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Events at Alpaca

Where Bitcoin is Headed, Liquidation Engines, and High Interest Rates #022

Mariangela Martinez
Mariangela Martinez

All views and opinions expressed by the guest speakers are solely their views and opinions and do not reflect or represent the views and opinions of Alpaca Securities LLC, Alpaca Crypto LLC, and AlpacaDB. The guest speakers' opinions are based on information they consider reliable and therefore Alpaca Securities LLC, Alpaca Crypto LLC, and AlpacaDB do not warrant its completeness, accuracy and it should not be relied upon as such.

The content is for general informational purposes only. Alpaca Securities LLC and Alpaca Crypto LLC do not recommend any specific investments, investment strategies or cryptocurrencies.

Fintech Underground by Alpaca is a podcast devoted to all topics related to stock trading and APIs. From trading with algorithms or connecting apps or building out services, we aim to bring light to the different corners of Fintech.

Where Bitcoin is Headed, Liquidation Engines, and High Interest Rates #022 by Fintech Underground by Alpaca
In episode 22 of Fintech Underground by Alpaca, we interviewed Julian Figueroa, owner of YouTube blog Kinetic Finance, a blog with videos explaining crypto and finance-related topics, such as Bitcoin, scams, inflation, among other topics. We discuss topics about the fall of Bitcoin and where its goi…


TL;DR

In episode 22 of Fintech Underground by Alpaca, we interview Julian Figueroa, owner of YouTube channel Kinetic Finance, which covers crypto and finance-related topics such as Bitcoin, scams, and inflation, among others. We discuss the fall of Bitcoin and where it's going, liquidation engines, and high interest rates.

Kinetic Finance
I’m Julian Figueroa - a full-time trader/investor and video agency owner looking to help others understand capital markets, personal finance, and achieve financial independence! Subscribe for weekly content!

Find the full transcript below. To hear interesting fintech companies share their experience in the industry, check out our other episodes below.

Fintech Underground by Alpaca • A podcast on Anchor
Fintech Underground by Alpaca is a podcast devoted to all topics related to Stock Trading API. From trading with algorithms to connecting apps to building out services, we aim to bring light to the different corners of Fintech. This is not an offer, solicitation of an offer, or advice to buy or s…

Full Transcript

All views and opinions expressed by the guest speakers are solely their views and opinions and do not reflect, represent the views and opinions of Alpaca Crypto LLC. The guest speaker's opinions are based on information they consider reliable and therefore Alpaca Crypto LLC do not warrant its completeness, accuracy and it should not be relied upon as such. Alpaca does not recommend any specific cryptocurrencies.

Alpaca is a developer-first startup focused on building open APIs for stock and crypto trading, investing, and embedding. You can learn more by visiting our website at alpaca.markets. You can also find us on Twitter @AlpacaWeb3 or join our discord community also with the invite link @AlpacaWeb3.

Mariangela: Hello, I'm Mariangela Martinez, host of Fintech Underground. And this is Jason Hsu, Crypto Growth Manager at Alpaca.

Jason: Hey everyone!

Mariangela: Our guest today is Julian Figueroa, YouTube blogger of Kinetic Finance. Kinetic Finance is a YouTube blog with videos explaining crypto and finance-related topics, such as Bitcoin, scams, inflation, among other topics.

Jason: Hey Julian.

Mariangela: I just wanna go ahead and say that any topic talked about in this podcast is not financial, investment and/or tax advice. We encourage our listeners to seek individual advice should they deem it necessary.

Julian, can you tell us about yourself?

Julian: Hey, thanks. Thanks so much for having me on the show. I really appreciate it.

I have been making videos on all things finance, specifically a lot about Bitcoin and the economy for the last three or so years. I run a film production company and I've been in the cryptocurrency space since about 2016 and a mix of those things have afforded me the time and privilege to make videos on YouTube. And I'm hoping to kinda keep growing that and keep learning while also educating some people about things like, you know, where we are in the state of monetary policy and so many interesting topics that they don't teach in school, right?

Mariangela: Thank you. So looking at your background, you have experience in media as producer, director, founder, engineer, editor, etc. And you said you have your editing company. How did you decide on making videos about finance?

Julian: I would say a lot of it kind of just fell into my lap. To give a bit of background, I didn't really care for learning about finance concepts 'till about 2016. In 2016, I got really interested in the election going on in the US, I'm Canadian so watching everything go down with Donald Trump, Hillary Clinton, was so interesting. I thought, "I wonder if there's a way to make money on this?" And my first investment back in the day was actually marijuana stocks. And the reason for that is that marijuana legalization was on the ballot for a lot of states in that 2016 election.

