A Financial Advisor Discusses, What is Bitcoin?
Video Transcript: A Financial Advisor Discusses What is Bitcoin?
0:00 Exciting day today. It's Bitcoin day. So my name is Phil. I'm a CERTIFIED FINANCIAL PLANNER™ and I've been doing some of these videos about personal finance and you know Biblical finance and tying some of those together and I want to start doing some videos about Bitcoin because it interests me and I 0:20 think that there can be some viability to it. Obviously a ton of risk at this point. I want to go through my initial video today is just going to be a brief synopsis of what Bitcoin is. 0:31 A lot of you have probably seen it and my explanation I hope will be beneficial but maybe not as optimal because I am still learning the exact, how would I phrase it the exact mechanisms be on behind some of how all of the Bitcoin systems work and things like that. 0:53 But I just know conceptually speaking, there is a lot of potential benefits from what Bitcoin can offer. So I want to start talking about that. 1:02 And I hope that that's interesting to you. And if you like it, please follow the video, follow my channel, follow me on Instagram, give this video a thumbs up. 1:12 Get the message out about just some of these things and love to help you if I can.
So when we look at Bitcoin, the original white paper that was published when it was first created calls it a peer-to-peer electronic cash system. 1:32 So meaning you don't need a bank to send money directly to someone else. Right now, you have to go through an intermediary such as a bank to send the money to someone else. 1:44 Even if you think, well, I send it through Venmo or PayPal or something, those are not final settlement. It still ultimately goes through a bank for those types of transactions. 1:56 Bitcoin would be a different situation where you'd be able to send the money without the need for a bank, which is very exciting. 2:03 Now at this point, there isn't a lot of infrastructure built around the actual use cases for that, spending Bitcoin, transfer Bitcoin to people. 2:14 That is in the process of being built out. And so it's pretty exciting to see where that could go. But at this point, it's not widely used. 2:23
However, when we're looking at how it could be in your financial plan and mixing with some assets. Something that really has got me interested in it is the idea that it is not run by a central bank in the US that would be the Federal Reserve. 2:44 It can really be potentially something that could offset inflation but really it's more of an asset debasement would be I think potentially more of a way to phrase it although I'm still working on how to think about that. 3:00 And so before I get any further I guess I should talk about you know the risk right Bitcoin I think has some potential benefits but it's incredibly risky at this point it time. Its very volatile. It's still speculative and you know the way you have to store the Bitcoin is different than how you store stocks or cash. 3:21 So there is risk you have to really understand those risks before you make any moves on putting some money in Bitcoin. 3:31 So I want to make sure I get that disclaimer out this is purely for education purposes only. Not investment advice. 3:38
But when we look at the last couple of years, you know, we had obviously a very large shock to the system with the COVID pandemic. 3:50 And so the Federal Reserve, they have various monetary policies that they can do where they will basically try to, you know, get liquidity into the system. 4:01 And they'll basically create dollars out of thin air and that's also done with banks when they write loans. 4:08 And so a lot of money is kind of created in various ways in the system. And so when you hold dollar bills and so say you had $10 and maybe there were only a million dollars out there, obviously it's way more than that. 4:23 But let's just look at that example. So there's a million dollars out there in circulation, you own $10 of that. 4:29 Well, a year passes by and you still have $10, maybe you have $11, you feel like you're doing well, you've got another dollar, but somebody injected another million dollars into the system. 4:42 Well now there's, you have $11, you think you're doing well, but there's now $2 million in the system. So you have a smaller fraction of what's out there.
4:52 Right, so that's continuously happening is the monetary supply is growing and that certainly can be of concern. You know, we're looking at that portfolios and trying to help offset the cost of everything going up and just the, you know, when there's that much money into the system, cost of assets rise 5:10 and it can be hard to buy homes and things like that because all the money is flowing into those types of places. 5:16 And it's hard to know where to put that money. And that's part of what we do here at Foundation Wealth Planning. 5:22 But when we're looking at another way to save your money, if you could save it, well, I haven't put the money into stocks or real estate. 5:31 And you could still offset inflation or monetary policies like that from the Fed where they're increasing the monetary supply. If you could do that with a single asset, that would be pretty incredible. 5:45 And so that's potentially what Bitcoin offers because there's a set supply. There's only going to ever be 21 million Bitcoin that ever get produced. 5:54 And so if you hold a little bit of that, you have a chance to at least hold some value relative to how many other assets are floating. 6:02 Out there.
So I think it's it's very exciting and I'm not going to get into a lot more of the technical pieces of it. 6:12 There's a lot of videos about that that may or may not go over your head with how the digital ledgers work called the blockchain and different things of that nature. 6:22 At some point I may interview somebody to talk about that or you know if you want to dive deeper into that, let me know. 6:29 I would love to do that. But this is kind of a first of many videos. I'm gonna eventually do a video that talks about how this could work into a financial plan and maybe go deeper into some of this stuff. 6:42 But yeah, exciting day. First video of Bitcoin that I'm putting out there. Hope you like it. Please let me know what you think. 6:50 And God bless.
Phil Francois, CFP®
Foundation Wealth Planning
phil@foundationwealthplanning.com