Welcome to Students Incorporated, a podcast where we dive into relevant topics and issues
related to the world of business, technology, education and design.
I'm your host, Mr. Jason.
Episodes include student conversations, interviews with thought leaders, and inspirational stories
with an international flavor.
This podcast is created and produced with the help of students from the International
Community School of Bangkok.
In today's episode, we'll be having a discussion about cryptocurrency.
Now before you roll your eyes or tap stop on your device, I think you'll find some
great information brought to you by our special guest, Mr. Brian, an economics and finance
teacher.
We also have a top 10 list we'll be sharing toward the end of the episode you won't want
to miss.
I'm also joined by our co-host, Lion and Linda.
But first, let's hear the quote of the day and get some headline news.
Thank you, Mr. Jason.
Today's quote is from Albert Einstein.
He said, it has become appallingly obvious that our technology has exceeded our humanity.
I've already thought provoking quote as we talk about a topic that has captured the minds
and even some hearts of the people who built our traditional financial systems, but also
everyday people, young and old.
But before we attempt to deconstruct crypto, let's hear some headline news for this week.
In local financial news, the Thai baht is quite weak right now.
It is currently sitting at 38 baht for one US dollar.
This number has risen rapidly over the past six months due to global inflation.
In regional news, a Japanese journalist has been sentenced to three more years in jail
in Myanmar due to accusations of violating local immigration laws.
Be careful when traveling to Myanmar.
And internationally, in Jamaica, their broadcasting regulator has banned music and TV that glorifies
crime, drugs, violence and scamming.
The government doesn't want criminals to be glorified and deemed to be okay.
Thank you for the quote and the news headlines.
Mr. Brian and I have had a few conversations about crypto, some coins or tokens we hold
and even the larger subject of how it relates to business and the economy.
So I'm excited we could dedicate a whole episode to the subject.
I've been quite surprised about how many young people have embraced this technology
as not only an investment avenue, but also as an alternative to having to deal with some
of the shortcomings of our traditional financial systems and banks.
Okay, with that said, let's get into our first question.
All right, Mr. Brian, thank you so much for joining us.
To start and for the benefit of our listeners, could you please give us the basic definition
of cryptocurrency?
Well, yeah, glad to be here.
Thanks for inviting me for this early hour podcast.
Man, I can't believe that I'm here at this time, but I'm glad to be here with you guys.
Now before beginning, just please keep in mind that whatever we share today is general
in nature and should not be in any way considered advice for any individual specific investment
decisions.
Cryptocurrency carries lots of risk.
So please do your own due diligence.
I think that's clear enough.
Good disclaimer, yes.
What do you guys think?
We agree.
Do your own research, right?
Mr. Brian, how does cryptocurrency exactly work?
Yeah, so I'm not really an expert, but I'll try my best to convey my understanding.
I think it's better if we look at it in chunks.
First of all, think of it as a digital asset.
An asset is something that you believe holds economic value and digital cryptocurrency
takes the form of code.
Okay, so in this way, it's kind of like how you might have money in a bank account.
You can see that you have money online or in your app and there's security to protect
your information and your savings.
Second, with different cryptocurrencies, there are different levels of decentralization.
To be centralized means that there's an entity that you have to go through like a bank or
an institution that is the middleman.
Cryptocurrency attempts to cut out this middleman and it does so in a pretty creative way, most
often through something called blockchain technology.
At a fine grain level, it's certainly much more complicated than I understand, but I
think we can get like a bird's eye view of it.
For our definition so far, we have digital accounts of assets that are not controlled
by a bank or government.
Instead, the information of all the transactions, the buying and selling is recorded on the
blockchain, which is the technology that allows for recording and storing these transactions
in a distributed way.
This means that rather than a bank holding all of the transaction information, it's visible
to everyone on the blockchain.
Although it's not like you're seeing everyone's identification and private information just
by looking at it.
In a strange twist with this technology, it actually is the currency itself.
So cryptocurrencies are different kinds of protocols in the computing sense of the word.
The record of transactions is verified by looking at the whole history within the ledger.
And so we see how the currency has been bought and sold, understanding of course that there
have been a crazy number of transactions.
From an economic perspective, these currencies gain value like any typical good.
When more people want to buy it than want to sell it, the price increases.
And when more people want to sell it, then buy it, the price is pushed down.
Seeing the economic connections, right, Lion?
Yes, sir.
