Can Crypto Be a Hedge Against Inflation? Vandross Interview Part 2

[00:00:00.890] - Dan Paulson

Hey, all, this is part two of our interview with Vandross idiake. He is going to talk a little bit more about how crypto can be a hedge on inflation. Be sure to check it out.

[00:00:08.770] - Dan Paulson

 Well, I think that a lot of what you said, as you pointed out, we tend to think of it from the west point of view, because again, it's very common for us here to have access to a bank, to be able to transfer funds digitally. Again, you have that lag time with banks, but we still have a pretty robust system here. Rich, you're the money guy. I'm sure you have lots of questions based on what he was saying. I'll let you start out here.

[00:00:41.850] - Rich Veltre

Yeah, I mean, you mentioned a lot of things, and I think the whole concept is new. And I think from my perspective, I like the idea of blockchain. I like the idea because there is nobody policing it. And it's one of those things that you can have a free market system when you're dealing with that and there's accountability, I'm sure in the next sort of segment, when I throw it back to you to tell me a lot more, I think you're going to talk more about the crypto part of it. And I think that's the part where I kind of get lost a little bit. But the blockchain, I like the idea of there is no government intervention. Nobody owns it. It's sort of like the Internet. I can't say I own the Internet. No, I don't. And I can't even say I invented it or anything like that. Like all these crazy things that you've heard over the years, it's just a free market, accessibility of people all around the globe. So I think with blockchain, I think of it the same way. Is there any reason for me not to think of it that way, though?

[00:01:59.060] - Rich Veltre

I mean, what you kind of mentioned was there are ways, obviously, the government wants to grab whatever it can grab. Same reason they grabbed everything with the banking system. Right. And while we can say it's not sustainable, it's 200 years old. So I don't know what sustainability becomes when it's kind of been, this is the way it is, and this is the way it's been since Alexander Hamilton or whoever actually came up with the banking system. I think it was know way back long.

[00:02:27.540] - Rich Veltre

Right.

[00:02:27.860] - Rich Veltre

So is there anything else? Like if we can keep it out of the hands of the government, then it really just grows to the point of taking over like the Internet did, correct?

[00:02:39.810] - Vandross Idiake

Yeah, I think there's a couple of things, right? When you look at. It's a very theoretical thing, right? Because should currency be left to the free market, right? And this is the question that we have to ask ourselves. Or should it be held with a private entity that kind of controls it and decides when they want to increase or decrease the interest rates and have the people scrambled basically to decide, especially imagine it's a nightmare. Imagine if you're on a variable mortgage, and then you just decide to increase the interest rates, and then it's like, oh, man, now I have to pay more for my mortgage. And so you kind of don't really get to decide. And should one entity be able to play God in this kind of sense? And this is the thing that we have to ask ourselves, does it make sense in the way the system is working now with how we keep having to increase the amount of supply of money every single year and decrease the amount of wealth in percentages that people have to make them keep having to produce more and more each and every year? I just don't think it's sustainable.

[00:03:47.660] - Vandross Idiake

If you look at all the different fiat models, they've all crashed, right? You look at Zimbabwe, you look at even Rome, when they started mixing their coins with stuff that wasn't tangible, they started mixing it to increase the amount of coins. You look at so many different systems that have failed with the fiat system. You look at right now what's going on, Argentina, and now they have that new president because their currency was inflating at 100% plus a year. Imagine, just think about the ideal of, let's say you make like, $1,000 a month in Argentina, right? You got to wait for your check at the end of the month. And because the inflation is so high that $1,000 is not $900 at the end of the month in terms of purchasing power. That is insane, right? And so these are some of the things that I look at when I think of the current fiat system that we have currently. And that's why bitcoin made a lot of sense to me. And there are a couple of weaknesses and obviously, trade offs that comes with it, because if you lose your crypto that you have in your wallet, you lose it forever.

[00:04:53.220] - Vandross Idiake

There's no customer service. So this is the thing that kind of frightens a lot of people, because it's like, oh, I can't call up Satoshi and just be like, hey, sorry, I lost my coins. In know, can I get them back, please? And it kind of doesn't work that way. But then it ties back into a little bit of philosophy of we as sovereign individuals, should we have control over our currency? Or is it that we just aren't responsible enough? That we should have a way in which the government still is able to control that? And that's something that I don't really have an answer to, to be honest with you. But I do see it as an alternative form of currency. Right? And I think we can have a hybrid. This is what I particularly think. I think bitcoin can still exist and fiat can still exist, and people should be allowed to choose. The free market should be allowed to choose what's more valuable. Right, over the course of time. But I don't think that we'll just go into this hyper bitcoinization. There's some people that are very maximalist, and they think we're just going to go into this hyper bitcoinization.

[00:05:59.370] - Vandross Idiake

I don't necessarily think that. I think that it's just going to be another currency like the euro. It already is, has over 100 million users. It already is. It has deep enough liquidity. You see what's going on now with the institutions getting in. If you look at Blackrock, right? They're getting in. Fidelity, wisdom tree, Deutsche bank, name it, and they're all getting in now because they see it as a viable solution. Because there's no better investment vehicle that we've ever had. Over the entire landscape of this past decade and a half that this thing has been around, it's outperformed everything. It's the best performing asset class of my generation. And if you just hold it for a long period of time, you just have to have a long term approach. Because it's an investment. It's not something that I think you should trade in the long term. Whether, if you buy it at the top, it's been proven every single time you buy at the top, you hold it for four years. It outpaces when you bought it. And you can dollar cost average down too, as well. And there's no better performing asset class for my generation.

