How to buy bitcoin with Ben Epling
00:00.00
ilm
Hey in today's episode Ben Eppling joins me to discuss how do you actually buy bitcoin. So again we discuss buying bitcoin also how do exchanges work. What's going on behind the scenes and some trends that they're seeing at the exchange that been works at river let's get started.
00:00.00
ilm
All right Ben thanks for thanks for joining me and excited to jump in have a conversation with you today.
00:06.86
Ben Epling
Yeah, thanks for having me as well. I'm ah mis tell your ride's been been a while since we last hung out in person. So I'm glad we can have a conversation virtual here as well.
00:14.38
ilm
Yeah, man, glad you were able to come. Um, yeah, such a good diverse group of people out there hanging out talking bitcoin and business and world and economics and things that for some reason are exciting to us but probably not most people reasonably. So.
00:29.68
Ben Epling
Um, yeah, yeah, not yet, not yet, but there's no better place to do it than Colorado is absolutely gorgeous. So yeah, it was amazing.
00:33.64
ilm
Sure? Well hey I yeah I want to have you on today to I guess talk through a few things and primarily to talk about actually buying bitcoin in the most practical sense. You know we talk through this you know theoretical like. What is bitcoin what problem does bitcoin solve and that's where a few weeks ago had a conversation with with Preston Pich and then had another one with with James Lavish talking through the current macroeconomic landscape and the current like ah financial scenario that we're in and. Ah, monetary policies and all that fun stuff and the debt spiral that paints this relatively grim picture and how we all believe that bitcoin is the most probable thing to help remove us from this this dire situation. Um, so if that's the case. It's like all right maybe I should own some bitcoin. How do I acquire this so that's where I want to go today is buying bitcoin and I thought who better than ah than Ben with river river you Ben you work with river I guess tell us a little about that like what do you do? who? are you.
01:37.23
Ben Epling
Yes, yeah for sure happy to give ah a quick intro there and dive into to how is the acquisition of bitcoin piece as well. So yeah I've been with river for coming up on 3 years now a relationship manager here also help on the operational side of things across money operations and a few different teams as well. So join the team. But back in what 20202020 at this race. It's been a while. It's kind of crazy looking back on it. But yeah to give context on us the organization company who is river just to lay the groundwork in that sense. We are a bitcoin only financial services firm. Um, so our flagship kind of product of what most people know us for is a bitcoin brokerage bitcoin exchange um, where clients can buy and sell bitcoin custody bitcoin transfer bitcoin deposit bitcoin all the functionality of what you would imagine a bitcoin exchange products being um, that's kind of our our bread and butter. So with that. Um, in mind definitely have the have the knowledge in terms of how that works in the backend as you mentioned right? for a lot of people. They know they want to get access to bitcoin. They know it's something that they should get access to but there's not really an easy way to do it or they don't know of an easy way to do it. And that's really where river fits into that picture for a lot of clients and their financial journey in terms of getting exposure to the asset class itself. So river really is that easy on-ramp for a lot of clients and and a lot of times. It really is the place where clients go for the first time in their bitcoin journey.
03:00.96
Ben Epling
When they're first dipping their toe into the water to either a learn more about it or b get their first exposure to it whether that's a dollar whether that's $10 $100000 whatever that looks like it's a wide spectrum. Um in terms of what everyone's kind of first foray into the asset class is but that's where river kind of builds that bridge for a lot of clients from traditional finance. To their first exposure to bitcoin.
03:23.76
ilm
Perfect and I guess with when it comes to buying bitcoin in exchange. Ah it can seem sort of strange like all right? So it's like buying a stock and obviously bitcoin is not a stock It's not a bond. It's it's it's own Asa class. It's it's money bitcoin is money. And I think when we position buying bitcoin itself I view it less as or not even less as not as the same thing as acquiring a stock so less as a a stock broker you go here. You give us money we're buying something that we're going to turn around and trade it later on but rather an exchange. So like if you went to and if you flew to another country. You have you flew there with us dollars and you land and you're going to need rupies for your monthlong trip through India you would exchange your usd for rubies and based off that current exchange rate you're probably not going to stand there and. Watch the exchange rates in real time and try to trade it in out. You're go to use it for your your intended stay in that trip and that's when exchanges you are literally exchanging this currency or this money for another and would you guess that's again I'm I'm a pretty simple minded person. Would you.
04:35.13
Ben Epling
Um, yeah, yeah.
04:36.10
ilm
Is there anything along like like basically like what is the exchange that you you think would be important for us to understand.
04:40.22
Ben Epling
Yeah, in terms of I think you described it pretty well from a simplistic way and I guess from even a higher level right? The the step that you need to complete is converting fiat or us dollar into bitcoin. That's really what your goal is it is that exchange right of your currency that you may be using the time us dollars convert that into a new currency. A new form of money as you mentioned rights and that is is bitcoin so it's a bit different than if you were going on to a td ameritrade or something like that and buying the stock as you mentioned now. When you are making that exchange since it isn't as simple as just buying ownership in a company like it would be with buying a stock There's a lot of complexity that comes up behind the scenes in terms of making sure that that is happening and happening correctly and smoothly for the individual who is wishing to convert their dollars into bitcoin um it's by no means a novel concept or a novel process. There's a lot of complexity behind the scenes which I'm happy to dive into some um of those complexities that may be may be fruitful or top of mind for some listeners as well and really the end state is converting those dollars to bitcoin. Um, there's a fiat on and offrampps right? You may hear people mention that's in the media or some some listeners may hear that as well on other podcasts fiat on and offramps right are the way in which you're getting the dollars that you'rechanging for bitcoin either on to an exchange to make that conversion or off of the exchange to make that conversion.
