Got rich off Bitcoin? Here’s how to protect the gains and pass it on when you die (feat. Unchained)

[00:00:08] Ray Salmond: The last few years have been crazy for Bitcoin. From FTX exchange imploding and SBF being exposed as a Ponzi-schemer to Bitcoin falling as low as $16,800 and then recovering. Fast forward to the present, and Trump ran for president and won. And Bitcoin briefly traded above $100,000 per coin. That’s at the time of this recording. Right now, as you listen, it could be above $100K. It could be at $150K, it could be at $200K. Who knows, maybe the strategic reserve thingy was approved. So, it’s been one hell of a ride. Many of us remember when Bitcoin traded for under $1,000, and some of us were fortunate enough to remember and recall the days when Bitcoin traded for just a dollar. Obviously, that’s not the case anymore.

$100,000 is a lot of money. It’s the type of money that everyone would love to make but would hate to lose. Bitcoin is no longer this odd, funny little money that you stash away on a USB stick or some random folder on your desktop like we used to. For holders, it’s time to get your Bitcoin house in order, per se. It’s time to think a bit more seriously about how to custody this asset and how you might pass it on to your loved ones if you die. It’s time to think about what can you do with Bitcoin as you reach retirement age. I’m sure these are thoughts that are on a lot of current potential and future investors’ minds.

So, that’s why I’ve brought on Joe Burnett, the director of market research at Unchained, today to share some thoughts and strategies on what Bitcoin investors should be doing and thinking about for the next few years. Now, before we get into it, I have to say none of this is financial advice. Listeners are encouraged to do their own research and diligence to decide what are the best steps regarding their investment decisions and who they choose to custody their assets with. So, with that said, let’s get into it.

Joe, welcome to Decentralize. I’m really excited to chat with you today.

[00:02:11] Joe Burnett: Ray, thanks so much for inviting me on the show. I’m glad to be here.

[00:02:15] Ray Salmond: Given Bitcoin’s rise over the last 10 years, it’s a bit more serious than holding coins on a hard or soft wallet at one’s home. And there are strategies for securing your coins, like using an air-gapped wallet or a hard wallet like a Coldcard. Air-gapped that has no connection to the internet at all unless you want it to, I guess. You can break up your holdings across multiple wallets. So, there’s all these different methods of securing and custodying your Bitcoin, but I find them a little bit daunting personally. Now I know Unchained has a multisig vault service that apparently can take investors’ security to another level. Can you share some details about that?

[00:02:58] Joe Burnett: Yeah, absolutely. It’s kind of interesting to think about, in general, because whether you’re talking about real estate or stocks, custody itself is kind of an afterthought. You don’t really consider the implications of choosing Fidelity or ETrade, or if you buy a house, you just receive the title or the deed. Custody within Bitcoin is very unique compared to every other traditional asset that you may hold today. Even dollars, right? Like as long as you hold dollars in an FDIC-insured bank account, you typically feel pretty comfortable with it.

Bitcoin is very different because of the history of Bitcoin. Think about you had events like Mt. Gox, which is one of the first, largest Bitcoin exchanges in the world, and people bought Bitcoin on Mt. Gox. They had a Bitcoin IOU that said hey, I own 1 Bitcoin. But at the end of the day, Mt. Gox held the actual keys to the Bitcoin. They held the possession of the Bitcoin, and eventually, Mt. Gox got hacked and lost a lot of Bitcoin. And so, people that had Bitcoin IOUs from Mt. Gox ended up losing a lot of Bitcoin. Obviously, this has not just happened with Mt. Gox. This happened with FTX as of a few years ago. This happened with BlockFi, Celsius and so many other things.

So, the history of Bitcoin is people losing Bitcoin and custodians losing Bitcoin. And the beauty of Bitcoin is it’s an asset that you can hold without counterparty risk. So, people intuitively, when they first learn about Bitcoin, they don’t think about custody for the reasons I stated. Because typically, for normal assets, you don’t really think about custody. But for Bitcoin, you can hold it without counterparty risk, which makes it a really unique asset. But then, once you start learning about, okay, well, how do I hold Bitcoin without counterparty risk, it can get kind of complicated.

You’ve heard about hardware wallets, software wallets. You can buy your Ledger, your Coldcard, your Trezor, which are all like individual hardware wallets. But still, at the end of the day, when you buy one of those devices, and you set up a default single signature address, which means like your Bitcoin is controlled or protected by one key that’s stored on that one device, and you may write down your quote-unquote seed phrase that is effectively your key to your Bitcoin, then that key becomes a single point of failure, like you mentioned. Do you hold it at your house? Do you hold it at a safety deposit box at a bank? Regardless of where you hold it, if you have one key protecting your Bitcoin, what happens if someone actually discovers that key? They actually have complete access to your Bitcoin. And that’s not an ideal way to hold your Bitcoin.

And so, I work for Unchained, like you mentioned, where we have a multisig vault service, and it’s called collaborative custody. So, you have trusted third parties, which would be Coinbase, Mt. Gox, FTX. They hold the Bitcoin for you. You have pure self-custody where you may hold one key yourself, and that’s a single point of failure for your Bitcoin. And then you have Unchained’s solution, which is kind of in the middle, gets the best of both worlds, which is called collaborative custody. And all this means is instead of protecting your Bitcoin with just one key, you protect your Bitcoin with multiple keys.

