How to build a "Crypto Farm" with Josh Rhodes from Crypto Y'all
Josh Rhodes explains a three-part strategy for generating income from crypto: earning yield through DeFi, holding for appreciation, and using assets as collateral for leverage. He also covers why Bitcoin differs from altcoins, why custody matters, and how macro conditions shaped crypto markets in 2022.
Basically, your job as an investor is to assess and look at these and say, is this, is this like buying Amazon.com in 1999? Like buying stock in Amazon in 99.
Welcome to the Next Level Income show where it's our goal to take your income, your investments and your life to the next level. I'm your host, Chris Larson. If you haven't yet, get a copy of our book for free at our website, nextlevelincome.com. that's www.nextlevelincome.com. just, just click on the book link and I'll even send you a copy if you put your address in. On today's show, we have Josh Rhodes. Josh is a crypto investor, educator, and entertainer. He got his start as a real estate investor and marketing agency owner before discovering the power of crypto as a wealth building asset. He now focuses his energy on cryptocurrencies and has created one of the fastest growing passive crypto investing strategies out there. He helps businesses grow with marketing strategy implementation, leverage growth and optimization to increase profits and achieve financial freedom. Josh, welcome to the show.
Honored to be here. Thanks for having me.
Absolutely. Man, I feel like we're old friends. I've been watching your, your course and, you know, learning about a little bit more about your, your company here, and I think you might even be wearing the same shirt that you were wearing in that course. If I don't, if I, if I'm.
Really good chance, I, I, I, I take the Steve Jobs approach to my wardrobe. You know how Einstein didn't wear socks, Ja wore a black shirt every day. I just, I rotate, you know.
Oh yeah. When I do my, when I do my recordings, they're all, all black, all the same black shirt every single time. So like, because then I don't forget. The problem is I grow a beard in the winter, so it's like, I gotta time my, I gotta time my recordings because people are like, why do you have a beard? Like the next day you don't have a beard. This is odd, Chris, you know what are you, like Wolverine? Yes, but. Well, Josh, I'm really excited to have you. We've had a few guests on the show here in the past year talking about cryptocurrencies and man, it's been a wild ride, you know, this year I'd love to talk more with you about that, but before we do, I'd love for you to share a little bit more with the audience about your background and how you ultimately ended up starting crypto, y'. All.
Yeah. So I grew up in northwest Alabama, just in the middle of nowhere. So just think of all the stereotypes that you could come up with. And that's where I grew up. Friday Night Lights, you name it. One, you know, one generation removed from extreme poverty and like, stuff like my grandmother had to make spaghetti sauce with ketchup. You know, it's just like almost depression era ways of life because, you know, there's not. There wasn't a lot of economy, there wasn't a lot of interstate connection. Where I grew up, it was very rural. But my dad came home from Vietnam, started a, a lumber sales business and made enough money as a small business owner just to keep out me and my brother out of poverty. And he was really kind of my model as an entrepreneur growing up, we. He never made a killing, but he managed enough to be generous to the people in our community and really modeled that. So fast forward and skipping over a whole lot story. Crypto, y', all, is a brand that I'm trying to attempt to merge that core value. Southern hospitality, where I grew up taking care of your neighbor, and the greatest financial technology in history, which is crypto. And when I got into crypto investing in 2017, man, I mean, any. And even still, like, if you try to use Google to be your, your search device, you're gonna, you're gonna step into some smarmy, scammy corner room stuff that you just don't want to do. Your, you know, your capital, your. Your treasure is, Is precious. And so I want to provide a place for people who are beginning in crypto, which is the highest performing asset class in history so far. I want them to be able to have someone to trust, you know, like a safe boat ramp into the crypto sea. So that's kind of what crypto y' all is all about. Obviously, I've got a bad southern accent here, so we're playing on.
There you go, man. Why? You know, we got, we have some common friends from Alabama, so despite all the, all the stereotypes, I'm very fond, I'm very fond of all my friends from Alabama and as well as their passion for, for Bama football. So.
Yeah, roll that.
