What crypto and Web3 mean for investors: Stocks in Translation

The tech sector has been pushing the markets (^DJI,^GSPC, ^IXIC) to record highs in 2024. Yet, AI isn’t the only trend dominating the sector. Web3 is increasingly gaining traction as investors eye the intersection of cryptocurrency and the internet. But what actually is Web3? And will it actually be able to take hold?

Founder of GrowMyBag.TV Eddie Johnson joins Yahoo Finance’s Jared Blikre for the latest episode of Stocks in Translation to discuss the current cryptocurrency market and what Web3 may mean for the average investor. Despite the recent dip in cryptocurrency, Johnson notes, "The state of crypto actually is pretty solid.” He encourages investors to do their homework when considering investing in cryptocurrency, explaining, “I tell people, ‘Dig in. Do your own research.’ So if you hear about a coin, who's involved in the coin? Who's actually handling the development? Where is it being stored? What's the security architecture on it?”

Be sure to check out more Stocks in Translation here.

Video Transcript

Welcome to stocks and translation, our essential conversation cutting through the hyperbole, the market, mayhem and the noisy numbers to give you the information you need for your portfolio.

I am joined as always by Sidney Fried, our Intrepid producer and today very special guest, Eddie Johnson.

He is the CEO of Grow My Bag TV.

Also a crypto professional, also an almost foodie.

We're gonna tell you what that is and an author.

So welcome.

Thank you very much for coming down here on, on the docket today.

Our theme is building wealth with Web three.

What does that mean for the average investor?

Even the crypto shy?

We're gonna find out our phrase of the day decentralized.

That's the uh D and D five.

But what does it really all mean?

And this episode brought to you by the number 31.4 trillion.

That's a and debt ceiling dollar amount.

And guess what all comes to a head?

This January, we're going to put a squeeze on the green back and tell you what it means for meme coins.

So Sid Eddie first, our story of the week and we're talking about building wealth with Web three.

And Eddie, you recently wrote a book seems quite relevant crypto foundations for building multigenerational wealth.

So just tell us a little bit about yourself and what you do here.

So I'm Eddie, as you know, what I do is try to educate people on what it means to invest in crypto and how it affect their lives, right?

And it's a matter of choosing, you know, what portion of your portfolio is gonna be covered by crypto and other investments.

So split your portfolio evenly and then start to dig in on what it is that you're interested in, in this case, crypto.

And what are some of the themes you're looking at today?

I mean, we can talk about current price action.

Bitcoin just had a slide, there's Mount Gox in there, you know, 10 year old bankruptcy settlement.

But what's really going on in Crypto because it seems like we had a lot of baggage to get through here.

I'm I'm talking like I'm part of it.

We I own a little bit of crypto.

So sure.

But what is the state of crypto right now?

The state of crypto actually is pretty solid.

And the reason why I would say it was solid is because yes, we had a dip and that was because Germany decided we've got a ton of crypto that they need to get rid of.

They got it as confiscation from a certain party.

Um But they didn't know how to actually get rid of it.

So it hit the market pretty hard.

They did it, you know, out in spot traffic.

Um And then right after that, you had the fear of Mount Gox.

Everybody thought that they were gonna give that nine point something billion dollars away as cash, which would mean they'd have to sell the crypto.

Definitely, that's not what's going to happen.

Wait, someone needs to tell me what Mount Gox is because I, I'm already like that.

I I need that information to continue.

It's a defunct crypto exchange.

So if you think FTX Mount Gox wrote the book 10 years ago, I mean, that was, that was 100 years ago in crypto times.

But uh but so basically this, this, these Bitcoins, 100 and 40,000 Bitcoins as I understand have been tied up and people who are the rightful owners have been forced to total.

So what's going to happen with these?

I thought they might be released in July, but that's not, that's not gonna happen now.

It's supposed to, it's definitely going to be released this year.

I thought it was going to be released in June.

It looks like it might be actually July, not 100% sure the letter said something like that.

Um But it's going to be released, like I said to all of the creditors as digital assets, meaning Bitcoin and Bitcoin Cash, that's a good thing.

And I don't think if you've been holding this long and I, I just did a podcast about this.

If you've been holding this long, chances are you're gonna continue to hold on.

But they've been forced to wait.