06:05.16
Ben Epling
In order to do so you need to be able to at least have an ach which is a bank transfer from a a checking accounts or savings accounts and you are transferring those dollars from a bank to an exchange such as River or any other exchange out there to then convert those automatically into bitcoin. Or you could go with a fit with a wire transfer as an alternative as Well. I'm sure most listeners are aware of the as H and wire transfer process but those are just the onrampps to get dollars to the platform or to an exchange and then from there that conversion happens. Um like with that conversion.. There's also complexities. Not sure how deep we want to dive into. Um, the complexities. Ah in terms of exchange rates and how like I guess Liquidity flows and things of that nature happy to dive into that as well though. So.
06:50.10
ilm
Yeah let's let's start. Let's go there behind the scenes and then I sort of and try to poke holes through things. There's a lot of I would say ah for anyone who's quasi-familiar with the crypto space probably has some level of distrust for exchanges based off of other crypto. Exchanges going all the way back to Mount Gox and as recent as ftx. So I think that's that's a hesitation of I thought this thing is supposed to be something that I'm not placing trust in any centralized party. But yeah yet here I am in order to even acquire. It. Yes, you can't acquire it through mining home mining something like that.
07:08.73
Ben Epling
Yep.
07:24.87
ilm
Um, but in general, most people will acquire their bitcoin through an exchange which pretty much mandates some trust in a centralized party. So I do want to address some of those concerns. But before we go there and maybe maybe this conversation will help alleviate some of those tell us like how does how does this work.
07:37.69
Ben Epling
Um, yeah.
07:44.51
ilm
So I go online I create an account with you guys. It say all right I've got thousand bucks I want to turn those us dollars into bitcoin tell us about that process.
07:53.89
Ben Epling
Yeah, in terms of that process first step as I previously mentioned is really just getting the dollars to river right? It's going to be an ach transfer from a bank account or a wire transfer from a bank account as well to river that's going to be step 1 no matter what is is that. Initial currency to convert into bitcoin. We need to have that on the platform in order to convert that or you can have it automatically pulled as well. But what that looks like is once that does arrive say in that your scenario right? A thousand dollars you're looking to convert that into bitcoin looking to invest in bitcoin through river when you go on the platform. Um, you're going to make a purchase of $1000 of of bitcoin now what does that mean, what does make a purchase of thousand dollars bitcoin look like that's going to pull a thousand us dollars from your bank accounts. It's going to automatically at that moment in time instantaneously convert those thousand dollars into 1000 Dollars denominated worth of bitcoin. So that conversion automatically takes place that conversion takes place at an exchange rates that exchange rate isn't agreed upon it was shown to you in the user interface when you make that that exchange. Um, that is going to be the bitcoin price in which you are acquiring that thousand usdollars worth of value in bitcoin if if that makes sense that exchange rate is denominated purely on peer but the market right? That's the beauty of bitcoin being really truly one of the only free markets.
09:21.65
Ben Epling
Um, a free market kind of tools in the world is that it is purely a market denominated price from supply and demand so that will fluctuate every second when you go by at one P M today it's going to look way different than 1 p m tomorrow and vice versa right? There's no kind of stagnant price in that sense so that will always change and when you go to make that thousand dollar purchase um, you will see that exchange rate in that price that exchange rate and price is being displayed to you is is a little more complex and just displaying you a mid-market price. Um, there's different sources essentially of where that price is being derived from we are showing you the best quote in that time. And that's something a lot of people understand is is we're showing you the best execution price but there's multiple execution prices out there on the markets at that time we're just giving you the best 1 for your quotes at that time. So for example, say in that $1000 kind of purchase order example that you mentioned there. There may be 10 order books or liquidity providers out there and they might say liquidity providers. What does that mean that just means other exchanges. Um other marketplaces out there that have access to deep pockets essentially for liquidity in in the bitcoin markets. They may have 10 different price quotes. We're pulling in that best price quote that best execution price at that time and displaying it to you so that's kind of the first step of complexity and a lot of people realize is that there is no one kind of agreed upon execution price across exchanges that varies wildly if you go on coinbase if you go on a crack and if you go on river wherever you're looking.
10:50.39
ilm
Equally.
10:55.41
Ben Epling
Um, where where you can purchase bitcoin. The prices may look different because they're they're sourcing their liquidity from different providers. Um, or they may also build a spread into the order which that kind of introduces a whole different complexity right? is step 1 exchange rates that's being pulled in from the market. That time. Step 2 is a lot of providers will add a spread on top of that exchange rate so that spread is being realized by the exchange itself as a result of facilitating that that transaction. Um, what that spread does say it's 0.2% 20 basis points that spread is inflating that purchase order. Or that execution rate um or exchange rate that rather by that 20 basis points and that's being realized by the exchange in order to facilitate that transaction now in practice what that spread does for a lot of exchanges is it actually hedges against slippage and volatility risk. Ah, which I'm not sure if that's getting too different into the weeds or not ah but what that does is when you go in an exchange and you're placing an order especially on river we're holding that quote for you for a se amount of time when we're holding that quote for you. The market could drastically change right? We saw a week ago two weeks ago the price just went skyrocketing up. Um, so if you're on the order page at that time and we're holding a quote for you. We built in spread for a certain percent or certain order size in order to hedge against that slippage involved utility risk in case, the market were to move one way or the other while you're deciding if you want to actually go through this purchase on the confirmation page so does.
12:29.75
Ben Epling
Have some utility aside from just building on top of that execution rate from an exchange fee standpoints. Um, it's more so to hedge that slippage and volatility risk here at river um, we have a spread for anything under fifteen thousand us dollars um in terms of trades and think above that is directly otc or over the counter which. Can can dive into that there too which one to pause since that was a a decent bit of somewhat deeper in the weeds. Um, in terms of the exchange rate. Obviously there's complexities aside from that but just explaining exchange rate and spread want to pause there and see kind of let you digest that and see if you're any questions there.
13:04.66
ilm
Yeah I don't want to make these questions too simple but I want to I want to keep it practical as well. So for instance, um, someone goes on river says hey I have I have ten thousand us dollars I want to buy bitcoin with and they execute that order through allt where are y'all procuring. That those those sats are also is river sitting on a mountain of bitcoin that you're ready need to deploy in exchange for us dollars and if so like are you then holding dose to us dollars or are you acquiring. Bitcoin are you the middleman like how is functionally how is that executed.