There you go. I was like setting you up. I was like, you got, you got to say that. Come on, man. So before we jump into, you know, what crypto y' all is, you know, and some of the, the highlights as I, as I talked about in your intro, you know, we are going into Q4 of 2022 right now as we record this, Josh. And you know, Bitcoin. I mean, shoot, all the assets this year have, I mean all the, all the stock markets have entered bear territory as of a week or so ago when we record this and you know, we're kind of in this kind of crypto winner, if you will. What's your take on that? And you know, what are your thoughts? You know, you've seen a lot from 2017 to 2022.
Man. Well, I will say this high level for any of your listeners just who are treading into the water ankle deep. You know, markets move in waves. And don't forget that nothing goes straight up and nothing goes straight down. So you're gonna always see this oscillating price action in the markets. You know, right now the old saying, don't fight the Fed is, is real. It's in neon lights and blinking in our faces. What you see globally is the US dollar has been crushing not third world countries and, and honestly first world everything from emerging to industrial economies. The US dollar being the world reserve currency, has been so strong that everybody's having, you know, all commodities are settled in US dollars. And so when the dollar goes up in value globally, these countries can't afford to pay their debts, they start to go bankrupt. They can't, they default on loans. It creates this DOM effect. And then you start seeing all the asset classes lose value, blah, blah, blah. And so we're kind of in this weird repression phase from COVID lockdowns, from 40% of all the fiat dollars in the world being printed in the last four years. I think actually the last two and a half years. 40%.
Yeah.
40% of all US dollars that have ever been printed were printed last few years. And so that's created inflationary pressure that has reduced our buying power domestic in the US while everyone else globally is suffering. So the crypto markets are, we're on the left hand side of the bell curve. You know, it's, it's work effect, adoption curve, asset class. We're 13 years in with Bitcoin itself. Many other cryptos are much younger. And people are starting like, as you and I speak, I think what we're starting to see is people are starting to wake up and go, oh my God, Credit suisse is down 95% as a stock and all the financial advisors in the world are like, don't do crypto, too risky. But then you've got this massive bank in Switzerland that controls $3 trillion of assets under management, is down 95%, right? And if they topple, it creates an entire global Economy breakdown. So people are starting to wake up and go, oh wow, Bitcoin's actually Gold 2.0. It actually is a store of value. It actually is an alternative parallel economy that a central bank manipulate. So I think that's where we are. But we're still in that situation where if the Federal Reserve comes out and says hey, we're not going to raise rates as much as we said we were, which is what Australian bank just did. The bank of England just turned on the money printer again. It's going to create this massive pump in the markets face melting pump and then take your money and run I think and get ready and move back to, to solids and then get ready for a crash where you can buy more. It's really like more than you asked for. But that's kind of where we are, I think.
No, I mean, listen, that's why I asked the question, Josh, because I talk a lot about the real estate cycles and I, you know, I've seen them actively throughout my life. My parents were, were in real estate and I remember watching the savings and loan crisis unfold and you know, then you see, you know, all these different events through history and then you know, we come, we come back, here we are again at this point in the cycle and people forget, you know, generation ago, you know, they forget that there are cycles to real estate and goes up and it goes down. I know you can trace it, you know, with bitcoin as well. I'm not, I'm not as familiar with a lot of these other things but I also think it's interesting, you know, if you pay, pay attention the past year or two, a lot of so called experts were talking about how the dollar is going to collapse and you know, it's going to, you know, they're even talking about it now with Russia and how they're cornering America. And here we are. It's, it's as strong as it's ever been. The US Dollar.
Yes.
Yeah, very interesting.
It's, it's strong in relation to the basket of other world currencies, but ironic. The paradox is that you can buy, if you had $1,000 in 2017 and you just left it in your retail bank account, It'd be worth $70,000 today in buying power.
There you go. And that's a great irony. Yeah, and that's a great point. So looking at bitcoin, I was down at the bitcoin conference in May in Miami and there was a lot of different themes. Peter Thiel said in his opinion And I think bitcoin was floating around 35, $40,000 somewhere in that space. He said on a risk adjusted basis today. He felt that it was the best time to be in bitcoin in history. And then the other thing I noticed is that you had a lot of people that were, you know, very optimistic, very bullish on bitcoin. It was kind of like bitcoin and everything else. And I know you talk about that in your course as well. Can you share a little bit about thoughts on how bitcoin is different from some of the other cryptocurrencies out there?