And so, in the typical Unchained setup, it’s a two-of-three multisig vault. This means that there are three total keys protecting your Bitcoin, and two of the three keys are required to actually move your Bitcoin out of the vault. And in the unique setup, you have two keys that you hold yourself, and then Unchained holds one key as a backup. And so, the reason that Unchained holds one key as a backup is if you have both of your keys and one of your keys gets lost, damaged, or stolen, then you actually don’t lose your Bitcoin because Unchained has another key as a backup.

And so, it kind of is the best of both worlds when it comes to having some trusted institution there with you to help you make sure you don’t lose your Bitcoin, and then also maintaining complete sovereign control over your Bitcoin. Because again, in this setup, where two keys are required to move your Bitcoin, Unchained only has one of the three keys. So, Unchained themselves alone cannot move your Bitcoin. They need one of your keys to move your Bitcoin. And so, in my opinion, it’s one of the best ways to securely hold Bitcoin for generations to come.

[00:07:23] Ray Salmond: How does it physically work? Like some people have their seed phrase written down on a piece of paper in their house, and maybe their Bitcoin saved to a Trezor or a Ledger or some sort of hard wallet, and maybe they put it in a safe. But maybe their house burns down. Maybe a tornado takes it down and like scatters their stuff many miles away. Maybe a hurricane hits and floods your home with eight feet of water. Your safe’s only good for like 24 hours underwater and 1 to 2 hours in fire. So, imagine if your hard wallet device gets damaged, and the seed phrase that you wrote down on paper is like destroyed.

How does it, like, physically work with Unchained? If you guys hold two keys, and I hold one, does that mean I still have a piece of paper or some sort of hard wallet at my home? And for the one key that you guys have, who custodies that? And how do I get my Bitcoin to you? Do I need to send my Bitcoin to you, and then you custody it with someone else?

[00:08:25] Joe Burnett: So, again, a client will hold two keys, and then Unchained holds one key as a backup. Each of those keys is still held on an actual hardware wallet, which could be a Ledger or Trezor or Coldcard. Each of those individual keys that are on those devices, though, can correspond to an actual seed phrase, which you can write down, or you can engrave it in steel in case there happens to be a flood or some sort of catastrophe. But again, the entire point of Unchained is to eliminate a single point of failure when it comes to securing your Bitcoin. And so, if one of your keys happens to be destroyed by a flood or some sort of natural disaster, or it gets stolen, or you simply lose it, then it’s not the end of the world, because Unchained has a backup key in case one of your keys gets destroyed.

So, typically, what Unchained will recommend is you have two hardware wallets, and then you have the two seed phrases that correspond to those hardware wallets. And if, for some reason, one of your hardware wallets breaks because it is, at the end of the day, a relatively small computer, then you have the seed phrase that backs up that key, and you can simply buy another hardware wallet, enter the seed phrase into that new hardware wallet, and then you have that key that you lost or the hardware wallet that you lost restored on it.

[00:09:46] Ray Salmond: That clears up a misconception that a lot of Bitcoin holders who are newer have, which is like my Bitcoins are on this hard wallet. They’re in there like physically somebody can go in there and extract them. So, what you’re saying is you still retain custody of your Bitcoin at wherever you choose to store them, but in order to make a transaction or to move them around, there’s three parties required. There’s the two hard wallets that you might have, and then there’s the one that Unchained has.

[00:10:20] Joe Burnett: Yep, that’s exactly how it works.

[00:10:22] Ray Salmond: Okay, so then there’s no custody required on part of Unchained, and Unchained can’t steal your Bitcoins.

[00:10:29] Joe Burnett: Exactly. That’s one of the major benefits of Unchained. If Coinbase or BlackRock disappears, and you’re holding Bitcoin at Coinbase or BlackRock, your Bitcoin is gone. If Unchained disappears, in that setup that we just talked about, your Bitcoin’s not gone. You still have complete control over it. So, it’s like you don’t even have to trust Unchained to help secure your Bitcoin. They’re simply there more as a backup and a support to help you walk you through how this actually works, which kind of actually makes you trust Unchained more because, again, you don’t have to even trust Unchained.

[00:11:01] Ray Salmond: Right. So, does doing this cost money, or is it something that’s free?

[00:11:06] Joe Burnett: Yes, so, we have a personal vault service that costs $250 per year. And we also have an IRA product, which has the exact same setup. And if you do that, it’s free for your first year with no setup cost.

[00:11:19] Ray Salmond: I’m glad you mentioned IRAs and Roth because that’s where we’re going next. So, all throughout this year, anyone who follows markets is hearing that perspectives on the classic 60/40 portfolio, that’s 60% stocks, 40% bonds, the kind of like perspective on that portfolio structure has been changing. And many asset managers are now suggesting Bitcoin allocation. Since 2017, when Bitcoin went from whatever, $600 to $30,000 or $35,000, I’ve been telling all my friends and family members and everyone who would listen or would not listen, you should make a 3% to 5% allocation to Bitcoin. Because I’m a nobody and don’t have a background in finance, I would say one day, financial advisers are going to suggest or even make the choice for you that all their client portfolios have an allocation of 5% or 3% or even 1% to Bitcoin. And no one ever listened. And everyone was like, this guy’s crazy. He’s like autistic with this cryptocurrency stuff. It’s all he ever talks about. It’s high risk, high volatility. You’re just going to lose all your money.