And at different points in time, depending on the supply and demand for the currency,
there's an equilibrium price and quantity for the given market.
And if there's a surplus on the market because more people want to sell, there's downward
pressure on the price.
And if there's a shortage because more people want to buy it, there's upward pressure on
the price.
And this makes sense.
When more people have become aware of cryptocurrency and are buying more, we've seen the prices
rise.
Linda is also nodding in recognition of these concepts.
That is right.
Yeah.
So when people with a lot invested in the currency cash out, they sell and the price
may go down if there's more interest in selling than in buying.
So who might consider getting involved in cryptocurrency and how can a person get involved
or what methods exist?
Could I ask you guys, have you ever been interested in getting involved?
I dropped a few thousand bond to Solano.
Full disclaimer.
All right.
Well, yeah, just a few.
Just a few.
How do you feel that that's going for you right now?
I take it as a lesson that I learned.
To play the long game, right?
Yeah.
Some of these lessons that we learn are probably best learned when we're young.
You know, I may have a little bit less time to learn these lessons.
So good for you for taking a step and learning that.
I bought NFTs, okay?
That was a bad decision on my part.
Anyway, so yeah, I don't know whether I can make a recommendation there, but I can't say
I don't own any NFTs.
As far as people who are interested in getting involved, you can set up accounts on cryptocurrency
exchanges now more easily than in the past.
But first, you had better make sure that the exchange that you want to use is legal in
your country and jurisdiction.
One way governments are trying to regulate cryptocurrency is by requiring these exchanges
to follow KYC or Know Your Customer guidelines.
This means you may have to provide a passport and or some other kind of ID just to start
an account.
Then if you want to transfer funds into that exchange to start dealing with crypto, you
need to link your bank account.
Be careful though, since the technology is new and there are new ways of doing things,
some people have tried to capitalize on the opportunity by scamming others.
So do your research.
Another reality of crypto that people have ignored to their peril is the issue of taxation.
Some countries tax you when you sell crypto for a gain.
So if you buy some cryptocurrency worth $100 and it increases to $150 in value, then you
sell, you may owe taxes on that $50 gain.
Even easier to overlook is the fact that in some countries, just exchanging one cryptocurrency
for another can cause you to owe taxes to your government.
For example, let's say you've got that $100 and it's an Ether, the value goes up to $150
and then you exchange your Ether for Cardano.
You may still owe taxes on that $50 gain you got before you traded it for another currency.
You have to do your research about whether or not you may owe taxes and under what circumstances.
I've read stories about people who made a ton of money after they sold crypto, spent
the money, then found out they owed taxes and didn't have any money left to pay the
taxes.
Mr. Jason, did you have any other insights into setting up crypto or what to be aware
of?
I do.
I actually use Coinbase as my exchange.
I would just be leery of the fees that are attached to when you buy crypto or you pull
crypto out, not only the taxes, but also the fees that the exchanges take when you put
money in or take money out.
These days with stocks and other more conventional securities, a lot of these fees are zero.
There's no cost, but with crypto, it can be significant.
Yeah, the exchanges have to make money somehow because they're handling the money passing
from fiat currency to cryptocurrency.
So they're transferring that and they're basically updating the blockchain for you in a way.
So you just have to be aware of those fees.
Sometimes they're in the low percentages up to 10%, depends on how much money you want
to put into crypto, but just do your homework beforehand.
Mr. Bride, you teach personal finance and economics and I know that.
So how does cryptocurrency relate to those subjects?
Oh man, it relates at so many levels to economics and finance line.
I was part of a group of people that thought that cryptocurrency would be uncorrelated
with the returns of the stock market and pay attention stats students because there are
also stats concepts in here.
What I mean is I thought that while the stock market moved a certain direction, crypto might
not move in the same direction.
I was trying to diversify my portfolio.
It seems that I was wrong, even though that could change in the future.
Part of investing carefully is understanding diversification so that you can maximize your
return while minimizing risk.
And risk in finance and statistics is typically measured with standard deviation.
Crypto has implications for the global financial system where governments are trying to regulate
it and even create their own cryptocurrencies.
A couple of countries have even adopted Bitcoin in cases where they think the cryptocurrency
can solve financial and economic problems that have troubled them.
Maybe we'll get a shout out to that.
We'll look at one of those.
Some of these problems include how and how easily people send money across borders back
to family and loved ones in their home countries.
These are called remittances.