Yeah, bitcoin is first of all, and this is arguable to a lot of like early, early, early pioneers, but like bitcoin's first to market, we're going to just kind of give them that mantle. But bitcoin also is the only so far proven and oldest decentralized network. Right. So it's largest computer network on the planet, which is saying something.
Bigger than.
Any government, bigger than any government, bigger. Google server farms, bigger than Amazon. Aw, you know, all of that. And it's decentralized in that oh one government or bank or corporation that owns all of the miners or the validators that uphold, kind of buttress the network. So much so that I think in 2020 it was, if I recall, China being the great communist country that it is, doesn't like individual sovereignty and financial freedom. They banned bitcoin mining and at the time China I think controlled 40%. I might be making that up. Fact check me. It's over 20% of the hash rate or the horsepower of the bitcoin network. Well, you would think, oh my gosh, they just shut down the bitcoin network. But all that really did is redistributed the workload to the rest of the world. So it's like a blob or an amoeba that just kind of moves into a different part of the membrane. So it's a immutable, uncensorable, incredible platform and network. Is it superior in performance to some other cryptos? No, it's not the fastest, it's not the, the sexiest, it's definitely been the most reliable and it has the largest market share. And it's going to be really hard for anything besides Ethereum to take its dominance away in terms of mass adoption. The the rest of crypto, Ethereum, et cetera. What you'll hear bitcoin maximalists say as a criticism is they're all centralized, they're all somewhat or majority controlled by a few hands, if you will, that could censor it, topple it, change the, the, the, the conditions of a particular crypto. And there are 18, 000 altcoins out there, qu thousand and counting. There's a ton of money and talent, you know, flowing into blockchain. So you're going to continue to see a lot of startups, you're going to see a lot of deaths. And it's basically we're, we're, it's, it's basically your job as an investor is to assess and look at these and say, is this, is this like buying Amazon.com in 1999, like buying stock in Amazon and. Because if so, then you might be onto something and you'll build some incredible wealth, but there's going to be some losers as well.
Yeah. So, yeah, let's, so let's shift gears a little bit because, you know, I think a lot of investors are, there's some trepidation because they just don't understand, you know, cryptocurrencies. However, you see companies like Fidelity, you see the blackrocks of the world, you even see governments of the world now having Bitcoin as a legal tender and you look at it, to me, it only makes sense to have it as a portion of your portfolio. But the reason I had you on, Josh, is because you were a real estate investor before you were in cryptocurrency. And one of the issues I have with cryptocurrency is it's, you know, it's kind of like gold, right? You know, you have, you have gold sitting there and okay, it's a hedge, you know, and maybe it's uncorrelated or it has some, you know, it has some diversification properties in a portfolio, which I think Bitcoin does, but it doesn't really produce any income. And you know, next level income, you know, we are huge on producing passive income. So I'd love for you to share with the audience your concept of the crypto flywheel and what that is and how you take these, these kind of passive or these inert assets and turn them into assets that are becoming productive.
Yes. So I was investing in real estate the day I was putting a for sale sign in the yard, the day Lehman brothers went under in 08. And it timed it perfectly. I'll nail it. Funny story is though, while I was putting the sign in the yard, a car was slow rolling by. I waved down and said, hey, are you looking for a house? And they were, and I sold it to them. The Next day under contract. So by the skin of my teeth, yeah, I didn't make any money either, but I got out. But yeah, when it comes to the crypto flywheel. So I the reason why I told you that story because I had to learn my lesson in asset class investment. Because if you don't approach it with some level of framework, you're going to be. It's almost more like crypto, slot machines and gambling than it is crypto investing. And investing to me is treating your portfolio like a business. You know, and business, businesses need P Ls, they need balance sheets, they need strategy, they need a vision, they need a direction. Well, I didn't want to get too far over my skis and so I needed something simple. I'm a simple country guy from Alabama, so I love the book Jim Collins wrote called Good to Great. He uses the illustration of the flywheel and how all the great companies had flywheels. And I love Robert Kiyosaki and I love all these other. So I just kind of fused my own little creation that I call the crypto flywheel just to keep me from sabotaging my own portfolio with my emotions, with my risk tolerant whatever. And so there's three little wealth strategies inside the crypto flywheel. They kind of make up. Those are the elements of the flywheel. Your listeners are drawing a picture on a napkin. Basically it's three arrows chasing each other around a circle clockwise. And each arrow represents one of the wealth strategies. And each of these wealth strategies are, are achievable with crypto with the asset class though. So the first one is where I like to start any business. And that is you got a cash flow, you know, you gotta get cash flow. This.