So I ended up buying some marijuana stocks, made some money there. At the same time, I also stumbled upon Ethereum and I learned about that. I had known about bitcoin for a while. But Ethereum sounded interesting. I didn't know much about cryptocurrency, what the whole point of it was. It just looked like another investment to me.

So I put some money into that and rode that. I think I got an Ethereum when it was like $13 bucks or something really early. But yeah, I mean, just riding those investments in their respective waves allowed me to actually build my own production company. And from there we did a lot of commercials for Amazon products.

So, we do like Amazon product videos, but we also ended up doing a lot of videos for public markets because through the process of investing myself, I learned a lot about how public companies operate and disclosures they have, and you know, the different ways that they go to get investors without straight up telling people "buy my stock."

So I ended up making a lot of videos through my production company that were tailored towards public companies. And from there I took everything that I learned through interviewing CEOs and things and just having these great conversations with great founders and leaders. And I said, well, I could possibly teach people about that myself and go on my own learning journey and try and just translate things in a fun kind of visual way to people that I just didn't see in the same manner, especially in the crypto space at the time.

Mariangela: Wow. And when you said you first invested in marijuana, how did you feel about putting money into an investment?

Julian: I didn't have like a ton of savings back then. Like, I remember so many people, I think it was last year when the GameStop thing was going, I had a whole bunch of friends who were like, this is the first stock I've ever bought. And they got in just early enough to double their money. And then they were like, "oh, sweet. I'm a genius at this." And then, you know, everything crashed from there.

But I was really lucky with the whole marijuana thing. And then Ethereum at the same time. But basically from there, it peaked my interest to kind of look at kind of the broader space, what was going on in both those sectors. Now the epilogue to all the marijuana stuff is like, all those companies have fallen basically to zero because marijuana is one of those commodities that just gets cheaper to produce and it's a race to the bottom on it.

And the issue with marijuana companies, at least in the US is because it's federally illegal you can't actually write off any business expenses. So everything that you spend, all the capex in your business you cannot write off. So you have to be basically profitable even with all your expenses and you're usually constantly going to the market to do fundraising events. And this is a big thing that played into my video production as well, is we did a lot of videos for marijuana companies and they really need to spend a lot of money on marketing because they have to spend so much on growth that the only way that they can generate money, the dirty secret of it all is they get a whole new cohort of investors whenever there's one of big events, they push a bunch of media out and then a couple weeks or months later, they do a dilution round and they just add more shares to their float, they do a fundraise and that's basically how they keep these things going.

Until marijuana is federally legalized in the states, it's kind of the fate of like every marijuana company there is, they're just constantly diluting to raise new cash and the charts are a lot worse than any crypto chart in a bear market I would say too.

Mariangela: Wow. I'm gonna go ahead and say that I had no idea about any of this, but it's really cool to know. How did you learn all of this? Because you were interviewing them or you worked with doing videos for them?

Julian: Yeah. Like we interviewed a lot of people. I'm not gonna name any specific companies, but I've done enough that no one would know who I'm talking about, but the truth is like almost all of them in the states do this. So it was something I learned through interviews and I just found like it was something that I was doing for work, but I was so interested in the behind the scenes on these things. And every time you interview a company, you know, sometimes you meet these really amazing founders and you're like, damn, "I wanna buy some of their shares." But, you know, I'd always do an interview with a CEO or something. And if I really liked them and I thought they had a vision, I would look at their company and I would start digging and trying to figure out like, what has their stock price done historically? What is their balance sheet like? And again, I had no knowledge of how to read any of these things. So all of it ended up being this like YouTube and Google journey. Just my curiosity, leading me to essentially learn more about this stuff. And eventually I was like, "oh, this is so cool, I want to teach this to people and tell people about this stuff as well."

Mariangela: Nice. So in 2016 that you started, you know, getting a little bit more into the finance industry, before that you were only doing videos and then you suddenly, not switch, but added a lot of finance into your day-to-day activities.

Julian: Yeah. So, I mean, my video production company is called Kinetic Cuts and basically I started that in 2017 or 2018, I don't remember now.. around then. And then I started my YouTube channel around 2019 called Kinetic, it was actually first called Kinetic Crypto, now it's called Kinetic Finance, 'cuz I wanted to expand outside just crypto. But I've been running those two things kind of side by side. The YouTube channel, which is now a TikTok, Twitter, etc. has basically just been a passion project up at this point and not something that like I rely on for any sort of income. It's just like, whenever I have time, I kind of put it into the channel, but as the business has been going well, as the investments have been doing well, I've decided to kind of take some money out and just go fully into doing more of this finance education stuff.