And then fast forward to like three days ago, I’m on Twitter, right, or X, scrolling looking for leads at Cointelegraph. And here’s an analyst from Charles Schwab who says everyone should allocate 10% of their portfolio to Bitcoin or you’re going to fall behind. It was nice to hear it, but also like, I wish I could get some credit for saying that for all these years. Maybe I should work harder. So, I’m holding this like chip of bitterness on my shoulder over screaming a flood’s coming for eight years in a row, and I’m the only guy on the boat.

With that in mind, about the 60/40 portfolio perspectives changing and everyone suggesting allocation to Bitcoin, what sort of retirement planning advisement strategies are you guys offering at Unchained? Like a 401k rollover? Are there any Bitcoin tax advantages of an IRA? I do stuff with Vanguard and Schwab, and Vanguard is like no Bitcoin or anything, so I can’t even get exposure to the spot Bitcoin ETFs at Vanguard unless I leave and go elsewhere. So, how can people use Unchained’s 401k rollover, and what sort of tax advantages are there?

[00:13:38] Joe Burnett: Yeah, it’s a great question. And Ray, definitely, everyone should have been listening to you for the last seven years or so that it’s been. So, I completely agree, including Vanguard, which I guess they’re still not listening to you and, really, any of us on Bitcoin Twitter.

Yeah, it’s a great question because, especially in the United States, like a lot of Americans have always been told to DCA into their 401k, and that typically buys some sort of target-date fund that is some arrangement of the traditional 60/40 portfolio that pretty much contains almost no Bitcoin whatsoever. And so, when you’re doing this over and over again, and you see Bitcoin going up, and you’re like, wait a second, maybe my retirement portfolio actually should have some form of Bitcoin allocation. Well, you can actually do that. Unchained offers actual Bitcoin IRAs where, again, just like the personal vault product that I mentioned earlier, you actually control the keys to the Bitcoin within the Unchained IRA. So, if you have an old IRA or an old 401k from a former employer that you’ve kind of forgot about, whether that’s a traditional IRA or a traditional 401k or a Roth IRA or a Roth 401k, you can roll those over into an Unchained IRA and actually buy real Bitcoin that you control the keys to.

It’s a pretty cool product, especially since literally trillions of dollars are kind of trapped inside of retirement accounts all across the United States. And your typical retirement provider, IRA provider, may not give you flexibility on what assets you can buy. You pointed out a great example with Vanguard, which still doesn’t even let people buy the Bitcoin ETFs, despite Bitcoin being up probably 2x or more since the Bitcoin ETFs launched this year. So, they’ve done, unfortunately, a pretty good job at preventing their clients from making more money and ensuring they have a more secure retirement. But if you don’t want to do that, or you have your IRAs at another provider, you can move it over to an Unchained IRA, where you actually control the keys to your Bitcoin. There are other Bitcoin IRA providers, but a lot of them don’t also enable you to control the keys to your Bitcoin.

So, if you have Bitcoin at another IRA provider, that is kind of like Coinbase, where it’s kind of a black box. You don’t know where they hold the keys to the Bitcoin. You don’t even know if the Bitcoin really exists because you cannot verify it yourself. You can move Bitcoin in kind from an existing Bitcoin IRA provider into the Unchained Bitcoin IRA. And again, you can control the keys to your Bitcoin. So, it’s a pretty cool way to really ensure that you actually literally hold the keys to your retirement.

[00:16:23] Ray Salmond: That is unique. Now, how does it work, like the conversion and rollover? Because I do have a 401k, and when I roll it over, I think there were redemptions. And then, the positions don’t carry over to whoever your new broker is. So, is there like a tax hit that one takes when you close all these positions and then reopen a Bitcoin-only position at Unchained?

[00:16:52] Joe Burnett: Yeah. So, that’s one of the great parts about it. There is no tax hit. When you have Bitcoin or whatever asset that you hold within your existing IRA or an old former employer 401k, you simply move those assets to Unchained. And depending on where it’s coming from and how the process works with the existing provider of your IRA or 401k, it can take a couple days, a couple weeks even, but eventually, the funds will move over to Unchained, and those funds will be used to buy Bitcoin, and then you’ll end up controlling the keys to the Bitcoin that’s purchased within your new IRA. So, it’s a pretty cool process. The transfer process will vary depending on, again, who you’re coming from. But once the Bitcoin is within the Unchained IRA, you have the keys to your Bitcoin. And it’s a pretty awesome product.

[00:17:41] Ray Salmond: Yeah. Yeah, it is. The lady at Charles Schwab and Larry Fink and all these other brilliant people have been saying, if you don’t allocate to Bitcoin, you’re going to fall behind. But contrast that against this year, equities went gangbusters. Like gold is up. Silver is in a bull market. Commodities did well. Every day I get on my computer, the S&P 500 or Dow is like hitting some new all-time high. Apple’s up. Tesla’s up. Nvidia is up. Like everything’s up. People have done really well this year and last year and really like since Covid. Year over year, they’ve done fantastic in the stock market, which is what they’re accustomed to. It’s low risk. I’m doing a 6% to 9% compound return year over year. I’m on target to meet my retirement goals.

So, what are these guys talking about? Because brokerages always try to sell you on a new product. And Bitcoin and Bitcoin ETFs are the new products. So, I’m sure there’s a bit of skepticism among investors who are now like being told to buy this thing that they were told for many years not to buy by the exact same people. So, how does one fall behind by not having a Bitcoin allocation in their retirement portfolio or investment portfolio in general?