They didn't have a choice.

So they did not have a choice.

So, but think about this, if you, if you took that loss 10 years ago, right?

And now you're sitting here and you're going, well, I'm gonna get it back.

It's like ST checks.

Yeah, it's like it's like found money now.

So you're not really crying over it.

So at this point, you, you're just going to continue to hole and watch Bitcoin go up and then maybe cash out.

So it'll happen in, I think in very disparate stages, I just had to Google Hole because I thought you guys were saying holding and then I thought I was mishearing.

Ho holding refers to the buy and hold strategy, buy and hold.

Investors tend to hold their assets for an extended period of time to profit from the long term value appreciation.

That's right.

Are people still doing that?

I mean, if you survive 22 22 2023 I mean, I, I would think that you got a lot of stamina here but are people, is that still the strategy or are, do we have new entrants?

So what I try to tell people is pay attention to your strike price.

So whatever you purchased your, your crypto at, understand your strike price and also understand your blended strike price.

So if I bought Bitcoin two years ago, last year, whatever, if I'm using, using a dollar cost averaging strategy, now I have a blended strike price and now I can figure out well, how long do I want to hold?

So, like if you're looking at stocks, uh Berkshire Hathaway's um, Warren Buffett used to have like a 10% rule.

So if he profited 10% he would sweep some off and keep it moving.

So I tell people to try to do the same thing or I tell my kids that's how I got started in all this, Eddie.

I want to go back for a second to crypto overall.

When you talk about what portion of your portfolio should crypto be?

Are you basically saying that everyone should own some crypto?

And are you saying they should own something in particular Bitcoin spot Bitcoin ETF S Bitcoins?

If I was a financial analyst or, or a financial planner, I would say something.

But to my kids, what I say is that's what we want.

They, you better have crypto, right?

Oh, definitely.

So I taught all of my kids this is how you go about handling crypto.

This is how you do this, this is how you do that.

And if I'm going to be paying attention to coins, I'm gonna pay attention to the top 25 coins as according as according to coin market cap or coin gecko.

Is that enough to really kind of filter out the bad ones though?

I, I mean, we have in uh securities land, we got prospectuses but with crypto, you don't have anything that's been blessed by regulators.

So if they give you something to read, you don't even, I who can even rely on that.

I just uh top 25 is that the all we can do in terms of safety but, or is there more that an investor can do?

I'm glad you asked that question.

The truth is I tell people dig in, do your own research.

So if you hear about a coin who's involved in the coin, who's actually handling the development?

Where is it being stored?

What's the security architecture on it?

All of those different things that I'd be looking when I do M and a, you know, consulting.

Those are the things I'm looking at who's involved, what's involved?

How long have they been in?

What previous projects they've been on?

Were they rug polls any celebrities?

I mean, a celebrity can almost be the death knell sometimes.

Um Is that kind of a red flag?

If a celebrity is endorsed for me, it is a huge red flag.

So the reason why, I mean, look at the latest one, Jason Derulo, he's known to actually be involved in certain things in certain coins and have those coins just kind of go tanked, right?

So when I look at them.

I, we've got Jason Derulo, Hulk, Hogan.

Iggy Azalea.

Um, Andrew Tate.

So you look at all of these people that are doing all these, all these nice little coins and then they don't go anywhere.

Looks like, smells like, feels like a rug pole.

So I don't, I don't push those at all.

I don't tell anybody to get involved with them if you get involved with that and you've done your own research, you need to do more research.

I wanted, I wanna hone in on the word rug pole there because that's something that we hear in crypto a lot.

Not necessarily if you're buying NVIDIA, but uh it is, it is a piece of terminology there.

So tell us about the rug pole.

Technically, it's a, it's a technical term in my world.

Um A rug pole is basically somebody coming along propping up a coin and holding a lot of that coin to the side for themselves.

And then when all of these people buy in, they're selling, selling, selling and then they just disappear.

So we do see that in stocks sometimes.

Short squeeze sometimes, maybe.

Yeah, but you're seeing it, you're seeing it far less.

I mean, the boiler room stuff doesn't happen, you know, all that much anymore, right?

Because everything's electronic, it's easy to track.

I I have a question for you going back to the basics kind of is crypto going to become what the US dollar is.

Ever.