I feel like I probably lost track of your question there. But, yeah, I've kind of done them both aside. One is kind of like paid for the other sort of thing. The video production business is paid for the time I can spend on the YouTube channel.

Mariangela: Yeah. But you do have a lot of subscribers and that's, you know, even if it's a little bit of money, it's better than nothing.

Julian: Yeah, for sure. I've been again, super fortunate, like all these things have come from those like initial investments, right? Like the marijuana stocks and Ethereum, those went up quite a bit, so I took profit. I put it into buying film gear, starting this business, incorporating all the things that come with that. And then that business has provided cash flow for me to be able to take time off whenever also, you know, give the work to my employees and just allows me to spend time on the YouTube channel, which is super fun.

Jason: I think I was just gonna ask if you run Kinetic Cut exclusively through Fiverr.

Julian: Good question. Fiverr, we actually only started doing, I think it was about a year and a half ago. And it turned out that there are a lot more people in that platform than I initially thought. So, most of the work we do nowadays has actually been through Fiverr and I like Fiverr, but I don't like that they take 20 to 25%.

Jason: That's pretty steep. Yeah.

Julian: Yeah. It's pretty steep. But, you know, it's the cost of marketing essentially, if you think about it. So, we used to pay for leads and do Google ads and stuff like that. But, Fiverr kind of brings everyone in. So it's interesting when you do a video production business, generally from the other people I know in town that have similar businesses, like 70 to 80% of your clients are referrals. Because I'm on Fiverr, I don't get that as much. Like we have recurring clients, but we're always getting like new people in the system, which is interesting.

Jason: Right. And, I guess going back to your early investments, I think most people buy into the hype 'cuz like regulations were, I guess, lifting state to state and you said you were lucky to kind of come on to the other side of it.

Julian: The marijuana stuff, so, yeah like back in 2016, there was also good momentum because we knew that in 2018 Canada would legalize it. So there's two sides to that trade. There's the Canadian marijuana stocks and there's the American ones. And in 2018, the first Canadian stocks actually started getting listed on the NYSE and the NASDAQ. So they became a lot more liquid. However, for most of them, if you go to their charts, well actually they were OTC names and then they moved to the NASDAQ and the NYSE, basically when they got up listed was almost around their tops. And if you go back, almost all these stocks, were a sell-the-news event. So like within days of the Canadian market legalizing marijuana, almost all of these stocks topped, and it's just been like, they're all down 95 to 99% from their peaks.

Jason: Gotcha.

Mariangela: About your investments, I have another question. So you said that your first crypto coin that you bought was Ethereum, why is that? What was your thought process that led you to buy Ethereum?

Julian: Okay. Short story. My first actual crypto purchase was Bitcoin, but it wasn't for an investment. It was just me messing around trying to buy some stuff online. And so shortly after I saw, you know, it's kind of cool, it was like, "oh, I can send money to this party. I don't even know who they are. I can send money, I can get this like stuff thing I bought online." Kind of a cool way of doing that because I mean, especially back in 2016, like it was pretty hard to sell stuff online without just straight up using PayPal. Nowadays you have Shopify and Google Pay and all that other stuff. So from there, basically, I was like, well, this seems cool. What else is there? Is this the only cryptocurrency? And that led me to Ethereum. And at the time, all Ethereum was, was just a version of Bitcoin that allowed you to put some code attached to it, like smart contracts. And so, again, super early on this, but it seemed interesting at the time. You know, a better version of Bitcoin. And this was before I got really down the rabbit hole of like Bitcoin being hard money.

I'm not a huge Ethereum advocate on a fundamental level. I still take it as a trade every now and then. But I much more align, I guess, with the political and fundamental view, I wouldn't say maybe political, but just the fundamental view of what Bitcoin's actually trying to do versus what Ethereum is actually trying to do. I think Bitcoin solves a very clear problem with our monetary system, it takes power out of like central banks. Ethereum, you can pitch it a thousand different ways. But there isn't one hard use case for them. I would personally say right now, outside of just enabling more speculation. So like right now everyone is using Ethereum to do NFTs. I would say that's the killer app for Ethereum right now. Some people say it does DeFi as well. But again, like all these things are just extended forms of financial tools that allow for speculation.

Mariangela: Thank you.

Jason: I was looking at your YouTube channel and one of your most popular videos was on Michael Saylor. Would you say you're a fan of him?

Julian: He's interesting. He's an interesting person because he is one of the oldest, not oldest but he's one of the longest serving CEOs. And I think actually he might be the longest serving CEO ever, or at least currently on a NASDAQ company. Most CEOs will have 10 years between like, 1 to 10 years. I think Bezos previously was like one of the longest serving ones, but he retired recently. But Michael Saylor has been CEO of MicroStrategy since its inception. So it's been I think over almost 30 years now.