Draw my flywheel on my paper.
Yeah.
As we speak.
Yes.
So that's perfect.
And that's it. And the second element is appreciation. That's your, that's where you have your up price and down price. You know, it goes up in value, goes down in value, and then the third is leverage. And that's where we use our assets as collateral to buy more cash flowing. Assets.
Are we talking about real estate now or.
Well, we're talking about crypto, which is the fantastic part because the dirty little secret of the flywheel is that it, it really works in all asset classes. You know, Elon Musk trying to buy Twitter. Well, he's, he's using his Tesla stock as leverage to buy to get that cash, you know. Yeah, he's not selling Tesla to go buy Twitter. He's not Selling his rental properties to go buy a apartment building.
So he only sells Tesla stock to spite Elizabeth Warren. I think otherwise.
Right. 100%, which is fun to watch. But most people in listening to this will be able to relate if they have purchased crypto. They, they started appreciation part of the flywheel. And there's a little, there's a little enigma there that I. A puzzle that people get stuck on. And I call it the buy, hold and hope.
Yeah.
Place.
That's what got a lot of people in trouble in the mid-2000s.
Yeah, 100. And so the buy, hold and hope mentality is where you go in and you buy an asset and you just wait and you hope and you wait and you hope and you don't really know why you bought it outside of fomo and you don't really know why it would go up in price and at what rate. And that acceleration now this is a. But it's not a bad place to be. Like, it's a part of the flywheel. There's a role for appreciation.
Yeah, I'll take it.
100. Like if you bought Bitcoin in 2010 with a thousand dollars, you'd have, I think, something like one $8 million now off of that. So like that's a, that's a part of, that's an example of the appreciation part of the flywheel. But that's 12 years ago. So if you've got a 12 year time horizon and that's it and everything else is cool and kosher, great buy, hold and hope. That's fantastic if that's where you are in your landscape. But most people who are in the prime of their life, quote unquote, need a more productive portfolio. And so Warren Buffett talks about gold, compares gold and farmland, where gold, great cool precious metal asset that we all love and, and want more of, but it doesn't create more gold. Gold doesn't beget more gold. If you, it can go up, it can go down as a matter of, funny enough, I think if you bought gold 40 years, it would still be worth the same amount of money now. So it's like, it's not very accretive and there actually is inflationary characteristics to gold. I think it has about a 2% inflation rate every year because we're still pulling it out of the ground a little bit.
Yeah, absolutely.