13:28.28
Ben Epling
Um, is.
13:33.65
Ben Epling
Um, yes, functionally. Great. Great Question. So How that works um is we are Abiqui Brokerage. So That's going to defer from a peer-to-peer Exchange That's kind of distinguishment number one with a brokerage. You're technically trading in and out of River's bitcoin Position So We have a set Bitcoin Brokerage balance or position if the trade is is ah small enough to be facilitated by our our bitcoin balance or Bitcoin Position. We can trade in and out of that position. If It's over that Balance. We will then source liquidity from Market Providers. So kind of answering your question there. We will then source um liquidity from other Providers. So mostly other large exchanges on a global scale who will pull in those quotes in livetime we will source the best quote and show that to you for whatever that order size may be. If. It's small enough though and we can essentially trade in and out of the art of Rivers Bitcoin position without having to access the open markets we will do so so it depends on the order size and threshold or that changes every now and then but typically we'll source that from external liquidity providers to get that. Best. Um, and I say liquidity providers that really is just other large exchanges across the globe who have access to deep liquidity deep balances of bitcoin who are willing to sell it at that exchange rates.
14:54.40
ilm
Which again this may sound super simplistic. But I've got a simple brain That's how a market is made or at least a pure market is made is is a pairing up of of willing sellers and and willing buyers for an agreed up on price. So what happens like right now a lot of the. A lot of the bitcoin that's in existence right now. 93 per the bitcoin 93% of the bitcoin that will ever be in existence is already been mined and out there now a lot of that's actually lost and will never be recovered or a fair amount at least um and the remaining 7% will be. Mined over the next or we had about one hundred and sixteen hundred and seventeen years before the remaining 7% introduced to the to the fair open markets. So with that the a significant portion of the bitcoin that's in existence has already been locked away into. People like you and and me who don't intend on spending it right now. This is a long-term asset that we are going to hold until we feel like we can actually use this for for day-to-day money purposes primarily and I think there's a lot of people out there like us you can look on on chain analysis and be able to see.
15:56.29
Ben Epling
Um, yep.
16:08.67
ilm
How long bitcoin sat in ah in a certain wallet and it's it's it's it's very bullish for um, people have high conviction. So with that said, a lot of the liquidity that's hitting the market is either through traders or also miners. So again, we we talked about we last week with with Michael Schmidt talking to like the mining process and if you mine a block you're rewarded with x amount of bitcoin and those miners I'm sure they would love to be able to retain all the bitcoin they mine but they're also running a business with lots of expenses and and significant amount of cost overhead. So they go and they had to sell some of that bitcoin and that's how a lot of the bitcoin right now is hitting the market is through miners and that's coming on now. Let's play this out where let's say over time the the mining reward I mean I heck in.
16:48.52
Ben Epling
Um, yep.
16:58.41
ilm
Few months the mining award it's going to get get get cut in half and now happen again and roughly 4 years after that and then four years after that again. So the introduction of new units. That's a large like liquidity supply is going to be reduced and as the. Understanding education of bitcoin grows I would assume that long-term holders and conviction will will grow in Tanle. So what happened y'll have to youll have to go source y' are essentially sourcing sellers either through y'all's own and pile of bitcoin or through other large sellers out there. What happens when there's not willing sellers for a purchase for a for a bid or an ask so when they're not reaching up obviously that leads to price increase but tell us about that.
17:40.90
Ben Epling
Um, yeah.
17:43.54
Ben Epling
Yeah, yeah, well I think the latter piece is the important piece right? that you mentioned there in terms of the the price increase in the beauty of bitcoin and just markets as a whole kind of zooming out just any economic market. It's the beauty of economic actors being able to freely buy at the price they're willing to buy or sell the price they're willing to sell as you mentioned. And that's really what would happen in that scenario right? As you mentioned mining rewards are getting cut in half in every four years they're going to do so so it's continuing to dwindle um in terms of the open supply out there with the chart of bitcoin being held over a year over two years up until it's growing up into the right significantly so supply out there is continuing to get smaller and smaller. In that scenario even if demands stay the same inherently price is going to increase and as you mentioned I don't think demand is going to stay the same right? We have Etf News we have institutions getting involved. We have education in the bitcoin space going up. Um, we have financial advisors like yourself right? that are educating clients. Um, and users on bitcoin and kind of and and orange pulling in that sense. So even if demand were to stay the same as supply is getting cuts inherently, it's going to lead to a price increase theoretically in that scenario in a pure theory. Don't want to absolutely price guess in that sense. But what that does is that when you're going to sell. Um, the price and the exchange where it's going to react natively to that right? So if you're trying to sell. It's say on global scale and you're trying to sell bitcoinnets right now. So they're trying to sell it at Fifty Thousand U s dollars there's obviously not going to be a whole lot of buyers for your bitcoin out there. Fifty thousand us dollars because
19:19.35
Ben Epling
There's an agreedup upon Agreedupon quote rate at whatever it may be or now 34 35000 Whatever it's hovering at right now and vice versa on on the buy side for for an exchange rate as well. So that typically will will go into Equilibrium right? And that's where the exchange is agreed upon and so there's really. I Guess there could be a scenario at some point in the future right? where all supplies dried up and and there would we wouldn't really be able to find a quote or or any bitcoin in that sense. But that would mean everyone in the world is also not being able to find a quote um or any bitcoin in that sense as well. So It's really just would just lead to a higher exchange rate. Then incentivize people to be willing to sell at that price you and I were long-term holders. It won't necessarily incentivize us if the price is is 10% higher. Whatever that may be but a lot of economic actors out. There will see that and be willing to sell now. The price is 10% higher. So then there would be bids that would flow into exchanges on a global scale. As a result of that price increase.