And so I find him really interesting because he wrote a lot about the mobile wave, which was 2011. I think it was becoming obviously clear that mobile computing was going to overtake desktop computing. And he wrote a book about this. I don't think it was obvious to everyone, but around the time the iPhone 3 came out, a lot of people were thinking, "well, hold on, like this is going to be the thing that people spend their time on, computers will still exist, but mobile is where everything is going." And he wrote this great book about it, called The Mobile Wave, he was on a couple talk shows about it. And no way to really monetize from that though. I think MicroStrategy itself invested in mobile tech.

Then comes Bitcoin. He dives into that. He has this great way of words using different types of metaphors and analogies and stuff. And he became a really good voice for Bitcoin. I think just because of the way he was able to explain it to people with these different concepts, like Bitcoin is monetary energy and talking about how money is just a way that humans channel energy through time and space. And I had never really heard of money being described in that way, but he's just done such a great job of kind of getting out on the podcast circuit, talking about these things and because it was something he could actually put his money on, he's made these pretty massive investments into it. I think now MicroStrategy owns 1 in every 150 Bitcoin that will ever exist, which is pretty phenomenal.

And he did some really interesting things when it came to the capital markets to be able to afford this Bitcoin. Without going down like a big explanation of it all, the first time he bought Bitcoin, it was with like half his company's treasury, and then they went all in and then they started issuing these tenders and bonds that didn't have to be paid until 2025 with like 1% interest rates. They bought another billion. I think they did that another couple times. And then they sold some stock options and then they leveraged some of their Bitcoin to buy more Bitcoin. That's where it starts to get a little bit, like, I don't know if I would do that sort of thing. I don't like using leverage for anything outside of like really quick trades with defined stop losses.

But it's interesting to see somebody with that much conviction do it, and it's so interesting because they get him on all these talk shows CNBC and whatnot. And when Bitcoin's up he is praised the genius. And when Bitcoin's down, he's written off as a loser and they're all trying to roast him, but he keeps a calm level head and I think it it's kind of a role model for all of us in the Bitcoin space, particularly because you kind of have to just like go through these fluctuations. As Greg Foss says, you know, 19,000 or 60,000 is like a rounding error to what this thing can actually be, if it makes a significant land grab for something like gold or the bond market.

Jason: Yeah. Yeah. I mean, I was looking at news and the numbers, I don't think he actually was not that super early. I think he added Bitcoin to the MicroStrategies' balance sheet in 2020 and he was buying at a price around like 30k, but he's averaged it down, now it's like 20k and he's definitely up.

Julian: I think he's still down a little bit, but I mean, it's pretty amazing. Like I'm not a fan of the spin that he's done because when you tell people "we made this great decision, look at our stock price." You have to die by that as well, because if your stock price goes down, then that decision you made isn't that great.

And so, you know, I remember when Bitcoin was around like 30 or 40k, he was still saying like, "oh, look our stock's up like 4x where it was." But you know, when Bitcoin hit like 16k because he's so leveraged on it or 17k the other couple weeks ago, his stock was actually all the way back to where it was before he had ever bought Bitcoin. And, you know, his paper loss is like a billion, so I'm not a big fan of like, "oh, I made this great decision, check out my stock price." But you know, I think time will tell.

The thing where I kind of deviate with him, is I don't think it was smart to use leverage to buy more Bitcoin. And I understand that his rationale is like interest rates are cheap, I don't have to pay these convertible bonds off, or the interest rates are the interest payments are super small, but as somebody who I think is a role model for a lot of people buying Bitcoin, he also came out and said, "you should like mortgage your house and buy more Bitcoin." And I'm just like, no, like that's not, that's not how you get more people on board. That's how you get people wrecked. And if you want this to become a monetary standard, the less people that you wreck on the way up, the more likely they're gonna stick around.

And so it's just like the people who use leverage on crypto, they get wiped out and then they probably get jaded about it and they don't put new money into it. But the people who are able to only just put in what they need and dollar cost average, like they don't care where the price goes. And ultimately they become the floor because they are not considered for sellers at the end. Michael Saylor, I think the way that he set up his structure, he's never going to be forced to sell the Bitcoin no matter like how low it goes, or I think it'd have to go to like 3000 or something.

But it's just not a good position to be in, I think. And if you're going around telling everyone like to buy this thing, it's just, you know, be a role model. You didn't need to use leverage. I get that. You have conviction, but just like, be happy with your, like 2 billion of it. You don't need to get 4 billion.