Other problems include how countries deal with inflation or exchange rates between their
currency and the US dollar, for example, such that they want an option that mitigates the
risks associated with currencies that don't hold their value.
And I'm sure my answers to some of your other questions will reflect how integrated the
concepts of cryptocurrency are with these fields.
My next question is, what is the difference between cryptocurrency and traditional currency
or fiat currency?
The proponents of cryptocurrency, if I may paint in broad brushstrokes, are big on decrying
the faults of fiat currency.
And it's true to a large extent what they're saying.
Inflation is a real issue, especially right now.
And I think we may see a lot more of it in the coming years.
I talk about this a lot in our personal finance and investing course, as well as in AP macroeconomics.
But there was a period in the 1970s when inflation skyrocketed in the US.
We won't even go into the hyperinflation in places like Venezuela, Sudan, or Zimbabwe,
to name a few countries where it's been particularly bad.
So at the time, Paul Volcker, the chair of the Fed, and the Fed is the central bank of
the United States, imposed interest rates that got as high as about 20% in order to
curb inflation.
And of course, this impacted employment for a time.
That's what was necessary, perhaps, to stop the inflation and lead to what economists
call the Great Moderation in the 1980s.
A similar action could be required these days with our unsustainable levels of inflation.
Cryptocurrency advocates sometimes argue that fiat currency, business cycles, and all
kinds of macroeconomic woes can be avoided or at least mitigated with cryptocurrency.
So the somewhat inflationary tendencies of fiat money are, at least at some level, I
think, encourage people to invest as long as the inflation generally lies within a controllable
range, like 2% to 3%.
People believe that currency like the dollar is going to lose purchasing power if it sits
idle, like in a bank account.
Then they may want to put in assets they believe will grow in value.
The consequent flow of cash through the economy spurs it on like it's lifeblood.
People may buy stock in a company or buy debt in the form of bonds, for example, which companies
then use for projects, expansion, and various investments of their own.
In the process, these companies do just that.
They hire help, they grow their physical capital, buy resources, innovate, and produce more
of their goods or create new goods, which will create further market opportunities.
There are steps missing, and I'm simplifying a lot, but that's a bit of the idea.
One concern I have with cryptocurrency in general is that it doesn't act as a store
of value in the economic sense of the word.
Definitionally, a store of value implies a certain degree of price stability.
As my economic students will recall, maybe you guys will recall, expectations of future
prices shift supply and demand curves, which in this case applies to how people use or
don't use cryptocurrency.
If people invest or speculate in cryptocurrency because they believe that it will increase
in value in the future, they will not spend it or sell it.
It depends in the sense on the greater fool theory, which states that one can buy an overvalued
asset only to sell it later at a higher price to another person who's willing and able to
pay more.
And that person is the greater fool, according to this phrase.
And since I own some, not much, cryptocurrency, I may be considered in some sense of the word
a fool.
So that being said, I've invested an amount that I believe I can completely lose, even
if I don't particularly want to lose it.
I've invested in a few things over the years just to get skin in the game so that the lessons
I learned about those investments through successes and failures mean more to me than
if I look at them from the sidelines.
And obviously I try to do it without bringing financial ruin upon myself or my family.
So Bitcoin and pretty much all cryptocurrencies have exhibited extreme volatility.
We're back to the standard deviation variance.
The groans are coming out.
No, this is good stuff.
So yeah, many of them recently have stabilized considerably.
But look, if there's a big uptick in retail or institutional interest, then that buying
interest will push the price up again.
Then when some people like Lion are making a ton of money and they see the price increase
a lot, they're going to sell their shares and the price will come back down some amount.
So I have a limited imagination, but I have a hard time envisioning a stabilized cryptocurrency
that can gain and retain the economic prerequisites of currency.
Again, if you want to look further into those qualifications of currency, they are these
three, a unit of account, a medium of exchange and the store of value.
Okay.
With that insight, we will be right back for part two after a short financial lesson, not
by Mr. Brian, but brought to you by Professor Lion, our cohost, right?
Yeah.
All right.
We'll be right back.
Forbes magazine published an article in September of this year, which highlighted the top five
cryptocurrencies to invest in.
Their recommendations included one Bitcoin, two Ethereum, three Tether, four Binance coin
and five XRP, also known as Ripple.
Fun fact together, these five coins have an almost one point four trillion US dollar market
cap.
Insert white ID emoji here.
Yes, you heard me correctly.
One point four trillion US dollars.
What is market cap?
You may ask.