20:16.65
ilm
Yeah, and I don't want this to sound condescending to listeners but just in a very practical sense. How our markets made is actually really interesting again. Markets are simply a whole bunch of buyers and whole bunch of sellers if you had if I came in and said hey Ben I'll give you one hundred bucks for a bitcoin right now. You you would turn it down because you have thousands of other people who will offer you a better price and vice versa. If you said Jim I'll sell you a bitcoin for $50000 I would not take that offer because there's a large group of people who be willing to sell it to me for a better price and it's that gathering around a generally agreedupon price in real-time that. Creates the market itself and yeah.
20:56.56
Ben Epling
Yep, and that's and that's for for any good right? And that's that's I guess for for listeners as well, right? It's it's a really interesting kind of theoretical question to think about like I could sell you a shovel right now right? But if I'm offering you if I'm selling to you at $20 but there's somebody down the street who will offer you $5 for it. You're not going to buy my shovel. You're going to buy their shovel and that applies to really any market and obviously it also applies to bitcoin from a theateral standpoint. Um as well. So there is just the interesting kind of thought and in question to think about. Um. But when you're going when you're laying your head on the pillow at night those are the questions I think about not sure if that's normal for everybody but that's usually what I'm what I'm thinking about.
21:30.44
ilm
But yeah, it's super simple yet something most people gloss over and don't think about is how do we reach prices for things and again, that's supply demand Now you you started going somewhere a second ago with if there's no more supply which I think that's a common concern. Ah, amongst people who don't understand Bitcoin is so you're telling me this is money yet people don't spend it and it's somewhat highly concentrated amongst a few people. Um, how in the world is that money. How will I be incentivized to spend this. When you simply view as ah as a savings backing Mezzle Can you speak to that like how will that play out if if you and I are long-term holders but it's supposed to be uses money and tell us about that were your thoughts.
22:17.40
Ben Epling
Yeah I think my thoughts on that. Um really are I guess right now where we are in the the bitcoin story or the bitcoin trajectory is that it really is a store of value for most people across the globe now. It is obviously medium exchange and it is used as as currency as money. Um, and many countries such as El Salvador and other places as well and also even people in the us um, utilize it. We've been spoiled over the last ah hundred years um to have access to a somewhat stable and a use stable very very very very loosely um currency from a dollar perspective to use that for transactions. Um, obviously the governments can print as much dollars as they want and that's where as you mentioned that's the difference with bitcoin is that scarcity is that that finite supply that cap of 21000000 ah decreasing um circulation of new supply due to the having as you mentioned as well on the mining side of things. Um. And I guess it all comes back to to the market in economic actors in terms of if and when bitcoin is used as money. Um and traded it's being traded at its fair market value that exchange rate. Um, so. If you were price have been a bitcoin I think there's some some really good articles out there as well on on Twitter on the internet of of if you bought if you valued your house maybe back in 2010 in bitcoin and valued it the same today. The price discrepancy is pretty crazy in terms of the difference ah per bitcoin ah essentially bitcoin and nominated value.
23:46.77
Ben Epling
Um, of your home. So it really is the inherent value that you're trading whether that is the nominated in dollars or in bitcoin getting access to the currency to trade it. That's where a lot of people get turned away from bitcoin because it seems very intimidating to.
23:50.26
ilm
Are.
24:06.19
Ben Epling
Go buy this magic internet money right? A lot of people have these have these preconceived notions that bitcoin is is used by criminals super shadowy coders in their parents' basements with red and green flashing lights popping up on their computers and and they don't know how to get access to to that. Um, they're very intimidated by it. Um, so getting access to it right is kind of step 1 in order to use it as as currency and as that supply dries up getting access to it unless it doesn't get harder it just leads to an increase potentially in exchange rate. Um as the demand continues to grow for it to to be used as money the demand for the the assets will also grow. Demand for the currency will also grow similar to what we saw studying kind of throughout history with different global currencies right? When a new global currencyre is introduced to the world such as the us dollar potentially bitcoin in the future other currencies one hundred hundred years ago the demand for that currency rises therefore the value of that currency. Dedominated against other currencies will also rise in part with that. Obviously fiat currencies. You can print as much as you want bitcoin. You can't print more bitcoin. That's a key difference for for listeners when thinking through that as well but just kind of my thoughts on that.
25:15.83
ilm
We have to remember that I mean money itself is simply a means of communicating storing and transferring value across space and time so right now and in the most practical sense that we're talking about transferring storing.
25:25.41
Ben Epling
Um.
25:33.90
ilm
Value through bitcoin is first taking the the value that has been stored in us dollars converting that to a new new storage unit of bitcoin and then holding on to that that would be like ah maybe I was going to a barbecue and i. Ah, need to keep someone on ice. Okay so I could I could just simply lay my brisket over a bag of ice itself and then take that to the barbecue but that bag of ice is not well insulated and will melt and is exposed to other elements. Okay, so the protection I can transfer that easily. From my house to the park where I have in the barbecue. So I can trace that from 1 place to another but the storage of the energy is going to reduce quickly then I could take that and I could place that and exchange just that ice for something else that is a better means of.
26:20.40
Ben Epling
The.
26:29.58
ilm
Storing energy across time. So I could take that that bag of ice and my brisket and I could throw that into a cooler and that cooler is as easily kept and taken across space but also is going to retain that energy over time far better than. The the bag of ice alone. So again, we're not talking about exchanging simply us dollars for something because eventually that will break. We're talking about exchanging value for 1 thing for another in value and money itself is a means of storing that value. So if I went then I mow your yard. Said hey Jim I um I don't have any money I'll pay you in apples. Um, maybe I don't want I don't know how many a thousand apples for and in exchange for mowing your yard that would be that would be a poor transfer, especially if I if I if I don't need all those apples before they go bad that would not do not work out. Well.
27:19.93
Ben Epling
Um.
