Why Lending Rates Differ from Passive Yield

Bitcoin is definitely volatile. If you told me it was going to go down by 50 percent next year, I would hesitantly believe you. However, there is no way you can convince me that Bitcoin will not hit $500,000 at some point within the next five years. Think about what’s happening: ETFs are everywhere, treasury companies are holding Bitcoin, there are rumors of central banks buying it, and even an American Bitcoin reserve. It is an asset that will go up. But it may go down before that, and that is unnerving. You should not put money into Bitcoin unless you commit to not touching it for 5–10 years. But then you face another problem—Bitcoin is like gold. Unlike apartment buildings, there is no rent, no cashflow. Other coins like Ethereum and Solana have mechanisms called staking that allow for yield. Bitcoin does not. Its beauty is that there are not a lot of moving parts. It’s a vault of security, and that’s pretty much it. Again, just like gold. There have been companies like BlockFi and Celsius—which are, indeed, traditional finance companies—that lost people’s Bitcoin when they went insolvent. But now there may be a way to get yield from Bitcoin while keeping it in your custody. That’s what we talk about on this week’s Wealth Formula Podcast, in addition to covering recent news and making predictions about Bitcoin’s price. Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  When you're time locking your Bitcoin, it's fully self custodial, so you're never giving up those keys at any point, and that's what's so critical. Welcome everybody. This is Buck Joffrey, the Wealth Formula podcast. Coming to you from Montecito, California today. Before we begin, I wanna remind you there is a website associated with this podcast. It is called wealth formula.com. Lots of resources there, including the opportunity to join our accredited investor club. Uh, take the opportunity if you, um, are, you know, if you do make over $300,000 per year and, um. And, uh, have a net worth over a million dollars outside of your personal residence to join the club. It's free to join and it basically just allows you to see deal flow. That's pretty much it. That deal flow is not seen outside of, uh, the network because, uh, it's private. Private placements you've probably heard of. Right? So anyway, go to wealth formula.com, sign up for investor Club today we're gonna talk. About Bitcoin. Again, I know a lot of you still probably are seeing on the sidelines with this lately. The, uh, the price of Bitcoin has been extremely volatile. Well, it's not volatile compared to what it historically has been, but it's been volatile. But listen, I will say this, um, if you told me Bitcoin was going down by 50% next year. I would hesitantly believe you. Okay. But there is no way that you can convince me that Bitcoin will not at some point be worth $500,000 per Bitcoin at some point within the next five years. I mean, that could happen in two years, and then you could end up coming back. To a hundred thousand dollars. But I, I'm, I'm convinced that it ends up there. I mean, think about what's happening. ETFs everywhere, treasury companies holding Bitcoin, rumors of central banks buying it. An American Bitcoin reserve is on the table. It's already exists. It's just are they gonna actively buy it or they just going to confiscate it and hold it. Um, now that being said, you know. The volatility is a real thing. And so what I, I think is really important is that you should not put money into Bitcoin unless you commit to it for five to 10 years. Just buy it and forget it. Don't look at the price. Don't look at the price. I mean, what I will say is, you know, say a couple years down the line, if all of a sudden you're hearing people talking about how Bitcoin went crazy and it's, you know, worth a million bucks or something like that, then yeah, it out sell it. But. You know, volatility is a real thing here. It is not, uh, something you want for money that you need tomorrow. Okay? Now with that Bitcoin, you face one other problem. It's kind of, see Bitcoin is kinda like gold, right? Unlike apartment buildings and stuff that we do in a credit investor club or investor club, there's no cash flow, right? Um, other coins like Ethereum of in Solana do have mechanisms. Are called staking that allow for yield, but Bitcoin does not because in fact, it's, it's beauty in, in many ways, in the way it's designed is there's not a lot of moving parts. It's a vault of security and that's pretty much it. Right. And that's why it's like gold. I know some of you're thinking, oh yeah. Well there