[00:18:53] Joe Burnett: Yeah, it’s a really good question because you’re right. Like this year, the Mag 7 tech stocks have done exceptionally well. The S&P 500 has done exceptionally well. Real estate has done fairly well. A lot of things are still doing fairly well. You can even keep money in a money market fund right now, and you can earn 3% or 4%, which is historically not a bad return, at least, you know, given since like 2008, when most savings accounts paid out basically 0%. One way that I guess I like to frame it is you can actually look at all of those assets that you hold and measure them in Bitcoin, like measure them denominated in Bitcoin. And with the S&P 500, it may be going up in dollar terms, but over the last 15 years measured in Bitcoin, the S&P 500 is actually going down. In fact, it’s down, you know, 99% or more over the last 10 years. It’s all kind of relative to what you’re looking at.

An extreme example might be something like Weimar Germany. Obviously, the United States, thankfully, doesn’t have anywhere near that level of inflation, but the United States still has some inflation. So, back in Weimar Germany, everything was going up. Real estate was going up. Stocks were going up. But it wasn’t going up because everyone was becoming wealthier, it was going up because the currency was being debased. I think everyone, especially since Covid, has kind of had this feeling that inflation is a little hotter than normal. Grocery prices are getting more expensive. Everyday essentials are just relentlessly going up in price. The government is now, you know, $35, $36 trillion in debt. And it seems like they’re going to probably continue spending more money than they earn from tax revenue. And it feels like something is kind of breaking, or the dollar isn’t as sound, maybe, as it used to be.

And so, maybe measuring your wealth in this political currency that is controlled effectively by the Federal Reserve and the central government of the United States and governments all around the world in their own local fiat money. Maybe measuring your wealth and your financial returns in those political currency units isn’t the best way to see if you’re performing well. Because, like you said, like everything is doing well. What do you mean? How can that be the case? Well, maybe not everything’s actually doing well, and maybe your money that you’re using is just getting debased over time. And then that also can kind of explain why Bitcoin has potentially done extremely well, especially relative to almost every other financial asset throughout, you know, the last 15 years, actually.

[00:21:22] Ray Salmond: Yeah. Yeah. That’s true. A common thing I hear from people who aren’t into crypto or Bitcoin when it comes to this talk about allocating some of your wealth or basing a larger portion of your wealth or net value in Bitcoin is, you guys never spend Bitcoin. These dollars that I’m making in my investment account, I can see them. I can spend them. I can go use them for stuff. But you Bitcoiners like have all this money in Bitcoin, but there’s nowhere for you to spend it. And then you can show them, yeah, there’s markets where you can spend it and blah blah blah blah. But then they’ll be like, no, but you don’t spend it. You never spend it. You hold it from 0 to 100 back to zero. So, sure, maybe inflation is eating away at my wealth, but if I buy Bitcoin, I don’t agree with this theory, this thesis, this mandate that I have to hold it forever in order to preserve my wealth. How do you deal with people when you hear that conversation? And I’d like you to connect it to your theory on that fantastic paper you wrote called “Your Wealth is Melting Away.”

[00:22:28] Joe Burnett: Yeah, it’s a great question, and I definitely think it does stump a lot of people, because when people think about money or currency today, they think about this asset that they spend, they may even spend on credit. Everyone has these credit cards where they’re spending money that’s not even theirs. And I think it almost goes to show like how bad our money is. In a way, we’ve never really even had a good form of money in the history of like human civilization. Our money has always been something that can be debased, whether it’s by free markets, gold as money or seashells as money, or silver or ray stones or glass beads. If humanity stores a lot of wealth in those inferior monetary tools, and the price of those inferior monetary tools goes up really high, all that does is it incentivizes the market and entrepreneurs and businesses to go out there and mine more gold, find more seashells, mine more silver, create more glass beads, create more dollars.

And so, throughout history, that’s all that humanity has been doing. Like we’ve been trying to find this perfectly scarce monetary tool that hasn’t existed until Bitcoin. And we’ve tried to, like, use these imperfect, semi-scarce monetary tools to store wealth and then ultimately spend the wealth, or at least have the optionality to spend the wealth in the future. And they’re not perfect tools, and that forces us to do all of these sorts of weird passive investing strategies that may not be the best way to actually store wealth into the future, post-Bitcoin, now that Bitcoin exists.

And so, Bitcoin, yes, like obviously most people today are not using it to buy their groceries at Walmart or Publix or Kroger. But I think money is a medium for exchange. And Bitcoin is still very early in its stages of adoption. Like arguably less than 1% of the world probably has a very serious Bitcoin allocation in their portfolio. And so, as money is going to get adopted throughout the entire world, most people in the very early stages are going to want to buy and hold the best money, because they expect the best money to go up in value a lot as the rest of the world continues to adopt Bitcoin. And arguably, you know, looking back over the last 15 years, where Bitcoin has a compound annual growth rate of basically over 100%, which is insane. Like, imagine if you had a savings account that could pay you 100% per year. Well, that’s been Bitcoin over the last 15 years. Why would anyone want to spend that when the world is actively monetizing Bitcoin from zero? And that’s just the exact process that we’ve been on for 15 years now, over a decade.

And we know this because Bitcoin is objectively the best money. You just look at Bitcoin’s unique monetary properties where it’s immutably scarce, portable, durable, divisible and fungible, and you compare those unique monetary properties to all other previous forms of money, whether it’s the dollar, the glass beads, ray stones, whatever, the yen, the euro, Bitcoin is objectively better. And that kind of helps explain why its price has done what it has done over the last 15 years.