27:27.11
ilm
Um, so we have to have something an agreed upon unit that represents the value I presented and that that agree on unit is money now eventually like so I have a few few feet from me I have a picture of kids in post war war one Germany building a tower of their currency. That was inflated away. There got to a point and it wasn't a linear linear smooth transition of this is worth something and now it's not it was very volatile of those german marks priced against gold. It was very volatile there are days that you look like a fool for turning in your marks and buying gold and there's days that you look like. A fool for for holding onto your german marks and and not buying gold in the end they they became worthless though and there's a place of transitioning value is kept like if if we played that out. So go back to 1920 S germany and ah we're talking about this this currency that is being inflated away. It would be a hard tool to it'd be hard to grasp the concept of exchanging the value of the german Mark against gold when the german Mark is no longer even relevant. Well I also have on on my my desk next to me I have a $50000000000000 zimbabwean note and again if we went back not too long ago.
28:32.78
Ben Epling
Um, yep.
28:45.50
ilm
Said this is $50000000000000 that would not register because the value that represents is enormous but suddenly it's inflated where that value is meaning meaningless and it's simply something I have as a relic. Um, so again, the transfer primarily of money is not to transfer. Denominations but rather value and that's something we've lost touch with money is so normalized to us but yet skewed that we we think that it's mean it's simply a means of exchange rather than a means of transferring value. So again like if bitcoin is so I hope work.
29:10.22
Ben Epling
Yep.
29:19.75
Ben Epling
Um, and also and also how you generate how you kind of denoate production right? and that production inherently is value right? like especially here in the Us Whether you're looking at gdp or you're a construction worker or you're working whatever labor you're doing.. It's also a way that you are you are converting your production into value. Um, and not having to barter as you mentioned I Love the brisket example I haven't heard that before that's an awesome one I'd rather steal that for myself. But but love that example, in terms of the transfer and of the value as Well. That was awesome.
29:45.50
ilm
What when and then again this is something I commonly hear is well how will bitcoin ever actually exist if it's owned solely by a small group of people who don't want to part with it and it's not that I don't want to part with it per se It's just I I think that this thing retained its value better than other things. And the ah other things have a certain amount of value of prescribed to them based off of their utility but the cost of those assets in general is inflated because we have the ah the intrinsic value of something. The use cost of something but then we also have this monetary premium built-in because we're trying to use these other assets to store value it and I think that's going to cause a lot the the cost and the value of other assets in comparison to bitcoin to eventually dwindle down to their actual use costs and value. And then that premium will be transferred into a better store of value and better form of money and that's bitcoin So. That's why I own bitcoin Now long-term and people could see this as being bad for markets and bad for the economy. So you're saying that the primary primary means of money is going to be something that no one wants to ever sell. But again if you talk to someone who actually understands bitcoin. It's not that we don't want to ever sell our bitcoin. It's that we want something that later on we can exchange it directly for energy for use cases for ah you know, whatever for an exchange for value.
31:18.11
Ben Epling
Um, yep.
31:20.90
ilm
Ah, in a way that makes a lot of sense. We've removed the noise and we're able to exchange it and that's when like yeah I will partner my bitcoin to go and I hope one day to to want to deploy assets sell bitcoin to go by stocks again because this stock the growth rate of the expected growth rate of this stock. Is better than the growth rate of my bitcoin I hope that bitcoin gets to a point where it is very boring and we talk don't talk about it. We talk about in the same sense that most people talk about money now and when that happens I will gladly part with my bitcoin for useful assets. Um begin.
31:48.75
Ben Epling
Um, yep.
31:55.16
ilm
Because again, it's for transferring it for other means of value. It's not money is not really meant to be something. That's just so sat on forever. Otherwise this system would break. But again our current system is broken for another reason that's because we we can't sit on for a long time because the the the melting brisket an outward.
32:10.86
Ben Epling
Yeah, yeah, yeah, and I think I think exactly what you're describing is really hard for for a lot of people to grasp that situation. You described it very well and I think listeners will will grasp that for that I think it's just really hard for a lot of people to grasp it because we've so we've become so accustomed.
32:13.46
ilm
The very core analogy.
32:30.70
Ben Epling
And also numb to inflation into the current kind of structure of money and how it is and how it this is how it has to be right? people just kind of go through their daily lives saying oh every year I'm going to lose 7 % of my income as a result of an invisible tax. Um I don't even realize it's being done to me through aka inflation. We. We become so accustomed to that. It's hard to grasp that that money is that transfer value a lot of people just just don't picture it that way because the the relationship with money has become so tainted because of inflation because of these monetary policies monetary fiscal policies has skewed a lot of people away from learning about the actual kind of. Economic actors and and what is money and and answering that question and when you do answer that question. It makes you ask yourself a million other questions in terms of of deriving that and I don't think it's just individuals and we we chat about this before as well. But I think institutions are starting to wake up to this in terms of. The money they're holding on their balance sheet a sometimes isn't their money right in terms of fiat banking collapses. They're starting to realize with fractional was their banking and all of that that there's inherent counterparty risks that come with that. But there's also treasury risk when you're holding a currency that is not. Transferring value. Well like you mentioned when you're holding that as a as a company as a corporation as now we'll see um, you're at an an immediate disadvantage as a corporate treasury or as the person or the treas responsible for that because you're immediately trying to beat this hurdle that is.
34:03.33
Ben Epling
You're you're basically starting negative as a result of inflation. Um, and if you hold dollars you're just having your your treasury your balance sheets and plateated as well. So we've seen a lot of institutions start to wake up to that. Um, here at river and just in the bitcoin industry as a whole over the last twelve to eighteen months has a lot of. Um, inflationary risks continue to play out as a lot of counterparty risks in the fiat system continue to play out just the interesting trend that we've been seeing on our end as well.
34:28.56
ilm
Yeah I want to talk through what you're seeing on the institutional side but let's ah, let's finish up a few things from the individuals right? quick so like buying bitcoin. Um, you know you there are people out there I'm sure who bought a bunch of bitcoin at the high of 69000 and then it dropped a bunch and now they're sitting in the sidelines thinking I have friends like this I have a really close friend of mine and he reminds me regularly that he's just waiting to get back in the money on his on his bitcoin positions at which point he will just he'll sell it all and be done. Um.
34:57.59
Ben Epling
Um.