Market cap is short for market capitalization.
This is the total value of all the coins that have been mined.
Market cap is calculated by multiplying the number of coins in circulation by the current
market price of a single coin.
Thank you, Lion, for that lesson about crypto and market cap.
With values in the trillions of USD, you can see why this topic is so popular with people
and young people.
Okay.
We are back with part two of our discussion with Mr. Brian.
Lion is leading us off with our next question.
Alright, Mr. Brian.
Our next question for you is what might we expect to see in the coming years?
What's in store for cryptocurrency?
I mean, crypto at the moment seems to be having quite the cold winter right now.
Yeah, it's gone through a lot of ups and downs.
It's very hard to say.
What's easy for a lot of people, it seems to me, is to take a strong position.
Like so many aspects of life, I find it more comfortable to treat an issue as black and
white, but reality is often much more complex than that.
Those who are invested in any kind of cryptocurrency have a vested interest, a variation as I see
it of the word invested, in promoting it for reasons based on supply and demand.
So as more people want to buy, the price goes up and those who already own it are happy,
maybe happy to sell it and make money.
So I believe that as entrenched as cryptocurrency is and with the sheer number of people who
believe in it, whether that's Bitcoin, Ethereum, Cardano, or even some of the smaller altcoins,
a lot of things would have to happen for it to disappear.
So I'm not sure that it will disappear.
There are a lot of intelligent people that believe in crypto.
It's hard to parse out every person's reason or form a generalizable theory for its promotion
as there may be many reasons.
An extended period of people losing money and losing confidence in its ability to provide
long lasting solutions could propel the value downwards.
And it could be difficult to recover that confidence if people cannot see the impact
of the use cases or the potential for the given currency to return to former highs.
So have you guys seen any evidence that makes you think that it's going to succeed or fail
in the long term?
I think in the long term it's going to fail because nothing meets real estate, honestly.
Like any guy could make a new coin or cryptocurrency at this moment, as far as I know, but you
can't just make more land.
There's always a limited number of land, right?
But if new coins and crypto just keeps coming in, there's going to be too much supply and
not enough demand.
But with real estate, there's a limited supply and demand will always be higher and higher
and higher.
There's going to be more people in the world.
I think you're hinting at scarcity, Lion.
Good job.
Nice.
Very good.
Linda, you've got our next question.
Yes.
Are there any apparent risks or threats related to crypto?
Most other investments are invested in what's called the underlying, implying that there's
something quote unquote underneath the investment or behind the investment.
When you buy stock, you have ownership in the company and you can receive dividends.
When you have bonds, you typically receive coupon payments and repayment of the principal
amount you invested.
With cryptocurrency, there's a claim that many of them have use cases, but you really
have to be in the crypto scene to know how they're being applied.
So opponents of crypto say that there is no underlying asset and that crypto has no value
whatsoever apart from the market determined price.
And another threat, besides the skepticism of its inherent value, is that a lot of things
would have to happen for any cryptocurrency, even Bitcoin, to be able to be at the level
of the major global currencies.
Cryptocurrencies generally face significant barriers such as unknown long term macroeconomic
impacts and ripple effects on the financial system, government regulations, environmental
concerns and scams that target users who aren't as versed in the security aspects.
Governments won't sit idly by if people attempt to abuse the pseudonymity, which some
people think is anonymity, of cryptocurrency for tax evasion or even if the governments
can't find a way to regulate the usage in a sustainable way for their purposes.
People need to have confidence that they can store their money in a currency, including
trusting its relative stability, that they can use it as a medium of exchange and that
the currency is a unit of account where goods are identified by prices in and throughout
the broader economy.
You guys may have heard Warren Buffett advocate that investors stick to what they know and
understand.
In the name cryptocurrency itself, we see this relationship to the word cryptic.
So the crypto prefix we mentioned kind of is referred to cryptography and how code is
integral to this topic.
But that begs the question about whether we actually understand what it is and what it's
being used for.
I mean, we don't need to understand all of the mechanisms of credit cards, let's say,
how credit cards function before we can use credit cards, but it's really helpful to
be aware of credit card concepts like how to build a good credit score, how to avoid
paying interest on credit cards, how credit cards charge interest, credit limits and things
like that.
In a similar vein, if you want to speculate in cryptocurrency, I really recommend digging
into it for a while and listening to perspectives from both sides of the debate before you get
involved.
Keep in mind that it is possible to lose all your money and even more than what you have
invested.
