By now, most people in crypto are probably aware of Michael Saylor and Micro Strategy. If you're one of the massive pile of newbies that just got here via the Doge-bus, welcome aboard and you have no clue what I'm talking about.
See, in the world of crypto, the little bubble that is getting tighter and more scarce for space, people and start-ups pop up who do and say important things, and we think those folks are mega super stars, and then we talk to someone outside of that bubble and soon realize they are only famous... to us. So, lemme 'splain. Michael Saylor is what some might call a Bitcoin Maxi... or maximalist. From this perspective, the maxi at his level typically knows a great deal about other cryptocurrencies and stays current with those on the rise, but is convinced of the design and longevity of Bitcoin above all others. This post is not that discussion about whether he is right, or whether being a Bitcoin maxi is good or bad. This is simply an illustration of what Saylor may be doing right, and how one might apply that to their own scenario.
Michael Saylor of Micro Strategy sees the weakening of the dollar, truly the devaluation of fiat government currencies, and believes that even long staples like Gold and Silver are starting to perform poorly as long term stores of value. Bitcoin is, in essence, the new gold... or the new gold standard. Saylor believes that corporations that are doing something successful need to secure their value, especially their future stability, by converting their fiat earnings into Bitcoin. While the dollar loses value every year, those dollars can be going to work for the corporation's bottom-line, but probably even more important, it opens up new doors for their future growth.
Now, Saylor is not a one trick pony. He has actually developed, and given conferences on, numerous strategies companies might use to incorporate Bitcoin into their structure, and he is one of the smarter folks in the bunch. If this all goes down like a led zeppelin (the saying that formed the band... a big balloon fell out of the sky consumed in flames, thus going down like a led zeppelin is a bad thing... while going up like the band would mean success hehehe), then many will say he was an idiot. That would be untrue. We are all taking calculated risks, and sometimes you do in fact have to go all-in, with all eggs in the smart basket. Let's just say, Henry Ford could have tried his hand at the industrialization of car manufacturing, selling school uniforms, designing a local farmer's market and let's say one other thing... pet grooming. Something tells me this would only have distracted from his destiny in manufacturing cars.
In some ways, what I'm telling you, is that I am a maximalist in many areas of life. Focus on what you can do your very best. Balance that with the pleasant distractions that sure, you may also find success, but don't be distracted. Work your hardest towards those goals that are going to help you win your biggest, brightest, best.
Back to Saylor. Let us call his position as a Bitcoin pioneer in the corporate world, a position of a person who sees the massive history of growth with Bitcoin, believes it is going to forever keep going up in the future, and sees numerous advantages to converting cash profits into future-proof Bitcoin. This not only stops the bleeding that comes from fiat, but really is passively growing the companies value as it goes along. Stick a pin in it, because there is an essential second element to the Saylor model I'm presenting here.
Now, let's look at the individual in crypto. Different from a corporation, there are no employees, there is no main stream of income that needs to be directly tied to the products sold, company payroll, for companies that go public, the need to satisfy stakeholders or shareholders etc. The individual wants to pick winning horses and make profit from their investment. For the Bitcoin maximalist individual investor, that investment is long term. They are the classic Bitcoin HODLer. HODL means 'hold on for dear life'. The motto is not to get caught up in the fear of missing out, FOMO, or the fear of a tanking market coming from fear, uncertainty and doubt, or FUD. HODL your Bitcoin no matter what. Sure, you can use it to live off of, to pay for things, show utility, but you would never wanna sell your coins. Get it?
It seems to make sense. If you want something as a long term store of value, the more you have, the better, and there are even tax incentives for holding an asset indefinitely... especially for the individual.
Now, a return to Saylor to provide contrast on canvas.
An added benefit to one of his many strategies, is that a corporation, converting fiat to Bitcoin, raising capital to purchase more Bitcoin, funding rounds to acquire more... you guessed it... Bitcoin, is that whatever Bitcoin the company holds, they can also use as leverage to borrow money, using the current street value of Bitcoin as an asset, as collateral to borrow against. In fact, a whole new inner-crypto market is growing based on borrowing, which may make it super easy for the individual to do the same thing without even having to turn to the traditional banking world. Something tells me this is where regulators may step in, because the bankers DO NOT want to lose the access to take advantage of people's debt owed permanently to the banking sector.