There's an unknown quantity, whereas bitcoin, we know there's only 1 million, but that's another story. And then so back to the Buffett example, though. Gold's non Productive assets. And then he says, but farmland? Why do I buy farmland? Well, it's because it has livestock and crops, and I can sell that cash flow. And I still have the land, I still have the equipment. They're all assets. And on top of that, I've got a prod, a productivity line. I've got distribution, I've got revenue. Well, the beautiful thing about blockchain technology is that there's no opening bell. There's no closing bell. It's algorithmic. There's smart contracts that are working as farms for you all day long, all night long. And there's this little part of crypto called defi, decentralized finance. Basically a sector of crypto that's built to be the alternative to traditional banking, where we can make deposit into these crypto ecosystems or protocols, investment vehicles, whatever you want to call it, and earn yield just because we're providing liquidity, literally. So you can go and take your $100,000 to Wells Fargo and let it sit there and turn into 70,000 in the next five years, or you can take, you know, your, your cash to a defi protocol and earn a percentage, like certain percent per day. And there's a, it's Baskin Robbins, 31 flavors. When you get into defi, like, there's, there's everything on the risk spectru want to touch. But what you're doing there, though, is you're entering into a fully or more democratized profit strategy where you're adding liquidity and the, the treasury is going out into the marketplace earning a yield the same way the CEO at Wells Fargo is. He's buying companies and banks and insurance and all of the things and stocks. But they're keeping the profits, right. That they have a profit statement quarterly for a purpose defy allows us to have a decentralized banking system where we can earn the yields, we can get the commensurate returns to our capital, and so that we can use a, and earn a daily yield, which is the cash flow part of the portfolio. And what do you do with that yield? Well, you can continue to compound it in the rule of 72, or you can move it into the appreciation part of the flywheel and buy the blue chips that you really love and believe in. Maybe you love Ethereum, maybe you love Avalanche or XRP or whatever. I can name all the, all the names, but maybe. Or Bitcoin and just use house money then to buy more of what you believe in. And that's how we kind of fuel our portfolios.
So I Know, I love that. So you're basically, you're providing the liquidity to these banks. Just like if you deposit your money at a Wells Fargo, they lend it out at the, the banks lend it out on multiple. And they pay you what, something percent something Ridiculous. I guess the question I'm sure a lot of listeners are thinking, Josh, is yeah, but what about, what about these exchanges, you know, that we hear that that went under. What if the value of the underlying currency, you know, drops, you know, 20%, 30%, 50%, you know, how do you address that?
That's a great question. So you've got a little food chain that you're dealing with in the crypto space. And I'll, I'll keep it over simplistic. So at the top of the food chain, you have central exchanges that their primary role is to exchange currencies for crypto. US Dollar, British pound, Euro, Bolivars, whatever you got, and you put it into a crypto of cheating. Those central exchanges, those are like the, you know, basically like Robinhood, td, Ameritrade, et cetera, that we're used to in the equity markets. They have balance sheets, they're businesses, they're centralized. They have a CEO and they have business decisions. And if they don't manage their balance correctly and you're storing your crypto in their central exchange vault, you might not get your central exchange or your money, your crypto back. Because there's a great. In crypto, not my keys, not my crypto. And what they're talking about is your crypto or your wallet has private keys and a public, public keys, like the wallet address that I used to send to you and me and like an email address, the private key, that's like the Social Security number. That's like the key that gets me into whatever you own, and I have access to it. Now, when you have, when you buy something on Coinbase, they have the private keys. They have transferred it to you. They're acting as a custodian. I never keep my crypto on exchanges, ever, because I want custody. And that's the entire purpose of crypto, is to become bankless. So what, we use a mixture of hot wallets and cold wallets. All right, Hot wallets are wallets on your computer that are connected to the Internet. They're not completely just. They're not 100% safe. They can be hacked. If you do something foolish and give someone your keys or password or something like that, just like any other online account, but you have control over it and, you know, the if you're wise with your decisions, you can have very safe practices there. And then you've got a cold wallet, which is what you see. You know, people with the little USB hardware wallet online and they have little plastic analog buttons on them that can't be hacked. Like you can't send money out of them without being able to those physical buttons. And so it's just this non virtual way of securing your, your assets offline. And they're always on the blockchain. They're not actually in the little hardware device. They're, they're, they're on the blockchain, but they cannot be moved. It's all permissionless. And so they cannot be moved unless someone is holding that cold wallet and they know your 9 digit code and they know the buttons to push, et cetera. So it's all security code based. That being said, and I don't know if I'm answering your question as directly as you wanted me to, but there are varying levels of trust that you as a retail investor have to know about before you hand over your custodial rights.