Jason: Yeah. Yeah. I agree with that. Did you get a chance to meet him at, and that's where we met at Bitcoin Miami.

Julian: I didn't have a chance to interview or meet him. He's like a Bitcoin Jesus where everywhere he walks, there's like a hundred people trying to get his photo. So I didn't get a chance then. I've been trying to figure out if he ever watched that video I made about him, but I guess probably not.

One day. I'd love to have him on a podcast or a show and, and ask him some questions about things. But no, not yet. It's coming. I hope.

Jason: Yeah. And what's your favorite exchange?

Julian: When it comes to, if you're doing derivative trading of Bitcoin or any one of the alt coins, my preferred exchange would probably be FTX.

I still like Binance, but FTX, with their, I think their cross collateralization, you can have like a whole bundle of assets in there. You can use collateral instead of like individual ones like how Binance has it. It's a lot easier to use. I also find that Binance it's just like a maze now.

You know what, funny story. I got into the Binance ICO back in.. was it 2017 when they launched around like June or May?

Jason: Oh, wow.

Julian: 10 cents per BNB. Now it's at like 200 something. It hit 800. Worst decision of my life was to sell it. I can't believe I did it. But I didn't think it was gonna become so big.

I knew that Binance was a cool platform back then, but like, man, it got bigger than I ever thought it would.

Jason: No, I sold at 30 something dollars, so it's okay.

Julian: Yeah, yeah.

Jason: But that was before the whole BSC phase thing.

Julian: Well, to me, I'm always trying to be a realist about cryptocurrency. Like, what is the use case for this? And, you know, Bitcoin made sense, transfer money. Ethereum, back in 2017, it was like, you can use it to buy other cryptocurrency through an ICO, but like big whoop. But Binance was like, oh, okay, it's used to get you fee discounts. This kind of makes sense. I know what I'm using this for.

The problem is, is like 99% of these cryptocurrencies. If you just ask the question, how can I use it? Almost no one can give you an answer on 99% of them. And that's where it's just like, well then they're not really a currency. Like if you can't explain how you use it, besides just like transferring it around, then it's more of a security, but all these companies that have cryptos are like, oh no, we're not a security, like you're not buying equity with this. And it's just like, well, that makes it worse than a security then, because it's not a currency, and it doesn't entitle you to equity. So, what is it? And I have beef with the crypto space now over that, because it's just like, again, 99% of these things, like what do you actually own? You don't own a stake in the network. You don't own a currency, you don't own equity in a company that's creating it. What do you actually own? You own like a claim on sentiment basically.

Jason: Yeah. Yeah. So FTX is your preferred exchange. Are you also a fan of their liquidation engine?

Julian: This was something I wanted to ask you about. So, I know that exchanges, especially the obvious one is BitMEX. They have an insurance fund and this is to do mainly with, if there's some problem with liquidating and they end up taking like a slippage loss, they can't really socialize it to the users, right. Because it's not like a regulated entity.

And it's the same with Binance and Kraken. And all of these crypto companies, they take a portion of their fees, they put it into an insurance fund for any sort of flash crash or whatever. I feel like these things used to happen a lot more often. And ever since FTX got in the game, like their charts rarely can you find flash wigs, but you know, Kraken is like a pretty boring example of it where if you just have limit orders, you can snag Bitcoin sometimes at like a thousand bucks on certain pairs, because there's such a lack of liquidity. FTX gets around this, even on the most illiquid pairs they have. And I kind of wonder from a building perspective, how do you improve things like liquidation engines so that you don't get these big waterfall collapses?

Jason: Heavy question. I mean, I think it's interesting. I don't know how they built it so that it's so efficient that runs through all these checks and so people, users can't take advantage of it. And for an exchange that's built for traders and algo-traders, it's all about arbing cross exchange and finding these price efficiencies and they sort of eliminated all that, but that's also how we end up trusting it really.

Julian: That was Sam Beckman Fried's thing initially, right. Is like he was buying Bitcoin in the US and then selling it in South Korea and then kind of like looping that around and he made millions.

Jason: Right, right. Yeah. There's that.

Julian: Well, one of the cool things I like about crypto from a trading perspective is like all this stuff, like order flow is all public. If you wanna buy this stuff or get access to it on the stock market, you're paying hundreds of thousands of dollars. It's not for the average trader. But all of these crypto platforms, they keep their APIs pretty open. You can really see book density, you can see order flow.

It's pretty cool. And I feel like that's why I don't think the space is ever gonna die because at least for arbitrators, there's always so much to do there. And so it's in their best interest to not short this stuff to zero because they have all these opportunities on it.