35:04.80
ilm
And he doesn't understand he doesn't understand bitcoin. That's the funny thing here and it's it's hard for me to talk with him about this because he doesn't want to listen from a long he views it as a stock rather than the long game of basically more of like internet Internet adoption is how I view this more. So anyways. Um.
35:24.14
ilm
So I'd like to talk to like the the ways you can buy it So lump sum. There are there. There are inherent risks of making large large lump sum purchases. But there's also inherent risks of not buying um or not buying lots of it at a certain time so you can. You can make a lump sum purchase Also River facilitates ah recurring automatic purchases through a dollar cost Average. So I'll let you talk to this but right quick a couple things like if if you have an asset that goes up linearally.
35:40.71
Ben Epling
Yep.
35:57.96
ilm
Um, or more than it goes down over a prolonged period of time if your timing is good then it makes more spent sense to make a lump sum purchase I'm reading a study a few years back of and this was related to the general stock market but historically statistically it makes more sense to make a lump sum if available over a dollar cost average in now bitcoin is. Much more volatile at the moment than a general stock market and that's a way of dollar costavaging is a way of hedging your risk of your of poor timing again. If if you bought a whole bunch of bitcoin at Sixteen Thousand earlier this year or end of last year um then you've done really well from that. If. It's 16000 you saw a dollar cost averaging at X dollars or x amount of bitcoin per day or per week or per year per month. It made more sense instead to do the lump sum now if instead I saw about a week or two ago ah Dylan Mcclare tweeted that. Had you started anyone who started buying bitcoin the day of the all time high at sixty nine thousand if they bought daily all the way through about a week or so ago they are now in the money on their total bur bitcoin acquisitions. So that's where obviously banking a large lump sum purchase versus dollar cost average in makes a big difference in the. Ah, for the it's to better the dollar cost averager so you want to just talk through like those and like what you see as far as like people who buy there and how that works.
37:17.46
Ben Epling
Um, yeah, yeah, yeah for sure and I think the root of the question is also partially risk appetite as you mentioned with with lump sum purchases if you time it well the upside potential is a lot higher if you're trying to time. Its. But the downside is also a lot higher. So. It's really where your risk appetite and kind of what your your risk is within your your pick and holdings or your portfolio as a whole um, but in terms of acts and strategies and and what we see and what a lot of clients do as you mentioned right? There's a market buy. That's just the a lump sum purchase you're buying at the exchange rate at that time. There's a recurring order. That's a dollar cost average order daily weekly biweekly or monthly whatever cadence a user wishes to deploy their assets or their dollars to exchange bitcoin for they can set that and that will automatically occur based on that set cadence thirdly we also have target price orders. Um, a lot of people may know this basically essentially as as a limited order very structured very similar to that where say you want to buy bitcoin at thirty thousand us dollars you're thinking it's going to drop over the next few weeks you can set an order to buy ten Thousand u s dollars worth of bitcoin if the exchange rate hits thirty thousand us dollars and vice versa on the sell side. So you have 2 bitcoin if it goes to fifty thousand us dollars you want to liquidate it. You can set a target price order for those 2 bitcoin at a $ 50000 exchange rates if the price were to hit that's you would sell your bitcoin at that time. So those are really the 3 different ways in which you can acquire.
38:50.53
Ben Epling
Bitcoin through river what we see most clients doing is a mix of the first 2 in terms of kind of percentage basis wise. It's a mix of a lump sum and mix of a recurring order so a lot of clients will initially do a larger lump sum order um, depending on what their their assets look like. Deploy that get their exposure and then set a recurring order to get that kind of smoothed out exchange rate or smoothed out cost basis. Um, so it helps to kind of decrease that risk with a lump sum because you're smoothing out your call spaces over time by having that daily or weekly or monthly recurring order because you're getting exposure to the exchange rates. Over that time as opposed to just the 1 lump sum purchase. Um and to the recurring order and dollar cost to average piece for a lot of people the old verage of of time in the market always beats timing the market is true for a lot of people in bitcoin and that's why they love the recurring order or that dollar cost average feature. Just because it allows them to get that exposure over a set cadence because as you mentioned the price obviously fluctuates wildly It's very hard to time most people aren't in the business of day trading bitcoin. They just want to get exposure to it over the long run and if they do have that low time preference and they want to get that long exposure. Really is no better way than just setting the recurring order having 0 fees in those orders here river and then going and having that sort of execute on the set cadence as well.
40:12.31
ilm
Um, yeah, that's where I mean owning a volatile asset. It certainly can you know Ah, it can certainly pay off to have regular recurring orders through a dollar cost averaging mechanism to achieve an overall lower cost basis. Um, yeah. So and certainly it certainly helps. Also yeah from a risk appetite. You know if you bitcoin's at thirty five Thousand whoever it is today if you went and bought a whole bunch of 35 and it drops to 33 or 30 you might be kicking yourself if it goes up to 40 you might think you're a genius ah versus if you set a certain amount at a stake of 35 and say all right over the next.
40:31.73
Ben Epling
Um, yep.
40:48.88
ilm
X amount of time over the next month six months year I will buy on a regular recurring basis this much and you just scoop it up. You are reducing your regret on the downside but at least you took a large enough stake up the front where if it goes up. You have a stakee and you continue to buy on the way up and I think that's usually ah a great way to go for for most people if you I mean if you plan on buying this over x amount of time and a since you are going to dollar cost average. That's where like a 4 1 k plan is helpful is its automatic force savings on a regular recurring basis. That's yeah, the the.
41:12.70
Ben Epling
Um, yep.
41:27.00
ilm
Average savings rate of an American is abysmal and most of the average savings comes through outside of force savings mechanisms like social security or pension plans is going to come through forward case because you can set it up and be done with it and that's where you know if you have an investment if you if you have something you want to invest in or own. But you just never purchase it. You don't deploy dollars to it Even if it goes up a Thousand X. You're on the sidelines all time or maybe had a small exposure versus if you have something that goes up not very much at all. But at least you've been saving towards it. You're going to opperform and that's where at least starting with setting healthy setting Healthy Habits. Can make a massive difference in a way of a healthy habit can be used having automatic recurring orders that just happen on the backend and just know that you are saving regularly to an asset over a very prolong period of time but a big fan of dollar cost savaging.