And pay taxes.
And pay taxes after you've lost all that if you don't understand how you're investing
or speculating.
Thank you for that, Mr. Brian.
What are some differences between common crypto categories such as regular coins, altcoins,
tokens, NFTs and others?
Thanks for the question.
I think that maybe beyond the scope of this podcast, there are things like stable coins,
DeFi tokens and NFTs, and each of these comes with its own set of concepts and rabbit trails.
Maybe we can leave it to the listeners to enjoy what's here and have a look for themselves
at other aspects that they want to look at.
Also, you know, I'm just a beginner, so I really don't know a lot.
You can consider this a basic intro to some of the ideas that arise from these new financial,
cryptographic and economic developments.
Breaking from our question format, Mr. Jason has written a top 10 list that we'd like for
you to read for our audience.
Could you introduce the list topic and then read it David Letterman style?
OK, let me jump in here really quick for a moment and just say I wrote this list in more
of a tongue in cheek way.
So with that in mind, please proceed, Mr. Brian.
So it's interesting because we don't necessarily promote cryptocurrency, but we're nonetheless
going to present you with the top 10 reasons to get involved with cryptocurrency.
And reason number 10 to get involved with cryptocurrency is that you may one day get
to meet the famous or infamous Satoshi Nakamoto or Nakamoto Satoshi.
Number nine is that day trading has become cool again.
Reason number eight to get involved with cryptocurrency is you too can own fun NFTs just like some
popular celebrities do like Justin Bieber, Snoop Dogg and the great footballer Lionel
Messi.
The seventh reason to get involved with cryptocurrency is you get to trade currencies that have science
fiction movie title sounding names like Solana, Cosmos, Cardano, Hologrammatic and Algorand.
Reason number six to get involved with cryptocurrency, it's the only way to purchase property in
the metaverse.
I didn't know that one.
Where's the metaverse?
Where can it go?
I don't know, but Lionel, I hear they have real estate there.
They do.
Estate in the metaverse.
You can purchase pixels.
Yeah.
And you don't probably have to face the same scarcity that you do in the real world.
Reason number five to get involved with cryptocurrency, you can now buy delicious empanadas and tamales
on the streets in El Salvador with your Bitcoin.
Bring out the Spanish teacher.
Let's try it.
I like that.
It's like available as like a real currency, right?
In El Salvador.
El Salvador, it is legal tender.
Number four, you have new conversational topics for boring dinner parties such as a blockchain,
smart contracts and cryptography.
I'm glad you mentioned blockchain there.
Yes, yes.
You pull that out at a dinner party and the whole table will go quiet.
Reason number three to get involved in crypto, enjoy Singapore in a new way as a tax haven
for your crypto wallet.
Oh, and you may run into the co-founder of Facebook while you're there.
Reason number two to get involved in cryptocurrency, you no longer have to deal with the traditional
short banking hours and bank employees who take one and a half hour lunches.
Amen.
I like that.
That's a good reason.
Yeah, that's a good reason.
But it's not as good as our number one reason to get involved in cryptocurrency is because
Elon Musk said so.
Of course, of course.
Is there a better reason?
So Mr. Brian, do you have any more words of advice for people wanting to get involved
in crypto?
If you're interested, learn as much as you can, try to find resources on all sides of
the issue, talk about it, follow it and realize that no investment speculation or even life
decision comes without any risk.
And then on a more personal note, I encourage people to think about what good stewardship
means.
How can you use the resources that you've been blessed with to bless others?
I often have to pause to ask myself if I'm just thinking about my personal gain or whether
there's a more inclusive motive I have when I invest, whether that's investing time, energy,
money or any other resource.
So thank you guys so much for having me on Students Incorporated.
It's been great to join you all.
You guys are awesome.
OK.
And with that last bit of advice from Mr. Brian, he is my favorite economist and my friend.
We will be signing off.
But before we do that, Albert Einstein was accurate about how technology in some ways
has exceeded our humanity in what it means to be human and how we interact with each
other.
We could take his assessment as a warning to not lose our humanity because of technology.
Let's use technology for good.
Thanks again for joining us and we are signing off.
Please stay tuned for more episodes about exciting and engaging topics.
Our next episode will focus on the subject of company, culture and community.
As always, this podcast would not be possible without the hard work and support of our international
student production team.
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sharing copyright free images, videos and music.
And we are signing off until next time.
We are Students Incorporated because your voice matters.