So, let's say a company is earning $200,000/month gross profits (before taxes and before removing expenses from that figure). Let's then also say they are converting that to the current street value of Bitcoin. Just for easy math (bc Bitcoin is already worth more... again), they convert those assets to 4 Bitcoins. They can now actually turn to a lending agent, a bank, individuals, or perhaps even people and firms that already invest in the company, and can raise capital or immediately borrow against the Bitcoins as collateral. The company can now own $200,000 worth of Bitcoin, and have $200,000 in cash. This frees up the fiat cash flow that they need for expenses, to pay employees, but Bitcoin is earning them that buying power that means something incredibly important; if Bitcoin goes up while the dollar's value goes down, every time a Bitcoin is used to open up cash flow, the market value of that fiat, at that time, is measured in Bitcoin. You have the winning advantage over cash. Sure, you may need the liquidity of fiat to transact... let's face it... the top cryptos have a long way to solving certain types of instant-payment transactions, but already show great promise over money wires. Due to current market conditions, borrowing can be accomplished at competitive interest rates, and let's assume a bad deal, 10% interest on cash borrowed compared to the assumption that Bitcoin is going to be steadily rising another 50%, and another 50% after that, indefinitely, and one can see that the longer this strategy is used, the longer that corporation has an advantage over those stuck in the cash grind.
Now, I'm turning back over to you; the HODLer. I am not against long term investments, or investors. You don't pay tax on a buy... only a sell. So, the longer you hold a winning asset, heavy emphasis on winning, the more you take advantage of every dollar you can feed into that. You won't have to consider the tax implications on your profits until you actually take profits. But here's the thing: the asset needs to be loyal to you, and not the other way around. You do not owe some kind of allegiance to Bitcoin. What gives it value is the ability to utilize an asset to your own personal financial goals. The HODL is a one-sided plan to be worth more... always worth more.
In the same manner I added the all-important benefit of Saylor's strategy to use Bitcoin as a borrowing agent so that cash flow is handled in fiat, but utilizing fiat at an actual higher value, still not having to touch the precious Bitcoins, for you the individual HODLer, I want to interject one additional, important element to your strategy. Buy the dip.
That sounds simple enough. But regardless of our loyalties and certainty that Bitcoin is to forever go up, the truth is that it dances around an awful lot in the process. Bitcoin spends most of its time establishing a relatively low bottom line, and I know that is contrary to everything we believe about Bitcoin, but I am telling you the truth. Let's just look at Bitcoin from late 2017 to present. Bitcoin has been at $2800 and it has been at $63,000. Truly remarkable. And, there are people who have bought the bottom and sold the top. The HODLer or maxi, might say "what's the point" as they see all of their value in Bitcoin. Again, I get it and don't disagree. The problem, is that it IS valued against something else... in this case the dollar. Hate the dollar? You're not alone. But, truth be told... QUICK: what is the current price of Bitcoin?
Thank you for making my point for me.
So, let's get real. Cash has been going down in value for decades. For some governments it has already bottomed out, but what happens, is a bail out from the IMF, World Bank, certain angles from the BIS. The U.N. is actually, directly tied to the international banking system, and it is, in fact, their goal, to be an integral part of a global economy, but a centralized global economy. It is not a good thing. That's just a tiny kernel of truth about cash. The bigger picture for you, to understand that Bitcoin as an asset is now expected, even encouraged, to outperform real world stores of value, and that super crazy wacky crypto that no one should gamble with, suddenly has been moved to 'safe haven' in the financial sector's eyes.
So, perhaps you dollar cost average your way into your HODL, or you just scrape up whatever change you have available when it is available. Or perhaps, you even watch the market and wait to buy more Bitcoin when the price is a little low. Who knows. All good stuff. But here is the thing: Traders are not traitors. Liquidity is good. It is good for miners. It is good for the Bitcoin network. It is good for you. Imagine if there was literally nothing but HODLing. In that case, there would literally be 18M Bitcoins for everybody to fight over, and no one would get them until the next coins were mined. We'd already be seeing a $1M Bitcoin or worse I guarantee you! The fact that you can still get Bitcoin at a price of less-than $100K is thanks to liquidity. In some ways yes, it is true, that as a store of value, the ability to transact... buying and selling, does in fact drastically lower the going price. But, the ability to buy it, to do so instantly, no wait, and always have the buying confidence, is due to someone's willingness to take profit where they are. You should consider doing the same.
You HODL $10,000 worth of Bitcoin.
Bitcoin goes up 10%.
You wait for Bitcoin to come back down 10%.
Minus fees, and minus what I assume is a small tax burden at the end of the year, you now own 10% more Bitcoin.
Don't focus on what other maxi's are telling you, that you committed the ultimate crypto sin and touched your toes in the evil waters of fiat filth. You aren't declaring your loyalty to the wicked almighty dollar by selling your Bitcoin. You simply exercised the ability to acquire more! You put your Bitcoin to work for you, so that you could acquire more Bitcoin!
Now listen, this is not financial advice; do what you think it the right thing to do. But, if your goal is more Bitcoin, then why not accelerate that process and earn more?