42:19.18
Ben Epling
Yeah, and you're saving an asset That's that's scarce right going back to that conversation. You're saving an asset that can't be inflated in terms of printing more? Um, but just adds a difference of obviously appetite or or risk profile to a portfolio and that's why a lot of clients. Love the biweekly or the monthly recurring orders. Because structure very similar to say you get your paycheck biweekly say you have $100 biweekly recurring order. You just have $100 pulled from your bank accounts biweekly essentially on that cadence where you get your paychecks as well. Don't have to think about it. You're just getting exposure to bitcoin over time without any manual inputs. It's just being deducted automatically. So super super convenience um and a great way to get exposure of the long run as well.
42:55.59
ilm
Couple last things on the person I want to address that's going to be the ah the fear of exchanges I alluded this earlier with like Ftx the noncox. So um, yeah, what's what am I what am I talk about there like exchanges collapse what leads to that and how are you all different and.
43:05.43
Ben Epling
Um, yep, yep.
43:12.42
Ben Epling
Um, yeah.
43:15.15
ilm
Should even with y'all being different like should we trust it and trust our bitcoin with you guys. Do you advocate for moving it to to a wallet. How does that work all all of those questions.
43:21.10
Ben Epling
Yeah, yeah, yeah for sure having to address that first and foremost right, the end state and most secure option for bitcoin clients bitcoin users bitcoin holders is to self-castsy. So if someone's comfortable with self-casting. They can move their coins off a river anytime. They can hold that self- cusdy we will help them transfer it off of the platform. So by all means when someone gets to that portion of their journey. They can always transfer off in self-custody with that being said, we also believe that right clients can trust us as well and where that trust or I guess where the lack of trust in the industry has come into play as a result of. Ftx and the whole host of exchanges that have gone under um is really a lack of I guess operational efficiency a lot of times engineering issues. Um, and also just building products and comingling assets and a lot of funny business in the backend to say the least. Um, and where that comes into play and and where river is different than a lot of those companies as we really are the vertically integrated solution. So what I mean by a vertically integrated solution from a bitcoin exchange standpoint is we are the custodian and the exchange a lot of times those are two separate entities with river we are both of them. Um, and what that means is that we built all of our infrastructure so we have our own custody our own multi-signative cold storage custody full reserve no lending no reapppovocation we have full control over that there's no counterparties involved that can have a say over that that reduces counterparty risk.
44:52.12
Ben Epling
For any end user for any client who's buying through us and any client who's customing bitcoin on our platform as a result of that in order to do that. There's a lot of complexity behind the scenes from an engineering and security standpoint. But there's also a lot of complexity from a regulatory piece. Not a lot of people realize that regulatory that that matter piece is also. Um, a big hurdle in order to to be the casstodian and be the exchange. It took us years and years to get all these licenses we are registered in every state we operate where it's required as a money transmitter. Um, that allows us to exchange currencies that comes with a whole host of other kind of.
45:22.61
ilm
Um, go do it with.
45:29.14
Ben Epling
Ah, things that we're upowed upon from regulators financial audits surety bonds having different operational operational processes with the file with them different things that we have to submit essentially to auditors to regulators to hold those mtls and then on a federal level. We are registers of money services business by finsen so financial crimes and enforcement network. Um as a money services business or msb now a lot of companies don't hold those. They're essentially built on top of other companies who hold those. That introduce is counterparty risk whereas river we are the custodian and we are the exchange and the regulated entity having full control having only but truly bitcoin-only custody where a lot of exchanges especially ones that have collapsed. They were comming with other cryptocurrencies hundreds of different assets. They had lending products they had credit card products they're splitting up on top of it. Yield these yield generating products where their promising set yields whereas with river full simple 1 to one reserve. There's no lending, no rateprocation. There's no fractional reserve banking the number you see on the screen is backed fully 1 to 1 with bitcoin. In cold storage on your behalf. You don't have to worry about figure out keys doing all of that we will handle the complexity in that sense for you and hold that in cold storage on your behalf with no custody fee. No ongoing annual fee or account management fee. We think security should be default so we don't charge clients.
46:53.39
Ben Epling
Ah, for that for that kind of ongoing custy as well.
46:57.20
ilm
My wife actually about a week Ago. We were talking about bitcoin and she I mean she was asking some some questions along these lines and said well if bitcoin is supposed to be something that no one can ah create duplicates of and it's supposed to be safe in this. Asset and all that fun stuff. Then? how did this whole thing with with Ftx and sambaker free. How how did that happen and again that comes back to That's not that's not Bitcoin. That's an institution that just happens to be related to the broad crypto Network and some bitcoin in a sense even explaining that how that took place like.
47:25.30
Ben Epling
Um, yep.
47:31.80
ilm
How they were able to essentially inflate and manipulate manipulate the exchange rate of bitcoin based off of inflating the ah the supply or at least creating a false level of supply and that is ah you use that word a moment ago as re-hypoication. So you mentioned a second ago if you see. On your screen when you buy bitcoin at river and exchange it says that you own 1 bitcoin um is there actually 1 bitcoin backing that and you mentioned a second ago that you said that river does that versus like ftx if I went on there and I bought I gave you $35000 and it says now you own one bitcoin and um, there's that was a screen. And that would be and a common analogy I use and I talked with Kindra about this would be if if I wanted to sell her and a whole group of friends a beach house in Hawaii now I even had a picture of that beach house said hey give me a million bucks and this house is yours. And I know that most people aren't going to go to Hawaii for quite a bit despite the fact they really want to go there. It's just it's a long ways from here. So I they give me the million bucks that can they have a picture of the beach house as well. I can go sell that same beach house to a hundred people and they all let's say let's say even.