[00:07:03.900] - Vandross Idiake

I think my generation right now, there's issues in my generation because you guys are a little bit older, and I know you guys have probably been beaten into your heads, the 60 40 model, right, of the stocks and bonds. And for my generation, when I did a podcast recently on why you should buy bitcoin instead of real estate, and the reason I'm saying that it's not for everybody, but the reason I'm saying that is because I firmly believe that if your net worth is not seven figs. Plus, it doesn't make sense to buy real estate currently. Right now, this is this very controversial hot take. But I'll explain why. Right? If you look at the fact that bitcoin has outperformed real estate over the course of time, you look at the fact that the confiscation aspect, right? You can't confiscate it. You can confiscate my real estate. If I don't pay my property tax, what happens to my real estate?

[00:07:54.430] - Dan Paulson

Government takes it.

[00:07:57.590] - Vandross Idiake

Exactly. So that aspect too, as well. There's so many different outlooks that you can look at with why you should buy bitcoin instead of real estate. I know it's super controversial, but I look at a lot of different factors and I see, okay, I have maintenance cost. And even if bitcoin is not a yield generating asset, it still outperforms just off of asset appreciation more than my real estate property would. Its appreciation plus the revenue that you generate, it's usually right around five 6% yield that you're looking at. So when bitcoin is doing around an 80% to 200% return on an average basis, if you hold it for a four year long time span, right? So why would I then buy real estate when I can outpace the rate of inflation of real estate by buying bitcoin, build my net worth high enough, and then go buy real estate later when my net worth is high enough? And this is why, actually, with the clients that I've had too, as well, I suggested them, depending on their portfolio size, if you're talking about 100k less, it's better to invest into cryptocurrency in general as an asset class, because it's just going to outperform.

[00:09:09.240] - Vandross Idiake

Right now, bitcoin is over 100% on the year. Is your real estate property over 100% on the year? No, it's not. I think what pisses is that a bubble.

[00:09:18.830] - Dan Paulson

I mean, every market kind of has this expansion, and then everyone gets in and the hype and that obviously adds to the value. So the earlier in, the better off you are. But then you get the people that enter in the later stages. And we kind of did see that a little bit with bitcoin, where it shot up to, what, $60,000 per bitcoin. And then it went from there down to, I think it got down to the high teens or the low twenty s. A lot of people invested on the high side. And then of course, panic sets in and then they sell off and they lose money. And that's usually when government gets involved, because of course that creates problems and then they try to regulate in some way. So aren't we kind of going through a similar thing, almost like the real estate market in the mid 2000s when everyone was buying property, they were buying on variable rates and stuff, and ultimately they were spending more money than they were making on it. And that's what led to the crash. Don't you see that happening here?

[00:10:18.070] - Vandross Idiake

No. The reason is because when you look at it, it depends on when you buy, as a smart investor would do, especially when it comes to liquid markets. You should always dollar cost average, right? And you need to understand market cycles and how they work, right. It's the same in the stock market. You had stocks that were blue chip stocks down 50, 60, 70%. They were volatile. Would you consider them a bubble? Some people would consider Amazon a bubble after it crashed, 90% down when it came out. So was it a bubble? No, it's just you need to time the market. If you can't time the market, which most people can't, then you should dollar cost average. Slowly learn the asset that you're invested in. Understand market cycles and you get convictions through education, right? And so the asset is here, the state, it's not going anywhere. Institutions are adopting it now you have countries making it legal tender. More countries are going to start doing that because it just makes sense as an alternative to. Because Argentina is a really good case study now, because they're going to be put in the crossroads right now between what they should do.

[00:11:24.330] - Vandross Idiake

They obviously can't keep using their pesos because it's worthless. So they're looking to potentially dollarize, which is cool. But now you don't have control over your national currency and decide when you want to inflate the monetary supply for whatever you need and when you want to decrease the demand through increasing interest rates. And so it's one of those things where Bukele, I think he made a good decision, where he's like, look, we're not going to make another national currency, the other one that we had failed, and we're still going to dollarize, but we're going to do a hybrid where we're going to give people the optionality as well, to use this as a potential inflationary hedge, which it's proven to be over the long period of time. I don't think it's a bubble. I think it just goes through cycles like every market. Real estate too, as well, stocks, they all go through these cycles. So if you buy, I have a budy that's also really big into real estate in England. I did a podcast actually with him too, as well. And yeah, he bought the top real estate and he had to wait ten years to see the value that he bought accrue in terms of asset appreciation.

[00:12:32.170] - Vandross Idiake

It took a long time, so I think that was it. A bubble. No, he just bought at the wrong time. But he held and he stayed patient. And over the course of time now his property value eventually 75% from what he originally bought in terms of asset appreciation. So, yeah. I hope that answers your question, Dan.

[00:12:51.480] - Dan Paulson

More to come. Check out part three. Bye.