Should we all go to Zero Fiat? I recently saw this idea stand out on Bitcoin’s Twitter. LaserHodl When Heavy armed clown.. Personally, I’m open to the idea and believe that we all end up with #GetOnZero.But but just not yet.
As long as we want to live in a hyperbitcoinized world today, we aren’t there yet. Simply put, I still have a flat-denominated obligation to individuals or businesses that do not accept Bitcoin directly. Therefore, although I generally minimize Fiat exposure, there are legitimate criticisms and concerns about literally zeroing Fiat today. And what about using the fiat money system debt for your own benefit before it collapses?
So when I wrote this in December 2021, I didn’t think that for many Bitcoin traders sitting around 99%, “juice is worth squeezing” down to 100% Bitcoin and Zero Fiat. Hmm.
Let me introduce you to the charitable version of the case, the “Steelman”.
The main point of #GetOnZero is to maximize Bitcoin exposure and minimize apparently flat exposure. The #GetOnZero gang has the advantage of supporting the fiat money system in a way, rather than “truely leaving” the fiat money system by keeping the fiat money. Economically, even if you have fiat money, you can say that it contributes to the liquidity of fiat money by interrupting the reservation demand for fiat money.
One of the valuable insights from the #GetOnZero gang is the headache of capital gains taxes related to the sale of Sat, but at least reports In many cases Automation. For example, an exchange or Bitcoin broker service should provide a transaction export CSV list. You can then pass it on to your tax accountant or automated software solution to automatically calculate the tax paid at the end of the year. I think this is a point that was hardly considered until recently. Still, if there were many bitcoiners sitting in a solid green position and had to liquidate some due to an urgent flat duty, they would now not have to have a capital gains tax. Must be paid.
#GetOnZero What is the rejoiner from the stance? Well, due to the additional Bitcoin exposure, it may still come out after tax.
So let’s say you’re a hard-working saver and planner, and you’ve accumulated six months of emergency funding. For example, instead of maintaining 6 months of emergency funding, you, a proponent of #GetOnZero, just want to use HODL Bitcoin without any hassle.Bitcoin is rising so rapidly (as of December 18, 2021, 155% per year in 10 years, or 60% to 70% Every year in the medium term), it’s clear why we want to maximize Bitcoin exposure.
So let’s say you had $ 10,000 in a fiat hidden in your account, well you’ll be exposed now That emergency fund 70% annual profit. Therefore, in a year when you did not need to use this emergency fund, you could incur an additional $ 7,000 for the $ 10,000 emergency fund. It ’s pretty good, is n’t it?
So where do I mainly agree?
If your obligation is in Fiat (and the borrower does not receive Bitcoin payments), you generally need to sell Bitcoin. Especially in these cases, you are bringing a whole new world of taxes and bringing to your life reports that did not exist before compared to paying with fiat money.
In other cases, it may conflict with other purposes of using the fiat money system. Let’s summarize some of the situations you may be in:
- Protect yourself against the expanding bear market and unemployment
- Use the fiat money system for loans to stack more sats
- I’m interested in staying under the radar by legally not triggering capital gains tax events
- Unable to access services to help maintain Zero Fiat
Long bear market may leave you lect
I say this because the bear market in 2014, 15 and 16 was cruel. Bitcoin has fallen from about $ 1,200 in the second half of 2013 to about $ 200. At that time, it wasn’t even clear if Bitcoin would recover.At this point, if you lost your job or income at Zero Fiat, you would have run out of Bitcoin. at the worst case.. This is the time when fiat money for living expenses, for example 3 to 6 months, is most useful.
The scenario may be bearish, but I generally prefer to be more resilient throughout my life and less dependent on selling or spending the foundation at the worst of times.
Also, consider that there may be significant obligations in the future. If you lose your job, can you be willing to sell Bitcoin to meet them? What about the scenario where the Federal Reserve and other central banks try to raise interest rates and market tanks (even temporarily), resulting in mass dismissals? Losing your job at these times would be even worse if you didn’t have fiat emergency funds.
Now, the #GetOnZero rejoiner here looks like this: Save enough soil enough to survive this. But how much is it really enough? You might think, “I saved two years of sat in case things get worse,” but what if Bitcoin goes into an 80% tank?
If the purchasing power of fiat money drops to one-fifth of what it used to be, does that mean that 10 years’ salary needs to be stored in Bitcoin? How comfortable would it be to spend a significant portion of the stack and try to get over it for two years without work?
Well, to be fair, a 6-month emergency fund may not get over you for 2 years, but I see this as: Department Overview of the overall mitigation approach: Instead of using Bitcoin when looking for new jobs or income, reduce costs and reduce waste.