48:25.96
Ben Epling
Are.
48:41.87
ilm
Maybe the beach house does you know exist I just made a picture of or I grabbed off the internet. Maybe I have one I own one beach house and everyone decides to fly out there at once who has claim to that and that's what we had poation is and they fly out there and the local say that that house doesn't need to belong to him you grab that thing off of of Google that's ah, that's a picture of someone else's house. Essentially was happy. You had a picture of an asset that was not actually backed by the asset itself and you can recreate that picture over and over again and suddenly if you do that enough. You can actually ah deflate the value of beach houses in Hawaii because suddenly there's so much more so many more houses. In existence quote unquote than really are out there and that's minutely manipulating the price of those and you're messing up these again. It's ah money is a means of communicating value and when you mess up the means of communication you mess with the signal you introduce noise. And it confuses a lot of things and the confusion can be the exchange rate of those those means of money as well.
49:43.31
Ben Epling
Yep I think the the key part there kind of I love that explanation again similar to the briscoe one. Love the beach house explanation I think the key part of that is that it can be. It could have been any asset right? It could have been a beach house. It could have been whatever that they were doing fraudulently. It wasn't. As a result of bitcoin or was it bitcoin or digital assets or crypto that was defraing people. It was the the the actors within an institution that were that were derauding people. It wasn't inherent to bitcoin and and that's a stigmama I guess ah that education is starting to help people overcome. That's a lot of people who. In the industry or or haven't learned about bitcoin. They see the Fda situation. They think that that's a result of of bitcoin like that was something that that bitcoin did whereas that could have been any other asset as you mentioned like like a picture of a beach house. It wasn't something inherently native. Um, to bitcoin as a result of that it was just the practices in which the exchange was engaging.
50:39.48
ilm
Exactly um, here, let's go right? quick I don't I don't want to muddy the waters with 2 different conversations but just quite let's keep it brief again and I'd love to bring you on. Ah again to talk about this specifically. But you mentioned earlier and. The institutional side bitcoin for businesses institutional sign of things like what are you all seeing there.
51:01.62
Ben Epling
Yeah, the institutional piece. Um, the snowball is getting bigger and bigger for lack of better terms over the last twelve months um it seems that a lot of institutions I mentioned a little bit ago are waking up to the risks of their treasuries of their balance sheets inflationary risks that come with it. But then also the benefits that bitcoin exposure and holding bitcoin their balance sheets can do for them in in hedge against that now there's a lot of complexity around the benefits of holding bitcoin on a balance sheet and there's also complexity of holding bitcoin on a balance sheet as a whole if you're a 5000 person corporation. Holding bitcoin on a balance sheet can be quite complex. Especially if you're self-cusding or having different custody models. It can get a little complex from internal controls. Um, so there's obviously complexity. There don't a dive completely into that. Um, but from a advantage standpoint from what we're seeing for a lot of institutions who for who want to get exposure to it. It's really a a reduction of counterparty risk right? Um, you're reducing your counterparty risks on fiat banks. You're also I guess mixing um, putting not putting on your eggs in 1 basket for lack of better terms depends on your custody model. But it does decrease your counterparty risks if you're a corporation holding bitcoin. Um, it's a bit of an insurance policy as well against fiat debasements as I mentioned on the inflationary standpoint. It's an insurance policy for a lot of businesses to have exposure to bitcoin um and get that kind of inherit. Um, guess yeah insurance policy for like better term and then also thirdly having a twenty four seven liquid market
52:34.68
Ben Epling
Is huge for a lot of businesses. Um say in the scenario of Svb right? say you are an operating business. You have to pay payroll you have to pay vendors. You have to pay whatever expenses you have to pay even if you had Fdic insurance with svb or any other fiat bank that went under up to two hundred Thousand Euros dollars you still have to wait for those funds to arrive in order to do that and you can't just stop your operations for weeks or months but while you're waiting for this this currency to arrive in order to exchange value going back to kind of tye it all back together having 4 % 3% 5% of your Balan sheet bitcoin at 24 7 3 65 liquid markets. Allows you to at least have access to some sort of transfer of value in that scenario. So. It's also an insurance policy for a lot of operations for corporations l will see is all like good stuff in that sense as well. So really those 3 buckets are are a lot of what we see here and there's complexities to each of those 3 um, that's kind of just a quick rundown of really the 3 themes and 3 advantages that a lot of institutions are approaching us in terms of why they want to get bitcoin in their balance sheet.
53:38.20
ilm
It's Michael Sailor the the Ceo who's really best known for doing this I watched an interview him yesterday and he mentioned ah strategically this is a means of not only deploying your productivity of the company but also deploying your balance sheet. A means of growing the value of your company. So now you instead of having you're trying to grow your productivity so much that you are outpacing inflation press but plus producing profits instead you're using and and almost essentially fighting your balance sheet. From an inflationary perspective. Suddenly you're able to deploy your your balance sheet as a means of overall complementing that with your productivity of the company to grow the overall value of your company really interesting and I curious to see how this progresses over the the following years. Ah.
54:25.37
Ben Epling
Yeah, it's definitely super interesting and it's it's a big shift from I think previously five years ago if this question was prompted. It's a lot would be a lot of holding companies who are holding bitcoin right? A lot of just trust and and and oscs and things of that nature. But we're starting to see a shift to actual operational businesses such as Micros Strategyy obviously being the biggest case that everyone knows about but even construction companies real estate companies plumbing companies all these different sorts of small medium large sized businesses that are on the operational side and not just holding companies or funds. That are getting exposure to it for those exact reasons as you mentioned so super interesting shift just to pay attention to.
55:00.90
ilm
Awesome! Well Ben, thanks for coming on I know we we talked a bit about handful of things. Some of it were real simple and unpacking the the overly simple in a sense and but we're able to scratch the surface on some more things as far as where you see bitcoin coming. So glad to have this conversation and. Appreciate you joining me alrighty.
55:20.39
Ben Epling
Um, yeah I Appreciate you have me it was a pleasure.
