Please click the link below to listen to the 83rd episode of my weekly crypto podcast ‘Five Minute Crypto.’ These are intended to be short, single-topic ramblings on some aspect of the cryptosphere. Comments and critiques welcome.
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Five Minute Crypto – The Bitcoin Hodler Rabbit Hole : Saving
Do not save what is left after spending; instead spend what is left after saving.
― Warren Buffett
It’s not how much you make each month that matters — it’s how much you save along with the flexibility and time outside work that you have.
― Francis Shenstone
Welcome to Five Minute Crypto -this week we continue our exploration of the Bitcoin hodler experience with our focus shifting to saving.
Let’s face it much of what passes for ‘modern life’ is debt-based. Houses, cars, vacations and objects of all shapes and sizes are pulled from the future to the here and now. We happily saddle our future selves with mountains of debt to get ahead right now. In a world where cash becomes less valuable every year – taking on debt seems to make a lot of sense, particularly in the context of investments. Within an inflationary model, a house or blue-chip stock may correctly be viewed as a means of protecting your hard-earned wealth. Cash certainly will not as its erosion is both desired by the government and implemented by central banks.
Little by little the average person ends up in a topsy turvy world where saving is counter-productive while amassing mountains of debt actually safeguards your future. Of course, this precarious situation is eventually going to end up collapsing in on itself. Ray Dalio identifies this collapse as the end of a multi-decade debt cycle which is as inevitable as it is destructive. Evenly properly managed such deleveraging is painful but in the current monetary environment catastrophe beckons.
Thankfully many people have now discovered a far more sustainable means of wealth protection and generation – Bitcoin. By design, BTC becomes increasingly scarce through time. As it is truly decentralized there are no pigs at the trough to rewrite the rules to fill their voracious appetites. It’s a level playing field for all – the supply is the supply, the issuance the issuance. It is both predictable and inviolate, making it the first true hard money.
For those who choose to hodl BTC the benefits of access to decentralized sound money are profound and diverse from permissionless use, to immutability and censorship resistance. Another boon to the hodler is a re-examination of spending and spending habits.
Once you invest in BTC you inevitably begin to compare it to other forms of money or stores of value. Fiat, of course, comes up short but other asset classes also lose some of their shine – holding stocks in companies with falling revenues and ever increasing dependence on the central bank printing machine certainly looks a lot less attractive over the long-term.
Beyond this, once a hodler begins to price everyday purchases in Bitcoin a renewed thriftiness generally emerges. A two hundred dollar shirt to sit beside your other 10 such shirts loses its lustre when viewed through the lens of its cost in BTC terms. Spending those sats on vanity purchases is revealed for the mostly absurd activity it actually is.
In short, hodling Bitcoin reawakens the dormant saver in all of us. In direct contrast to fiat -the longer you save it, the higher the likelihood it will purchase more in the future. Deferred gratification becomes the norm. We’ve all been taught that deflation is bad – it causes the economy contract and as a consequence jobs will be lost but is that really the case? If the money I hold will buy me more in the future – how does this disadvantage me as a consumer? If my labour ends up being converted into an asset that builds my wealth by not only buying more but by encouraging more thoughtful spending behaviour – how have I been disadvantaged? Rampant deflation would certainly cause widespread economic issues but a slow and steady price retracement relative to hard money would likely benefit almost everyone. The ancillary benefits to the environment and economic sustainability are obvious. The current worldwide rampaging and ever inflationary economy that’s always on the march can and will end badly.
Right now – global equity prices are approaching record highs – bankruptcy investing has become a thing, central banks have moved onto junk bond-buying sprees, and trillions of newly printed money will soon become tens of trillions. In such a world – the Bitcoin hodler – cuts back -stacks sats and builds themselves a better financial future. Is such an outcome guaranteed? -obviously not but the competition is anything but fierce.
Thanks for listening.