The 2018 and 19 year bear cycles were not as strict and long as the previous ones, but there is no guarantee of what the future holds. Note that the backtest only contains recent history.
Use the fiat system and debt to stack more sats
I recently did an episode of a podcast with Dylan Le Clair. Bitcoin magazine (SLP326) Talk about using the fiat money system to stack more sats. In this episode we talked about some techniques about using fiat money so that you can stack more sats. As part of this strategy, you may need to have fiat money on hand so that you can repay the fiat money. As a result, you will eventually move on with Bitcoin.
Another example would be to use a secured loan for part of the stack (don’t borrow for the entire stack! Or don’t borrow for most of the stack!). In this case, you may make a life cost or a large purchase to pay, and you want to keep Bitcoin exposure rather than paying or selling Bitcoin.
If you can get a loan under the right conditions and / or have a flat income to repay the loan, you can calculate that using flat credit has a higher expected value (EV) than using / selling a sat. increase. In successful cases, you will find that the borrowing fiat was successful. At the end of the loan period, you may have rolled over to withdraw collateral (if more) or saved enough fiat to repay and receive the principal. All of your Bitcoin collateral will return to your self-management. In this case, you can make purchases that may lead to life events, but you will avoid the capital gains tax event on the sale / disposal of Bitcoin and move forward from a Bitcoin perspective.
Well, of course, if you’re not careful, you can end up depressed and rekt, as I explained in an episode of my show with Andy Edstrom (SLP273). However, note one of the mitigations for getting a rekt here. Deposit more fiat money to reduce the loan-to-value (LTV) ratio. You may need a fiat on hand to handle margin calls and quickly deposit to a loan facility to avoid clearing. This is another reasonable case for calculated reasons, not zero fiat.
In other cases, it may be necessary to maintain some balance of fiat money for broader freedom and sovereignty purposes. For example, if you want to pursue residence in another country, one qualification is to show the smallest fiat money (for example, Malaysia’s MM2H program) or buy government bonds for a period of time. So why do you do this? This is because it may help to legally reduce the net tax payments to the state and provide another flag that can be stacked as part of the “flag theory”. By doing so, you may be able to reduce your dependence on certain conditions.
Australians may leave the country using different citizenship or place of residence rather than being trapped in the country as they were during Hysteria-19.Simply speaking Minimize fiat Here, it’s more accurate than taking a grand position about having $ 0.00 in a statutory bank account literally.
Stay under the radar
As Bitcoiners, we are often more skeptical of the state and do not want to unnecessarily report and deal with related accounting and tax headaches.There is an automated tool as described earlier, but this is not yet If you’re running multiple wallets and setups, tracking them can be tedious. Not all Bitcoin wallets have an auto-export feature with transaction descriptions attached, and few Bitcoin wallets track cost bases.
This problem is exacerbated if you are already sitting in profit for some time. That way, you will pay capital gains, even if the price hasn’t risen recently, even if you have an unreasonable obligation. The desire for complete purity from fiat money ultimately causes logistic and accounting headaches and increases capital gains taxes paid.
Not everyone has access to services that help Zero Fiat
Some of the services that specifically help Bitcoiner become “Zero Fiat” are only available to US customers and not everywhere in the world. For example, you can use a credit card that automatically pulls from your BTC balance, or you can use Bitcoin “as fiat money”.
What does HOD Ler do? Do you want to keep Bitcoin balanced on the exchange? Want to be able to find a peer-to-peer cash trading partner (who wants to buy Bitcoin in cash) every time? It doesn’t seem to be practical to me.
When does it make sense?
I’ve mainly explained some of the reasons why zero fiat doesn’t make sense. But for fairness right Does it make sense?
Perhaps if all income is Bitcoin and all or most of the costs can be paid directly in Bitcoin, ideally after the DCA army has grown. Living in a world where obligations are built in Fiat and not paid in Bitcoin makes it impractical for most people to have zero Fiat.
It also makes more sense when the inflation rate of fiat money exceeds certain thresholds. The reason for this is that fiat money emergency funds must begin to rise very rapidly in nominal value at some point. Yes, it’s subjective, but I don’t think that time is now.
Bitcoin is best treated as an ideal savings account — it does not necessarily mean that you cannot use the fiat money system for what it offers to you today. This could be the conservative use of fiat money or loans to stack more sats, or simply to protect yourself from the long bear market cycle and unknowns.
I think something like #MinimizeFiat is a better heuristic for maximizing Bitcoin exposure within safe and conservative limits than #GetOnZero. But do you go all the way to Zero Fiat? not yet.
This is a guest post by Stephan Livera.The opinions expressed are completely unique and are not necessarily BTC Inc or Bitcoin magazine..