Jason: I mean, as long as there's there's volatility, traders can make money, right. So, even as it goes down 90%, I think there are traders that are for it. I mean, I remember seeing an article, I think FTX went on the full offensive front and saying like, "oh, we have this liquid education engine that's superior to OKX's and you will not experience clawback and we have this insurance insurance fund in place. So we're different." But another point that he, when he started FTX was to resolve, he was claiming that all these other exchanges have a really large percentage that, right, like this order order flow thing is transparent, but there's a lot of wash trading and yeah. So supposedly, FTX is supposed to resolve that, but you don't really get that sort of transparency if you're a centralized exchange.

Julian: Yeah, for sure. No, they've done a great job. I just, the user experience too, I'm not crazy about finances UI. It's just it's always changing as well. Versus FTX, which I feel like it's been the same for like two years, at least, so..

Jason: Right, right.

Mariangela: So, okay. Going to another question, how do you think the Fintech industry will navigate the first high interest cycle of the last 20 years?

Julian: I have a couple different thoughts on this. I think it's pretty clear that when you have rates at zero, people move to higher risk end of the spectrum, things that don't have yield, they do more speculation, right? So you can buy something like Bitcoin, you can buy GameStop, again, all these things that have zero dividends, they don't pay anything back to shareholders or they don't have shareholders.

As we move to a higher interest cycle, what makes this kind of high interest territory we're going into really interesting is sure you can get 3% on bonds now, but is that gonna stop me from still having a heavily weighted portfolio in equities? Not really because inflation is still 9%. If inflation's 9%, my yield's 3%, I'm still losing 6% a year in my cash. I can either stick that out, I can just stay in cash and take opportunities where I get them, or I can stay in equities. And those two latter options sound still way better than investing in a bond in my opinion.

So what does this have to do with the fintech industry? I think that they're gonna tap into that and realize that while the banks are probably pushing people to get into mutual funds and stuff like that. They, in order to work with a younger demographic, let's just say, they're probably going to keep pushing things like cryptocurrencies, and they're gonna keep pushing things like equity investments and things like that.

A lot of people seem to think, oh, high interest rates like recession, tech investing in tech is dead and all that stuff. I just don't really see it happening.

I think the paradigm that a lot of people predict right now, which is that all this money might, all this sloshing money might just move back to like mutual funds and risk free return yield products. I think it's still gonna stay in the speculative area quite a bit. And frankly, I still think that inflation is gonna stick around higher than we want it to. I don't think it's gonna go to 20, but I wouldn't be surprised if we stay above 5% or 6% inflation for years at this point.

How does the fintech industry navigate that? I think it's just moving people towards products and things that are going to do well in an inflationary environment. And just educating people more on it. The thing that's so interesting about inflation is I find that when you look at the political landscape of the US, there's all of these little wedge issues, right? There's gun control, there's abortion, there's all these different like rights and things like that going on.

But the one thing that unilaterally affects everyone is inflation. And so you don't really get to have a left wing perspective on inflation or a right wing perspective on inflation. You just have the perspective of like inflation hurts people.

And again, that's just a rich and poor divide. So in many ways you can look at inflation as kind of bringing some of these divided parties together towards a common cause. But yeah, I just don't see the fintech industry going a completely different direction with this high interest rate cycle. I think they're still gonna just acknowledge the reality of their customers on the ground, which is just like, saving doesn't work for me anymore. I gotta put my money to work and they're just gonna trust that these companies have their best interests in mind in terms of the product offerings they have.

I'm curious what your thoughts are on this, because you're seeing some of the stuff on the ground. Are you seeing more people get into trading versus holding long term? How do you think that's going to play out?

Jason: I think the market has definitely cooled down. There's a lot of "have we hit the bottom yet" kind of questions floating around. And so something I think we want to do at Alpaca is launch products that are not so reliant on frequent trading, making maybe like staking services and whatnot. And I've got friends who bought housing in Vancouver a couple months ago thinking, okay, interest rates are down, but right after he bought it, it shot up. So yeah, everyone's just kind of speculating the timing on these.

Julian: I think the worst thing to have in a climate like this is an illiquid asset. Now mind you, real estate has not done bad, but again, how do you dispose of your real estate quickly if things change, right?

Jason: Yeah. I think he would just have to. He's getting married and settling down. So if it's just being put to use, maybe it feels not as bad, but if you're talking for investment purposes...

Julian: The good thing about real estate is, I can't live in my Apple stock or my Bitcoin, but I can live in a house. But I think the people who are speculating on real estate, like the people are just buying condos and stuff for their like third or fourth or fifth properties. They're gonna get whacked pretty soon, in my opinion.