are some ways, uh, the, you know, you can get yield. There are companies, and you're right. Whereas companies like Block Fi and Celsius. Um, for traditional finance companies, I think BFI is out of business, I think Celsius as well, basically because when Bitcoin went, uh, way down, they basically, uh, you know, the, the companies folded and a lot of people lost Bitcoin in those situations. In fact, with bfi, um. I, yeah, long story, but I lost, I lost a decent chunk there too when that happened. Now, in those cases with these, you know, centralized, uh, traditional finance companies offering yield on Bitcoin, the big thing here was that they actually had custody of your Bitcoin. If you have custody of your Bitcoin, you can't lose your Bitcoin. Right? That's, uh, that's a really important part of this whole Bitcoin ecosystem. And as it turns out, there may actually be a, a way to get yield from Bitcoin while keeping it in your own custody, keeping it in your own wallet or whatever, right. Um, that's what we're gonna talk about this week on Wealth Formula Podcast. 'cause we have a guy who's, uh, creating that entire ecosystem. This is an, uh, og uh, rich Rines. He's a OG Bitcoin guy. And, uh, a lot of interesting stuff we talk about. So we talk about, um, initially the yield thing, which I think is important. A really useful thing, but then we go on to talk a lot about, you know, the other issues around Bitcoin right now. Again, if you are, uh, not involved with Bitcoin, I think it's important, you know, whether or not you buy it to be in the know, learn about this stuff. Um, and, um, this is a good way to do that. So when we come back, rich Rines wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments. Here's the key, even though you've borrowed money at a simple interest rate. Your insurance company keeps paying you compound interest on that money even though you've borrowed it. Net result, you make money in two places at the same time. That's why your investments get supercharged. This isn't a new technique. It's a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealth formula banking.com. Again, that's wealth formula banking.com. Welcome back to the show everyone. Today my guest on Wealth Formula podcast is Rich RINs. He's a Bitcoin OG from the class of 2013 and one of the key architects behind the core blockchain. Uh, rich previously led the Money Movement engineering team at Coinbase, uh, helping to FCI facilitate over 1 trillion. Dollars in value transfers and now serves as founding contributor to Core Dow, uh, which is, uh, building a scalable self custodial yield layer for Bitcoin. He's also the CEO of Element wallet. Which integrate stable coins, encrypted messaging into core ecosystems. Uh, rich brings deep experience in both traditional finance mechanisms, uh, and mechanics, and, uh, blockchain innovation as well, making him perfect person to talk to about how Bitcoin is evolving into a yield bearing asset class. Uh, rich, thanks for joining the show. Thanks for having me. Really excited to chat here today. So let's start, uh, with the big picture when we talk about, um. You know, staking in crypto. My, my audience, uh, I think, you know, some people, I would say probably half are pretty crypto savvy by now 'cause I've been talking about it since 2017 as well. However, um, let's talk about staking and, you know, what does that actually mean and, and why has it been easy for some coins like Ethereum, Solana, but not really. So for Bick Bitcoin. Happy to, happy to unpack there. There's quite, quite a bit to unpack there. Um. So I think we take one step back and we kind of think about the origins of, of crypto, right? You, you had Bitcoin, which first came under the scene in 2008, 2009, and it was based on proof of work, right? And proof of work is solving cryptographic puzzles. When you solve those puzzles, you help secure the network. And we're all kind of familiar roughly with, with how Bitcoin works, energy, scarce, finite currency and, and you know, that was rhetoric genesis of this whole, of this whole movement. Somewhere, let's call it 2017, 2018 ish, you started to see a, a shift from people looking at proof of work and something. It's scalability limitations primarily because you do get a security benefit of proof of work that you do not get the same way with proof of stake. You get a different mechanism, but which is still secure, but not as secure. And there was this desire to move to a new, um, a new mechanism. And you saw Vitalik a lot of the folks in the Ethereum community really pushing this even earlier. We saw the first wave of, you know,