Is there a world in which we operate completely using crypto coin peg, the Bitcoin peg.

Exactly.

Wow.

That's a devious question.

Um, I love it though because it, it makes sense.

Right.

Right.

Now you have a lot of coin out there.

You have a lot of businesses out there that actually do want to accept crypto.

So I own a company, a hosting company and we actually help businesses accept crypto online.

So when we set up your ecommerce site, we help you get your obviously your web two address.

Your.com, we also help you get your web three address and we help you actually accept crypto directly to yourself.

So basically, if somebody comes to your site, it becomes an over the counter transaction or transaction directly between two people or peer to peer think cash app or Venmo kind of relates to all this.

I wanna get into our word of the day which is decentralized and I'm gonna define it here.

Decentralized refers to a system organization or process where control is distributed across multiple points instead of being centralized in a single authority in a decentralized market.

For example, you have buyers and sellers interacting directly without a central exchange, often using technology like Blockchain to facilitate transactions.

And so there's a lot of decentralized can describe a lot of different things including the market.

We got apps that are built on defi we have decentralized autonomous organizations.

So what is decentralized mean?

To you.

Decentralized means to me exactly what you said.

Basically, it's, I don't have a single entity or s or a small group of entities that control everything about a given project.

So in this case, think of a coin.

So Ethereum is a decentralized project, meaning that it's a layer, one and no one single person or one single group can control that coin.

It all goes to a vote.

I don't really get though how D FI is supposed to kind of free us from, you know, Gary Gensler's boot when it takes, it takes years to get a crypto ETF registered.

How watch out for your green screen here.

How is D FI uh actually different than just the status quo?

It's not that it's um out from under Gary Gensler's boot, right?

You're still, you, you actually want regulation.

You want some kind of guardrails and most people in this space actually want guard rails.

We wanna be able to operate in a way that people can trust that have clear rules.

The difference is that it affects the banking system often when I, when I speak about this, I describe how banks are gonna need to redefine what a bank does.

So dey, I can go to, I can go to a defy organization and say, hey, I need a mortgage, you know, I can do things like that.

So if I'm doing things like that in a decentralized financial space, then how is traditional finance going to respond.

So when you ask, are people going to be using crypto in the future as a part of everyday life?

My answer is going to be yes.

It's gonna be like, like, like Ready Player One.

Have you seen or read that where it's like they're operating in this game and they use that cash for real things?

I don't know.

Is that what you're kind of saying?

It's like Roblox kind of like using Roblox it exactly like that.

So what's hilarious is I'm actually a principal member of the Metaverse Standards forum where we actually work to actually do something like ready player one.

Basically, you have these different meta verses and people wanna be able to traverse through those meta verses.

How do you do that?

How do you do that with, you know, your Avatar's clothes on?

How do you do that with your Avatar's hairstyle, things like that?

And we work with different organizations to actually try to figure that out cross platform avatars.

I love it.

Um So that that's a very specific use kind of ex extrapolating how deeply maybe looks in the future.

But at its core, what is the possibility that it just disappears because it becomes too much like traditional finance just with an added layer of cost?

Um Does it really, I mean, because I look at, for instance, uh Ethereum smart contracts, it looks like the SEC is not going to consider them securities.

But if you wanna earn interest, if you want to pay your customers interest in your uh brokerage firm in crypto, you have to register, you have to register with the SEC to be able to do that.

And that, that's the same thing that happens in traditional finance.

So, are there advantages to being in the D five space if you still have to abide by the trad five rules?

Absolutely.

And the reason why is because decentralized finance is gonna move faster and more efficiently than regular finance.

So if you look at regular finance, you go to your bank and they say, oh well, we can give you 0.005% return.

Meanwhile, you can go to Defy and I can stake my coin for about a 5% return.

That's a big difference.

So that's going to be helpful to a lot of people.

All right, stay right there.

We need to take a quick break, but coming up, we're going to be talking about the debt ceiling and also a crypto showdown for the ages in the next chapter of who wore it better Defy edition.

All right, we are back and we're talking about defi crypto web three.

And guess what?

We're going to talk about the debt ceiling now because that is, that relates to our number of the day 31.4 trillion.

That's a theoretical dollar limit on Uncle Sam's debt ledger also called the debt ceiling.