And again, this idea of the report that I published earlier this year titled “Your Wealth is Melting,” this concept of melting wealth kind of applies to every asset other than Bitcoin. If humanity stores trillions and trillions of dollars’ worth of wealth in real estate. Well, what does that do? That incentivizes the production of more apartment buildings, more houses, even more land. There’s an artificial island off the coast of Dubai called Palm Jumeirah, which homes tens of thousands of people on beachfront property. And that was literally land that was created out of nothing. If humanity stores wealth in these traditional assets, that will incentivize the production of more of these traditional assets. And Bitcoin is just this one very unique monetary asset that no matter how much time, energy or resources are used to create more Bitcoin, you’re not going to be able to create more Bitcoin. There’s only going to be 21 million Bitcoin, and that’s going to be there for a very, very, very long time.

[00:26:49] Ray Salmond: Mind blown. Boom. To kind of digest that into something that’s accessible to the entire audience, and correct me if I’m wrong, you’re saying that debasement means that the dollar purchasing power is diminishing year over year because of inflation, and also because of more dollars being created, monetary supply expanding. There’s more dollars being printed and circulating throughout the economy. And because a variety of factors, one also being inflation, the purchasing power of each one of those dollars, the ones that some of us get paid in, is declining year over year. And then, in addition to that, these fantastic returns that people have got accustomed to in their retirement portfolios over the last one, two or three years might not go on forever. In search for yield, Bitcoin is possibly a yield maximizer. It can accentuate the yield that you get at the end of the year and year over year in your portfolio to help you hit that 6% to 9% target, or even exceed that 6% to 9% target so that you can retire at a later date. So, the CAGR of Bitcoin is, what, like 27% per year, year over year or something like that, and there’s not many other places where you can get that.

So, when Bitcoin advisers and advocates are saying, make this allocation, and hold it, and don’t deviate from it, these are some of the reasons why they’re suggesting that you don’t sell it unless you’re doing like managed investment. But this should be kind of an asset class that becomes anchored in your portfolio to help you reach your retirement targets. Is that a correct rephrasing of some of what you said?

[00:28:38] Joe Burnett: Yes. One way that I also like to think about it is the bear case for Bitcoin is becoming digital gold. Gold currently has a market cap of around $20 trillion, $18 to $20 trillion. If Bitcoin just becomes the digital equivalent of gold, then that’s $800,000 per Bitcoin. I like to think about like history of new technology. Is Apple the same size of Alexander Graham Bell’s original telephone company? No, of course not. Like, Apple is significantly larger, and they’ve created a lot more wealth than the initial telephone.

And so, like Bitcoin has a long ways to go if it just becomes comparable to physical gold, the entire physical gold market around the world. And arguably, Bitcoin is significantly better than physical gold because, again, it’s actually perfectly scarce. The supply of gold is growing at 2% roughly per year forever, and it’s been doing that for hundreds and thousands of years. And Bitcoin is also portable and teleportable over the entire internet. So, it’s like a very unique monetary asset that, in my opinion — not financial advice — Bitcoin could become, at the very least, $800,000 per coin if it just becomes the same size as gold. And arguably, it’s going to become probably a lot more valuable than physical gold.

[00:30:00] Ray Salmond: Amazing. God bless Satoshi. I think I picked up on a little hack that you mentioned earlier. Frequently trading and buying Bitcoin can create some costly tax burdens, especially if you hold it under a year. If you’re holding and selling under 12 months, and the capital gains tax on that match whatever your tax bracket is, which can be quite expensive. Are there better strategies for the new and OG Bitcoin accumulators and traders to use that could mitigate these tax hits?

[00:30:30] Joe Burnett: Yeah, absolutely. I mean, the IRA in the United States is a pretty great product. If you’ve been contributing to your 401k or an IRA, especially 401k, if you’ve left that previous employer, you can roll that 401k into an IRA. And then now you have access to Bitcoin, especially if it’s in a Roth IRA. You have access to Bitcoin that can grow tax-free in terms of your capital gains, forever, which is a pretty cool product because Bitcoin itself pays no dividends. It has no cash flow. So, obviously, the value of Bitcoin is going to be in capital appreciation in dollar terms. And if you hold that outside an IRA product or a Roth IRA product, whenever you sell it, like you mentioned, you’re actually going to have to pay capital gains, which is either going to be short-term capital gains... Obviously, with a retirement asset that you hold, at least hold it for more than a year, which makes sense. So, at least outside of an IRA, you’d be paying longer-term capital gains. But that’s still currently, I believe, about 20% in the United States.

So, with the IRA product, specifically a Roth IRA product, you can hold Bitcoin for decades, watch it appreciate very substantially, and you never actually have to pay long-term capital gains once you enter your actual years of retirement. So, it’s a pretty awesome product if you’re bullish on Bitcoin for decades like I am. It makes a lot of sense to have at least some of your IRA and retirement holdings in Bitcoin that you control the keys to.

[00:32:01] Ray Salmond: You can trade the peaks and troughs in Bitcoin price in the IRA and not have capital gains?