You may know exactly how much money you have coming in every month that you are able to invest into Bitcoin, or you may have to scratch the bottom of your pockets at random times to buy more. Whatever your current situation may be, I get it; the goal of HODLing is to constantly be acquiring more, and never letting go. This is not about trying to convince you to take profit. I may talk about the benefits of that versus bang-on HODLing in a separate post, but here, all I am suggesting is that part of the benefit of letting Bitcoin work for you, is choosing a matching pair to trade Bitcoin into, so you can take advantage of the huge fluctuations in price performance.
Right now, Bitcoin has been trading relatively sideways, stuck in between let's say $51,000 and $58,000. It peaked around $63K and dipped back into the high $40's briefly, but for the most part it is trapped in the mid-$50's. Do you believe, with strong conviction, that Bitcoin will someday be worth $70K someday? Do you also believe that it will be worth, let's say, $60K again? If you learn to study indicators, you will find that there is a good chance that even in 5 minute intervals, when Bitcoin starts to take off again, there will be numerous short term sell-offs where it is logical for people to take profit and sell to the highest bidder. My suggestion is that there is no greater loyalty to an asset, than a willingness to sell short term gains, wait for a small correction, and confirm your confidence in Bitcoin with... a little more Bitcoin. Especially if you are locked in to a set investment and cannot afford to keep acquiring more, but also if you only have small funds to go in, you can be buying more by using the market to your advantage.
For super easy math, let's say you own exactly one Bitcoin. You HODL because you bought it at $20,000 and you feel certain it will some day be worth $200,000. If you bought at $20K congratulations, you are up in your investment. But, at the end of the day you bought a Bitcoin, and today you still own one Bitcoin. What if, humor me, when Bitcoin hits $69,000, you sell. Now, you wait for the first time it goes down to $65,000 and you buy it back. You would own $4000 more Bitcoin.
I have listened to many a HODLer and have talked to some as well. Many believe that buying any Bitcoin at a higher price than their initial HODL is a loss, or buying at too steep a price. They HODL partly because they think that is the only price they are leveraging. I'm encouraging you to see the end goal, and I believe, if I am not mistaken, that end goal is to own more Bitcoin.
If you believe in the long HODL, then it means you feel certain that the longer time goes on, the more Bitcoin will be worth. It is scarce and it is the most widely known asset. Banks are going to open access for commoners in the very near future. The marketplace, for the first time really, is going to start transacting in Bitcoin, Ether, and Litecoin, and dare I say Bitcoin Cra...Cash.
In my next post, I am going to go into more detail about the mindset of trading from fiat to Bitcoin. It is an important element in understanding the difference in HODLing versus trading.
My suggestion... my thesis statement as it were, is that a true HODL is dedication towards an asset that means acquiring more to the best of one's ability. If we measure Bitcoin in a unit of value, it is not in Ether, Litecoin, Doge or other. We measure it in cash. If you earned Bitcoin all the way up from $20K to $69K and sold, you'd now have $69K in cash. Even if Bitcoin came down $1000, you could buy back in and own $1000 more of Bitcoin. Sure, there is also the risk you call it wrong and you have to wait until Bitcoin takes another correction to buy back in. There is risk involved there is no question. But, I can tell you, as one who professionally follows the market movement of Bitcoin: it does not hold it's peaks, and in my professional opinion, it never will. Bitcoin will always hover around a temporary average. That is actually what makes it a great investment tool in addition to being a store of value.
You can ride Bitcoin up to a peak, sell, wait, and get right back in. We already know you are comfortable HODLing, so there's no trouble in being patient for the right time to sell. That is already an advantage you have over others. But, HODLing at the sacrifice of thousands of smaller movements at market is simply willingly turning down the daily opportunity to increase the amount of Bitcoin you own. It is an extremely moderate strategy to only allow your HODL to fluctuate by, let's say $1000. There are historically very few days in trading history that Bitcoin has moved less than that in percentages, meaning let's say a 1% difference. These days are almost nonexistent. At the very least, not a single week goes by that you couldn't select a nice little peak to sell that will falter throughout the day's end, where you can then accordingly re-invest your value right back into the asset.
If you were seriously dedicated to just 1% in this mindset, whether it takes months or years, it would only take you 70 times to double your Bitcoins. Do this a second round, let's say again it takes you a couple of years to do so, the second time you would own 4 Bitcoins. Add that to whatever DCA or unsteady investing you are capable of, and that is, in my opinion, showing a much more serious loyalty to the HODL. It is not like you are selling off Bitcoin as an asset in order to have more cash. You are temporarily allowing the value of Bitcoin to go to work for you so that you end up with more. Since most of us are in a money crunch most of the time, this seems like a great motivation to end up with a larger investment, and that just makes sense.
And on that note, the Gordon wishes you and your funds well, and for now... crypto Gordon Freeman... out.