We've seen this play out many times before.

Sometimes markets barely notice sometimes brinkmanship on both sides awakens the bond vigilantes.

Uh for example, in 2011, the debt ceiling drama cost American tax taxpayers $1.3 billion.

A very real financial impact resulting from political indecision.

Um But I'm gonna bring this back to defi can defi solve the problem that we're talking about here in a lot of ways.

Yes.

The number one way is when you're living in a crypto world, if think about it as living in a cash world, I can't spend what I don't have.

So that whole credit piece is harder to get to right now.

We live in a credit based society and credit is everywhere.

Whereas in crypto, well, yeah, you can get credit but your day to day life is not gonna be based on credit, it's gonna be the dream is built on lots of credit here.

That would seem, that seems to me to be a huge paradigm shift.

If you're talking about Americans being less reliant on credit.

Is that something that just comes about naturally or does that need some kind of a push?

Like how does that happen?

That's a really good question.

The fact is, is that if you really think about it, you have a lot of people that are actually bank less so they live by cash, then if you really go back to it and you think way back when, when credit cards got started, we were a cash based society.

Credit was not a big deal.

Then we introduced credit cards and it took like what 40 years for credit cards to really kick in.

That's amazing.

Whereas with crypto, it's been 14 years.

So returning to our roots, our pre credit card roots and just kind of repeating the cycle with a new twist.

I think so.

Interesting.

Can you kind of explain for our viewers who aren't as familiar why crypto is kind of based more in like mining and you can't just make all these things up, you can't just make it up like cash because we're talking about it, depend on, depend on your coin.

But, but you know what I mean?

How, how it's more like cash in that sense.

So you're basically dealing with certain coins that are, you know, legitimate as I, as I would say that are meant for use, right?

So Ethereum Bitcoin, Solana Polygon, a lot of coins out there, a lot of the, you know, l ones are meant for purpose and they're, they're created based on mathematical theories and mathematical algorithms, all that other good stuff.

And there's a finite kind of way on how you're gonna do this particular coin versus that coin, some coins can expand some coins can extract, you know, compact other coins, they're finite like Bitcoin.

And so that brings value, but the fact that I can move money around the world because crypto is stateless.

Is that one of, is that something you look for that uh limited supply has to be part of the equation.

When you're looking at those 25 coins that you might think about buying or is that just not a, is that maybe just an ancillary factor?

I think it's more of an ancillary factor because what I'm looking for is how much is in the public domain versus how much is being held by the developers, right?

Because if there's too much held by the do developers, then I'm gonna start to think that, well, maybe that's not such a good situation for me.

What about the community?

How important is the community?

Uh We're gonna be doing a showdown and a little bit of uh Solana versus Cardano dts there.

Uh But how important is the community to really getting these things off the ground and keeping them sustained?

It is the number one thing your com your community is going to grow your coin, right?

So the more active your community is, the more use that your community gets from it, the more they're going to talk about it.

And that's how your community is going to grow in, in terms of the crypto community.

I feel like I even view it as more of like a young man's game are older people in the crypto community.

This is no reference to this is no reference to anybody in the room OK, I'm asking about demographics, you know, who is in crypto.

So I will, I will say it like this.

There are women.

Well, all right, me here and there are, there's, you know, everybody so on my crypto show, I've got everybody from, from younger, from the younger generation to older generation.

Even my mother takes part in my, in my, my, my podcast.

So it's, it's fun.

But the idea is that so many people want to know about it and they want to know in a way that they can use it and they want to be spoken with, not spoken to.

And I think that's the big deal.

Well, it is time now for, for our smart contract showdown something I alluded to a few minutes ago or will it be a Smackdown?

Uh in the red corner, we have Solana sporting lightning fast transaction speeds plus low fees, the darling of Defy and NFT enthusiast, the world over and in the blue corner struts, Cardano known for its robust research driven approach and strong focus on security and sustainability, both building an empire or trying to.

But there can only be one Eddie who is wearing the D five mantra better.

Is it Solana or Cardano?

It's a two part question.

The first part is right now, you're gonna say it's Solana.

But as soon as the hard fork happens with Charles Hoskinson and his team, it's going to be Cardano, I believe interesting.

Could you elaborate on that hard fork, the timeline or what should be, what should we be expecting here?