Mariangela: Okay. In what ways do you see decentralized monetary technologies impacting developing countries?

Julian: Yeah. So, quick plug, I went down to El Salvador in November of last year and we made a documentary about Bitcoin adoption down there. And it was really interesting because everyone kind of knows in the crypto space like, oh, El Salvador made Bitcoin legal tender. But I think the story as to why they did it, varies from person to person that you talk to down there. Some people say, oh, it's for remittances, it makes remittances cheaper because Bitcoin fees are way lower than Western Union fees. Other people are thinking it was a way for the president to get more investment into the country. So he didn't have to rely on the IMF. There's a lot of different things that adopting Bitcoin and other decentralized currencies can do for these countries.

And I'm trying to figure out, what is the most important factor? It seems to me as we go into this hyper, I don't wanna use that word kind of lightly, but more inflationary environment. Currencies that belong to countries with looser monetary policies than the US are going to have their currencies and their buying power crushed. So if you're a country in Africa and you are a net importer and you need to buy goods and services, gas, food, whatever, you always have to convert your currency to the US dollar generally to buy those things.

And every week or every month, if you got 50% inflation, you're losing like 5% of your purchasing power. And that's not accounted for, right? You're seeing these countries become gradually more and more isolated to the point that eventually if the US dollar gains too much strength they're faced with default.

And that's what we actually saw in Sri Lanka, not too long ago, they defaulted, they're having massive protests there in unrest. Their inflation rate was 131% a year, right. And again, just losing so much value to the US dollar. And so I think decentralized currencies, and when I say that, I mean specifically Bitcoin, can really benefit these countries because it allows people a way to save in something that is not just their home currency.

And we talk a lot about how inflation always affects those who are poorest, but we look at that through a Western lens, sure 10% inflation sucks here. Imagine you're in Sri Lanka or you're in Lebanon or you're in any of these countries that have like a 100% or 50% inflation.

These people can't just go on Robinhood and buy stocks, right. They can't get real estate. They're lucky if they bring back like $5-10 a month. And so what else do you have access to where you can protect yourself against inflation? Well, I don't know. You can buy steaks and put them in the freezer and hope the price of meat goes up.

But generally, people have no way to protect against it. And Bitcoin is the easiest asset for people to get into in every country around the world, because all it really takes is a phone and some internet, and you need to have a third party that is willing to sell you Bitcoin and someone that'll take your currency to buy Bitcoin. And again, there's always a market for that. There's always gonna be a net seller for Bitcoin in every single currency. Now that might come at a premium, depending on where you are. But in the long term, anybody who got into this like five years ago with whatever currency they bought is up tremendously on their investment and have hedged all sorts of inflation.

And so time after time, we're gonna see these countries like El Salvador, I think Central African Republic is gonna make Bitcoin legal tender, you're going to see all these countries that are crippled under either weak economic growth or very high inflation turned towards Bitcoin as a method of savings.

And I really see that being so much more important than like a spot ETF approval, for instance, because we see everything through this Western lens here of 350 million people in the US. That's the mark for Bitcoin. And when it's really like 2 billion plus people who don't have bank accounts and for the first time ever, they have a saving product that cannot be seized from them from any other party, and they can't be diluted on, and it's going to take years for people to see the value in that. We only have the last 11-12 years of Bitcoin history to see that, but Bitcoin's gonna be around for 20+ years. And I think the picture's gonna be abundantly evident over time that this is a tool that every single human on earth can use and has a market for.

And that is going to be what takes Bitcoin, in my opinion is just it has such a bigger market than bonds, stocks, and any other type of asset you can think of.

Mariangela: Wow, that’s..

Julian: Yeah. That's why I'm in it personally. I just don't see any other, there's isolated technologies, right? Like if you can get on the ground floor on like a gene editing company, if you can get on the ground floor on an AI company, space exploration, whatever, sure, you can make a great return, but those are isolated things that are kind of hard to get access to, and there's gonna be like a 100 terrible companies for every one successful one.

Bitcoin, I think is the most asymmetrical bet to the upside on any investment I've ever seen. A lot of really smart people think that way too. Michael Saylor does as well. Your downside right now, if you buy one Bitcoin is $23,000. Your upside, if this becomes a major phenomenon in every country on earth and every person has some money in their savings, in Bitcoin you're talking upwards of 2 million, I think. It would be replacing, let's just say like 1% of the bond market.

Jason: What do you think that timeline is?

Julian: That's the hard part. All I know is that some people look at Bitcoin and they're just like, oh man, this thing's so slow. Like it was $20,000 in 2017. But we're talking about something that was, people were spending $10,000 to buy a pizza, not too long ago, like 2010 or 2011, we all had our iPhone 3s, and now this thing is one of the biggest assets on earth. And so it's done that in its first 12 years.