[00:32:07] Joe Burnett: Yes. So, historically, Unchained has not been able to do that. But we’re very close, within a few months, of being able to actually have a cash account within the Unchained Bitcoin IRA. So, yes, theoretically, if you think you can time the market, which is very difficult to do, you can move Bitcoin from Bitcoin to dollar cash and then back into Bitcoin. So, yes, you could theoretically time the tops and the bottoms in your IRA account and pay no taxes on each of those incremental sells and later buys.

[00:32:39] Ray Salmond: Amazing. And as you make your $6,000 per year IRA contribution, that can directly be auto-converted to Bitcoin in your IRA.

[00:32:48] Joe Burnett: Exactly. Yep. The minimum contribution for, since you’re actually controlling the keys to your Bitcoin in an Unchained IRA, is $2,000. But again, the maximum contribution is $6,000 or $7,000, depending on the year. And yeah, you can send that to Unchained, effectively buy physical Bitcoin that you would end up controlling the keys to, and then it would sit within your IRA.

[00:33:10] Ray Salmond: So, hey, we all die one day, sadly. And if you are a lifetime Bitcoin holder, you probably have plans to pass it on to your family. My mom knows nothing about, she’s not good at computers or Bitcoin. Most of my family members are not going to sit and listen to me talk about hard wallets and all that junk. Transferring, double-checking addresses, making sure is it Lightning? Is it the old network? Well, you can send Bitcoin over Solana, but you know, you got to do this and this. And then, well, if it’s WBTC, blah blah blah. You know, there’s like a lot of ways to make a mistake and completely fumble that generational bag and lose it forever. So, what are some good ways for Bitcoiners to start laying out and planning their inheritance plans?

[00:33:56] Joe Burnett: It’s kind of like custody in general. You don’t think about this until you realize, like, oh my gosh, the Bitcoin that I purchased a few months ago or a few years ago is actually worth a lot more. And what happens if I do happen to pass away? Like is the Bitcoin in my Coinbase account going to be easily transferred to my heirs? Is the Ledger hardware wallet that I’ve purchased, where all of my Bitcoin is controlled by that key that’s on that Ledger hardware wallet, is that going to be easily transferred to my heirs? Like, how do I actually ensure that that process of transferring the Bitcoin to my heirs, how to ensure that it actually works when the time comes? It’s a really good question, and I think collaborative custody with Unchained actually kind of helps solve this because what Unchained does, like I mentioned at the beginning, is it eliminates single points of failure, and it enables multiple entities to actually control a key to physical Bitcoin.

So, with Unchained, what you can do is use something called the Unchained Inheritance Protocol, which kind of enables you to have one key yourself, have another key that you give to your executor of your will, which could be a lawyer, it could be a loved one. And then you also have Unchained holds the third key, just like I mentioned at the beginning. And so, in this case, whenever the time comes that you do pass away, you have all three entities hold a key to your Bitcoin. And when you disappear, if no one can find the one key that you had, your executor has a key for themselves. Unchained has a key for themselves. And then you can use the death certificates of the one that passed away, and then you can actually recover that Bitcoin and send it to the proper heirs that the Bitcoin actually belongs to once you passed away. So, it’s a pretty good way to ensure that no one can take your Bitcoin before you actually pass away. But once you pass away, it’s a great way to make sure that the Bitcoin does not get stuck or lost in the landfill or a hardware wallet that only you happen to know where it existed.

[00:35:52] Ray Salmond: Hey, going back to the multisig thing, so someone who’s doing multisig with Unchained, when they want to send like $10,000 in Bitcoin to Coinbase to cash out or something, what does that look like? Do I get my Ledger, and I just do that transfer here? Or do I have to like approve on both Ledgers and then log in to Unchained or call Unchained, and they give me some like little phrase on my phone? How does transacting actually look when you’re doing the multisig vault with you guys?

[00:36:24] Joe Burnett: Yeah, it’s a really great question. Historically, that’s kind of how it worked. You’d have to send your Bitcoin to Coinbase or another exchange. But now, Unchained actually has buy and sell directly to and from cold storage. So, you literally can sell Bitcoin directly from your multisig vault, and you don’t have to worry about sending it to another crypto exchange, and setting up an account there, and doing all of that.

So, the process for how that would work would say, okay, say you have 1 Bitcoin in your Unchained multisig vault. You have a personal Unchained account. You have two keys that control the Bitcoin, and you have Unchained, again, holding that one backup. Those two keys, again, can be on any sort of hardware wallet, a Ledger or Trezor or Coldcard. All you do to sell Bitcoin directly from your multisig vault using Unchained would be for each of those keys that you hold to sign a transaction, sending the Bitcoin to Unchained directly. And then once you’ve signed the transaction from both of your keys that you control, then the transaction is broadcasted to Unchained. Unchained receives the Bitcoin, and then the money is actually wired directly from Unchained’s bank to your bank account that you’ve set up. So, it’s actually a pretty cool process to where you don’t even have to send your Bitcoin to another exchange. You can literally send it directly to Unchained within the Unchained app on your computer, and you get the money, the dollars, sent directly to your bank account via wire transfer.

[00:37:52] Ray Salmond: Right. What happens if Unchained goes out of business or gets raided by the FBI and all the assets are seized? What happens if something terrible happens on Unchained’s side and my multisig, one key, is with you guys and I can’t transact?