So the timeline should be by the end of the year and we'll get that hard fork and it's gonna introduce the ability to build daps and all kinds of applications, build use cases, meme coins almost whatever you want.

So everything that SOLANA can do, but with the added security and network stability that Cardano brings to the table, how does an early investor kind of differentiate like me who's not a crypto professional?

How do you know who to play?

Um The first thing I would say to you is get a book and understand the foundations of it all like elliptical math.

So we need to go there.

It's not like that.

I mean, I've written a book, I see it, I see it.

So this book right here, I would, I would recommend you get and the reason why is because it truly does give you a foundation and what crypto is, what crypto means.

It's generational wealth and how you can use crypto to build that.

And more importantly, you'll get an understanding of how to actually understand the projects that are involved and those projects are going to be Daps Daws.

Um They're also going to be the coins and tokens themselves.

Yeah, we want, we wanna get a little personal now with the last, with the last minutes of the show.

So you have a really interesting background.

I see you started your first business before you even graduated high school.

Is that right?

That is true.

I used to, I used to have a security company and I was, I was used to be a bodyguard and the high school that you were going to was Bronx, the Bronx High School for Science.

Correct?

I was hoping you were gonna name drop, but he did let it go.

Yeah.

Very cool.

Here.

We gonna tease this out.

Uh, but this is, uh, I, I looked this up and more, more Nobel Laureates have come from this high school than any other in the US.

Uh, just tell us what it was like going there.

The high school is run, you know, when I was there, it was run like a college.

So you really did have that open college campus kind of feel you did what you wanted to do and you were gonna achieve what you did.

So if you did the work you were gonna do well, if you didn't do the work, well, you know, you're gonna graduate from Kennedy High School.

You get in when you put it, you get out what you put in?

That's right.

Can I ask, when did you start learning about crypto?

I wanna say a little over 10 years ago, I started learning about crypto, my friend Elliott and I used to, used to have a job.

Um, we were consulting a company and we used to have this desk and we sat right across just like this and then we started day trading and, well, you have a little bit of time.

You can watch everything that's going on.

So you start day trading and then, you know, I looked up and I was like, oh, wow, it's this crypto thing.

Started doing research on that.

And I said, hey, we're gonna buy Bitcoin and we're gonna buy Ethereum.

We're gonna buy Stellar and we're gonna buy XRP.

Done.

So you were buying at $11 and selling it at 12.

Any regrets.

No.

Um The one thing I've learned is, you know, learn from your past, don't dwell in your past, right?

Pick up and go learn from it, take everything that you can squeeze out of it and then move on from there.

You said that demographics for crypto are wide ranging.

A lot of different people are interested in this.

But what's something that people really get wrong about crypto or, or something that people are still nervous about when they're, when they're about to consider making their first investment.

The leading figures are in jail.

That's a good one.

So that's where, that's exactly what I mean by know who's involved in the project.

So I think what they get wrong is they don't do the research that they should be doing.

They do kind of a cursory cursory research and they get their information from, they heard about it guy.

You know what I mean?

That, that person who whispered it and I'm gonna go do that.

Exactly.

And that's not what you wanna do.

You wanna go find out, hey, what's up with this, with this particular coin?

And how does that work?

And you know, what's the history of it, all that other good stuff?

Is it a hard fork from something sort of like Bitcoin and Bitcoin Cash?

You wanna understand everything that's going into it?

But I think the thing that they absolutely get wrong is I know a lot of people that are just starting in crypto and they'll do not a, not a hard transaction but a very strategic level transaction and yet have no idea what they did just because they listen to somebody else.

They never did their research.

Well, it's a very important mantra.

We, we talk about a lot about risk management at uh stocks and translation and Yahoo Finance overall, we got less than a minute left.

Any final words for investors here, I would say you want to pay attention to purchasing meme coins and understanding how to get out of those meme coins and then stretch that a little bit further and say I wanna buy a regular coin.

But what's its use case?

How do I buy it?

And then how do I sell it?

Never buy without knowing how to sell.

Very good.

Always have an exit strategy wise words here and we had to wrap things up.

Thank you so much for stopping by Ed Sid as usual.

You've been great and it's time for us to say goodbye, but keep your dial tuned to Yahoo Finance.