Jason: Okay.

Mariangela: Okay. And one last question. How are liquidation engines improving in the crypto space?

Julian: Yeah. So, I mean, Jason, you might know more about this than I do, but, I think the kind of more recent innovation in liquidation engines has been this partial liquidation where if you're getting close, the liquidation kicks in a little bit early. And what that does is it prevents a hard sell off of all your collateral as soon as one price gets hit. I know that this caused quite a few waterfall events in the past where it's just like, if $20,000 is your margin call level on Bitcoin, let's just say, and it's going down, then the ticker hits that. And then all of a sudden the price goes under 20k and it drops to like 19k in like a split second. I don't see that happening as much because we're starting to see these partial liquidations, but I'm curious on your side, if you've seen any other innovation or change in the way that liquidation engines work in crypto that are making it a little bit easier for the books.

Jason: I think that's been my experience as well. I don't think I've seen anything more innovative than the partial liquidation stuff. I think that's how FTX does it, right? Yeah, I don't think I've seen anything more than that. And this has been in place at least a year or two, maybe.

Julian: All I know is it's getting better, like everything is getting. And I think a big part of that also has to do with just like increased liquidity now, you know, we're doing $5 billion a day on FTX. I remember whenever we did over a billion dollars of volume on Bitcoin in a day, it was like kind of a big day. So I think more liquidity helps for sure. And I would say this too, this dump from 69k to 17k has been brutal, but it's been very controlled.

In the backdrop, you have all these companies basically going belly up and you got Celsius, Voyager, Three Arrows Capital, who knows what other small hedge funds haven't come out yet and have reported mega losses. But you have all these people who are getting margin called and usually five years ago, you could spot a margin call on the chart and now you can't, right. It's just steady, down trend slowly but surely liquidating people left and right.

Mariangela: Okay. Julian, would you like to say anything else to our listeners?

Julian: Gee, what else? Well, Yeah, I have to, I'm curious what other guests you have on the show, but for me personally, I'm a freedom maximalist. There are Bitcoin maximalist, but I'm a freedom maximalist. And I think it's very important to invest and be curious about any technologies that enable more freedom and more human flourishing. And I think Bitcoin is probably going to be the most important technology to bring about those things in our lifetime. Maybe there will be some more, but it's good to promote things that I think bring that to people. And if you can make a bit of money on it too, money is all relative, whatever your currency denomination of choice is, but if you can do well on these things, everyone kind of wins at the end.

So what I would say is for anyone listening, if you've learned a lot reading books or listening to podcasts in this space, go out and share it with other people. The best way to solidify your knowledge on any subject is after you've spent a lot of time learning about it, taking notes, reading books, listening to podcasts, whatever, is trying to explain it in your own words to people.

Find your voice, don't hide. Unless it's really bad and your losses are massive and you've realized them. Don't hide the fact that you're into crypto and finance from your family. Don't be embarrassed about it. If they have questions, answer them and do your best to educate the people around you that you care about.

That's why I'm doing what I'm doing is, I just I'm taking in all this knowledge and I can't help but just share it with people. I just, it helps me solidify it better. I get to meet some really interesting people and expose myself to interesting concepts. And I think everyone has the opportunity to do that. Not everyone's gonna have a YouTube channel, but everyone can teach one another about these types of things. And so I'm a big proponent of that. And that's it.

Mariangela: Thank you. Julian, thank you so much for joining us in our podcast. It was a pleasure having you here with us and thank you for sharing your insight.

You can find Julian on YouTube as Kinetic Finance and on Twitter @Kinetic_finance, TikTok @kineticfinance and Instagram @kineticfinance.

To our listeners, check out Alpaca for more information about stock and crypto trading, and always remember to do research before investing.

Julian: Thanks so much for having me.

Mariangela: Thank you.

The content and comments of this podcast should not be taken as Alpaca providing investment legal, and/or tax advice. Every situation is different and you are encouraged to seek independent, legal and investment and/or tax advice. Cryptocurrency is highly speculative in nature, involves a high degree of risks, such as volatile market price, swings, market manipulation, flash crashes and cybersecurity risks.

Cryptocurrency is not regulated or is slightly regulated in most countries. Cryptocurrency trading can lead to large, immediate and permanent loss of financial value. You should have appropriate knowledge and experience before engaging in cryptocurrency trading.


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Mariangela Martinez

Mariangela Martinez is a Content Marketing Specialist, DX & Community at Alpaca. She loves working in the Fintech industry and is invested in how it is changing.