Crypto, right? Yeah. So I guess, I guess my question is, you know the concept, right? You're providing this liquidity. You are, you're putting your money with these exchanges or in these other, you know, potential cryptos. You know, if they're very volatile, how do you guard your, how do you guard your underlying assets of those? Because if you're getting a return, you know, even if it's, you know, a very high return, but that value drops. And that's why I talk about stock market versus real estate. You know, with investors, it's like, well, you know, people are like, oh, Chris, I got a 30 return in the stock market. You're like, yeah, but it's down 30% this year, right? So, you know, whereas real estate might not have, you know, stable real estate might not have that kind of annualized return. But if you're getting nice cash flow along the way and it's not dropping by 30%, that's very. Yeah, right. So how do you protect yourself against that in the crypto market, Josh?
Well, the first way you predict it is to know your time horizon. And the longer your time horizon, the, the more protected you are because of just the trajectory of adoption curve and network effect. Like, if you look at your crypto investment as, man, I'm going to get in and get out month or two, it's going to be really hard for you to profit because nobody can time the top, nobody can time the Bottom. And there is a ton of volatility, but because less than 3% of the world owns crypto still, but it's on every super bowl commercial. So we're at this weird like inflection point where there's not solidarity in the markets. So if you're okay just kind of going, all right, I'm in this thing for the next 20 months or five years or whatever your time horizon is. The time horizon needs to be commensurate with your capital action. So if you start watching the. You mentioned BlackRock earlier. You know, BlackRock controls, I think $11 trillion in AUM. They're, they're signaling that they will open up exposure to their client portfolios of anywhere between 1 and 3.5percent to Bitcoin. And if they do that, by the way, the price of bitcoin will go literally to Jupiter. It'll just be game, set, match for those who own crypto. But the thing is, they're not exposing 50%. They're not taking 20%. It's 1 to 5. And so as you look at a volatile asset class and you're thinking, how can I protect myself from volatility? First of all, allocate an amount that doesn't matter if there is volatility in it and then you, you, you can ride waves of the market. And if you pay attention, you. Actually, one of the most beautiful parts of crypto is that there are plenty of profit taking moments. As long as you're paying attention, you don't have to be glued to the screen. You don't have to be a day trade. I do not. I'm not a day trader. I don't teach day trading. I literally make three or four major moves a year. The rest of it's mainly in the defi liquidity space. And I'm just like you. I'm just earning that cash flow that's helping with impermanent loss that I experience because of volatility.
No, that's awesome. I mean. And Josh, I feel like we're just getting started here with a lot of this. I know there's a lot of curiosity from people that are listening right now. I've gone through your initial webinar. If people want to see the same thing, if they want to learn more about the course and how you teach people how to turn crypto into a productive asset, also protect themselves against some of these market moves. How can they find out more about you and your course?
Yeah, well, things go to cryptoyall.com. that's crypto. Y a l l.com and join my free newsletter. Yeah, join. Join my free newsletter there. It's. It's free to. There's about 3,200 people who subscribe weekly. Jump in on that. There'll be a link to my crypto farming workshop, which is what Chris is identifying. And then. Yeah, that's the best play. Those are the best ways to, like, get plugged in. Obviously, if you're on LinkedIn, not everyone is, but that's where I provide most of my content on. Is on LinkedIn and. And YouTube a little bit as well. So crypto, y', all, on LinkedIn on. On. On YouTube. And then Josh Rhodes on LinkedIn. Connect with me. Say hi, send message. Tell me, tell me how. How much you love Chris's podcast. I'll be there.
Awesome, man. Well, like I said, Josh, this has been. This has been great. I feel like we're just getting started on this conversation. Look forward to continuing it. And check out Josh's website, cryptoy.com check out his link to the webinar and how to get more information on his course in the show. Notes. And Josh, thanks for sharing all your knowledge with the audience today.
Yeah, thanks for being generous with your show.
It's been a pleasure. Hey, Chris, here again. I hope you found this episode valuable. Now, I have one more thing to gift you. We have a page for my coaching clients where you can get a free copy of my book as well as much more from previous guests on the show. Just check out nextlevelincome.com coaching to get a free copy of my book, audiobook, and much more. I'll send you a copy of my book and cover all the shipping costs as a thank you for listening to the podcast. Also, please, like, share. And take just 90 seconds to give us a rating on Apple Podcasts.