[00:38:11] Joe Burnett: Yeah, it’s a really great question. And again, one of the pros about Unchained is Unchained could completely disappear tomorrow, and you would still have complete access to your Bitcoin as long as you still hold those two keys that control your multisig vault. And so, you can use other open-source wallet software, like Sparrow Wallet or Electrum or BlueWallet, which is like an app on an iPhone. And with those open-source wallet software, you have access to your two keys, which can then send that Bitcoin out of that wallet to another exchange like Coinbase or Kraken or whoever. Or you can send it peer-to-peer to another individual. Or you can send it to another wallet that you’ve set up.

So, the FBI could theoretically come to Unchained or Coinbase. If the FBI comes to Coinbase and wants to raid all of the Bitcoin that Coinbase holds, they’re probably going to be pretty successful at that because Coinbase actually holds all the Bitcoin, and clients don’t hold any keys, whereas Unchained only has one key. So, Unchained can literally not do anything. Like there’s nothing that they can physically do to move your Bitcoin without talking to each individual client and forcing the clients themselves to use their key that they have located wherever they’ve located their key to cooperate and move their Bitcoin with the FBI or whoever demanded to seize the Bitcoin. So, that’s one cool thing about Unchained is like Unchained could disappear tomorrow, and your Bitcoin is still in your control as long as you remain in control of your two keys.

[00:39:46] Ray Salmond: Right. Every cycle, there is a Bitcoin Playboy. There’s someone who’s the face of Bitcoin or crypto. They’re our Jesus. They’re our savior. They’re going to take us to Valhalla. They’re going to take us to Nirvana. And price go up, and it shall only go up in perpetuity. That’s kind of been the case with Michael Saylor and the MicroStrategy effect. Over the last month, there have been an assortment of publicly listed Bitcoin companies and other random zombie corporations that are publicly listed either in the States or in Japan or India, and they’re all beginning to implement this Michael Saylor strategy, which is issuing fundraising to buy Bitcoin, to build a Bitcoin treasury, to pay yield to stockholders, and to issue new shares through fundraising, which is non-dilutive. But the whole thing’s getting kind of euphoric, and euphoria scares me in this market. So, you’re an expert. Share with me your thoughts on MicroStrategy and Michael Saylor.

[00:40:49] Joe Burnett: Yeah, it’s a really good question because MicroStrategy has performed exceptionally well since the bottom of the 2022 bear market. It’s outperformed Bitcoin fairly substantially. And it is interesting because you do kind of see some sense of euphoria within the market. And there’s been a number of people, and I was guilty of this last cycle, where I thought that Bitcoin would not have another 80% drawdown and long bear market after the 2021 bull market. Of course, I was wrong about that. Bitcoin fell probably around 78%, if not 80%, throughout 2022, or at least from the peak in 2021, down to the bottom in 2022. I’ve already started to see a number of people begin to say that, oh, there’s no way that Bitcoin will have another 80% drawdown. While yes, that may be possible, I, at least as of right now, remain fairly skeptical.

I think especially if we do get another massive surge in price by the end of this year or throughout 2025, then it wouldn’t be too unsurprising to suspect another Bitcoin bear market, as like that’s been the history of Bitcoin. We have these crazy euphoric parabolic bull markets where adoption just really accelerates. That invites a lot of leverage, a lot of people that don’t fully understand what they’re buying, but they’re buying it because the number is going up. And when that typically happens, the price gets bid way too high, way too fast. And eventually, we see a bear market.

MicroStrategy is very interesting because they’re doing a number of things. One, they’re issuing equity and buying Bitcoin, and then two, they’re issuing convertible notes, which eventually could turn into equity and buying also Bitcoin. But with convertible notes, it’s also similar to a bond instrument, where they’re borrowing money and introducing leverage into the situation, which leverage all that does is amplify returns. So, if you’re right about Bitcoin, and it goes up a lot, and you borrowed money at close to 0% interest, and Bitcoin went to $200,000 tomorrow, obviously, that trade would be very smart. If Bitcoin goes to $50,000 tomorrow, obviously, that trade would not be very smart. It amplifies returns to both the upside and the downside.

With that said, I think MicroStrategy and a number of other publicly traded companies are using leverage in a relatively conservative manner. MicroStrategy currently may have roughly $40 billion worth of Bitcoin on their balance sheet and maybe convertible notes money that they borrowed to buy more Bitcoin that might be worth $10 billion. So, there’s a pretty big buffer on their balance sheet of like what assets they hold and the liabilities that they hold. And so, obviously, if Bitcoin keeps going up, Michael Saylor is going to continue looking like a genius. And I think, over the long run, I think that will continue to be the case. But in the short term, whether that’s 2025 or a bear market that occurs after 2025, the market eventually might start to go the other way. And Bitcoin derivatives like MicroStrategy, which are slightly leveraged plays on Bitcoin itself, could underperform Bitcoin. They’ve already outperformed Bitcoin this current bull market.

[00:43:59] Ray Salmond: It reminds me of the Texas hedge, where you’re like spot long and then also long on calls and futures. So, last question what’s your realistic view of Bitcoin price going into the Trump presidency and into 2025? There’s a lot going on in the world. I’ve seen a few governments collapse. Like Syria is going through a transition. Germany may have dissolved their government. Something’s happening with Macron in France, where he’s losing control of his party. There’s a lot of political instability. Central banks across the globe seem to be cutting rates and considering ways to supplement via easing. I get this sense that the market is going up, up, up, but the pace of going up, the momentum of the bullishness is beginning to wane. And that worries me a little bit. So, what are your views on Bitcoin over the next year?

