they otherwise did not have

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to give to us. The point here though, was that the pan was not

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a meat tenderizer. It was a pan. And when you use a pan as a meat

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tenderizer it's not really surprising that the pan had a

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negative outcome.

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So what you need to know about cryptocurrency is that how many

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people are currently using it, which is an extremely

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speculative manner is not how it was created to be used. It

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wasn't developed as a means of get rich quick wealth creation.

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The word currency as you know it to this point has been defined

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as kind of this medium of exchange for goods and services.

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Usually it's issued by some kind of government, and it's

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generally accepted as a method of payment. You have $1 bill in

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your pocket, you go to the store, and they will take that

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dollar bill in exchange for that Snickers candy bar. The dollar

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bill is just a piece of paper, but it is a relatively stable

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established medium of exchange. This way you don't have to trade

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you know a goat or bushel of hay every time you have a sweet

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tooth. We have this standardized method of payment to purchase

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things from each other. You've heard of euros, yen, Swiss

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francs, they all work the same way. They're just currencies

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issued by other government entities. And right now there

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are roughly 180 recognized currencies worldwide.

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Cryptocurrency though, is a digital currency. It's not

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issued or insured by any government. As such new

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cryptocurrencies can be created and as of January 2021, there

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are over 4,000. So when you hear the word Bitcoin, aetherium,

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Dogecoin, or whatever the new one may be tomorrow, these are

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all just different virtual currencies that people have

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literally created all over the world. So you may be wondering,

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why did anyone go through any of the trouble to create it? After

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the 2008 financial crisis, a group of coders who like many

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people, were not happy with the roles banks played in the

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crisis, and wanted a means to remove the banks as a required

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intermediary in processing financial transactions. They

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created Bitcoin, which is considered kind of the original

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and largest cryptocurrency and most likely the one that you're

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most familiar with. Because it is not using banks, or any

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government involvement it needs its own peer to peer system to

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process and validate transactions, which is probably

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have guessed it does so digitally. To try to somewhat

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simplify the mechanics of this basically, there is a huge giant

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network of computers out there of those people that are

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participating. And they're using complex algorithms to validate

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these transactions. This is where you get the crypto part of

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cryptocurrency. Now as a reward for participating their computer

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power into this crypto aspect to make the whole system work,

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these participants are rewarded with shares of Bitcoin. So if

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you've heard of people mining before, this is essentially what

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they're doing. Because there is no central authority that's kind

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of the whole point of it. This makes it completely

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decentralized. And because it is virtual, unlike your dollar

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bills, and needs to be stored in a special what they call digital

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wallet. Can't just walk into your bank and deposit some

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crypto.

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Now proponents of cryptocurrency like the fact that is not tied

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to the decisions of any government, no bank involvement,

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and therefore the inflation that can result from actions of any

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individual government are not tied to any cryptocurrency. You

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also can see potential advantages in developing

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countries where say a family working in a developed country

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may want to easily move money to friends and family back at home.

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So now that you have a little bit of a better idea, maybe of

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the origins and the reasoning and the original purpose, what

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you can do is come at what you hear from headlines from friends

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and family members, hopefully with a little bit of a different

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context. Because what has really grabbed headlines and

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popularized Bitcoin and cryptocurrency as a whole is not

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as decentralized network or possible avoidance of

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traditional currency inflation. That's really been true all the

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way back to 2009. It's how drastically the value has

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fluctuated over the last few years. It wasn't really until

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2017, where you saw these big valuation changes that have

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gained in such popular notoriety. Now, depending on

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when you get in or out can result in you hearing these huge

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boom stories or also these huge bust stories. There really is no

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question that the value has been incredibly unstable among

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cryptocurrency. And the speculation has been just

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completely extreme. There is no underlying company or government

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that can be said to contribute to its actual valuation. As an

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example, Elon Musk tweeted earlier this year, April 2021,

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and sent the price of Bitcoin down over 50%. This leads us all

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the way back round circle to the definition of currency: a medium

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of exchange for goods and services that is relatively

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stable. So while an argument certainly can be made for the

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possible shortcomings of current government monetary policy and

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the banks that are involved with it, and there is no denying

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cryptocurrency uses just remarkable, remarkable

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technology in his data validation process. As of today,

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you can't use it to buy your groceries probably when you go

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tomorrow, or the next time you go to Target. And it really has

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been anything but stable. So those two core components of a

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traditional currency stability to some degree, and the ability

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to you know, readily trade it for other things.

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So a quick recap of today is that there are a wide range of

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opinions out there on what cryptocurrency may turn into,

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from the future of how we conduct business to just a

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passing fad but hopefully this at least gives you a little bit

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more information on its origins after the financial crisis, and

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the role of banks in that. The reasoning for its creation to

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remove those banks from being required intermediaries, and

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potentially avoid government based currency inflation. And

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finally, why you have been hearing so much about it lately,

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which are for completely different reasons. The one

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really main thing to take away from this episode, and I'll

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reiterate one more time because of that is why its founders even

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created it to begin with. It was an alternative means to the

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traditional banking system, not as a means of extreme

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speculation and quick wealth creation. Just like any other

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thing that we've talked about, whether it be traditional

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investments or insurance, it's all about are you using it for

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the right purpose.

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Thanks for tuning in today. As always, if you are able to

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implement what we cover, then that's fantastic. You have less

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to worry about them before and you can just focus more on

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enjoying life. If you are wanting help with these things,

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though, or have questions you need help in clarifying, check

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out the Ask Joe section on the show's website

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www.enjoymore30s.com. That's enjoy more three zero s.com. If

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you enjoyed this episode, please make sure to subscribe and

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review us on Apple podcasts or wherever you listen. There are

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literally millions of young families out there I'm trying to

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reach and help just like you.

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The next episode is Packed For the Financial Trip You're

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Wanting To Take and where we're going to connect on how it's

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important to tailor the financial recommendations you

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hear to what you were actually trying to accomplish. Until next

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week thanks for joining me today and I look forward to connecting

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with you soon.

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The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal tax or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer or other professional before acting upon

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any content or information found here first. Joe is affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS Securities, Inc., and TFS Advisory Services an SEC

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registered investment advisor member FINRA/SIPC.