[00:45:00] Joe Burnett: I think there may be two likely scenarios that might play out. One would be a model that I kind of really admire, which is like the power law model, where it’s this general concept of diminishing returns over time when it comes to Bitcoin. I think that that might be a likely scenario going forward where maybe by the end of 2025, Bitcoin hits $200,000 or maybe $300,000, and then we do see some sort of prolonged bear market throughout 2026 and maybe into 2027.

The second scenario that I see, which I think is where things could get potentially pretty crazy, is if the United States actually does bring about a US national strategic reserve and actually acquires a million Bitcoin or 4 million Bitcoin, as RFK has proposed, and other people and Saylor has proposed. The Trump max strategic reserve. I think if that actually happens, then we could actually be off to the races where there would actually be geopolitical massive implications as countries like China, Russia, the United States are actually in an arms race to acquire as much of the remaining Bitcoin as they possibly can. These countries have money printers, effectively. They can borrow nearly endless amounts of money, and they can literally print money as well. And so, if that occurs, Bitcoin could be off to the races towards $1 million and beyond in a fairly short order.

Now, what are the odds of the national strategic reserve actually happening and then happening to the degree of buying 1 million or 4 million Bitcoin? Who knows? I think on Polymarket, I’ve seen it’s like a 25% chance that we would see a national strategic Bitcoin reserve by the end of next year. Maybe that’s fair odds. But again, I think that if that happens, then this could be the quote-unquote supercycle for Bitcoin. If it doesn’t happen, then maybe we have a little more gas in the tank for hopefully a pretty good 2025. But if that does happen or if we get to $200,000 or $300,000 next year and we don’t get a US national strategic Bitcoin reserve, then maybe we will have a prolonged bear market that drives Bitcoin down 80% or around there.

[00:47:14] Ray Salmond: So, basically, if the reserve is approved and it happens, Lambos become the new Honda Civics. They’re going to be everywhere.

[00:47:23] Joe Burnett: Exactly.

[00:47:24] Ray Salmond: For people that are on the fence, they’re still like, I don’t know, that all sounds good. You know, I’m interested in doing this Bitcoin allocation thing, but I don’t know about the mathematics. I’m not a financial planner. You had shared with me this Bitcoin retirement calculator where you can input all this info to see like is Bitcoin for you. What kind of impact could it make on you getting closer to your life goals and retirement goals? Did you want to say a little bit about that?

[00:47:53] Joe Burnett: Yeah, absolutely. So, this is something that I actually helped build at Unchained. It’s at Unchained.com/calculator. It’s a pretty cool free tool that anyone around the world can use, and it enables you to kind of type in the inputs to your current portfolio, whether that’s stocks, bonds, cash, Bitcoin. And you can select growth rates for all of those assets. And then, you can also select what your annual contribution is going to be going for those assets. And then, you can also select like your current age. Your retirement age. And then you can see, model out, how your portfolio will do going into retirement and then after retirement. And then, you can remove Bitcoin from your portfolio. You can add more Bitcoin to your portfolio. You can see what it would look like if you moved Bitcoin into a Roth IRA, and you didn’t have to pay capital gains tax during retirement as you withdraw some of that Bitcoin to sell and to pay your living expenses. So, it’s a pretty cool tool that enables you to actually see what your portfolio might look like with some basic assumptions that you can make with stocks, bonds, cash and Bitcoin.

And one of the things that’s kind of cool about the Bitcoin is, by default, it’s set at a fixed compound annual growth rate. But there’s also various Bitcoin models that you can play around with, like the power law model, the stock-to-flow model, or Saylor’s Bitcoin24 model. And you can see, okay, well, assuming Saylor’s Bitcoin24 model, if I have X Bitcoin, how is my portfolio going to look in the year 2070 or something along those lines. And it’s really cool to actually model out how Bitcoin added into your portfolio will affect your retirement and your personal wealth over decades to come.

[00:49:39] Ray Salmond: I would suggest for anyone that’s using it, just put in 0.1 Bitcoin, $10K, or put in 0.2 Bitcoin, and then see how that alters your retirement goals by the time you reach that target retirement age. If you put in 1, 2, 3, 4 Bitcoin or whatever, you’re going to get this crazy number in the multi-millions, you know, and it’s wild. It’s hard to conceptualize that, even if it happens. So, I think you did a really good job with that, Joe.

[00:50:08] Joe Burnett: Awesome. Yeah, I appreciate it. It’s a really cool tool, and I encourage anyone to check it out. It’s free to use.

[00:50:13] Ray Salmond: All right. Well, there’s a lot to digest. There’s a lot of data. Joe, I really appreciate you coming on today. It was good chatting with you again. If people want to follow you and learn more about you, your research, your analysis and what you do on a day-to-day basis, where’s the best place for them to do that?

[00:50:33] Joe Burnett: Absolutely, Ray. Thanks so much for the invite. I’m super glad that you reached out to me earlier. If you want to follow me, in particular, I’m on Twitter, or X now, at @IIICapital. It’ll be Joe Burnett. You can also go to YouTube, type in Joe Burnett Bitcoin. It should pop up there. If you want to read that report that we mentioned earlier, you can go to unchained.com/melting. And if you’re interested in learning anything more about Unchained, you can just type in unchained.com and book a free consultation with any one of the Bitcoin experts on our team.

[00:51:03] Ray Salmond: All right. Thank you so much.

[00:51:05] Joe Burnett: Thanks, Ray.