The Bitcoin Newsletter #8 - How to be successful in Bitcoin
A summary of the Bitcoin Conference 2023.
Welcome to the 8th edition of The Bitcoin Newsletter
Bitcoin eliminates the need to go into debt as it is sound money that can be saved and allows you to become productive by accumulating bitcoin. This restores the natural order of the market that was destroyed by the fiat system. Nowadays there is no incentive to save as fiat money keeps depreciating due to monetary inflation.
Economic success today largely means taking on more debt and building value in inefficient corporate structures in order to then "exploit" them. Not primarily profitability, productivity or increases in efficiency. There seems to be a common misconception about what growth is. In this issue of the newsletter, I will talk about the importance of “leaving our fiat mindset behind” and the significance of bitcoin accumulation for economic success and a positive impact on society.
Best regards,
Leon
DEEP DIVE
How to be successful in Bitcoin
On August 15, 1971, US President Richard Nixon announced that the United States would end the convertibility of the US dollar into gold. Since then, central banks around the world have started operating a fiat-based monetary system with floating exchange rates and no currency standard at all. The monetary inflation rates have been rising steadily ever since. This is because states worldwide are effectively bankrupt. In order to "stay afloat," states continuously borrow money to fund their operations. The money borrowed is newly issued by central banks and did not previously exist. Due to the artificial increase in the money supply, everyone's savings are devalued.
The supply of money matters. What happens if there are 1,000 units of money in the economy (you have 100 of those units) and the government increases the money supply by 1,000 units? Your 100 units are now worth half as much as before the doubling of supply. As the supply of money increases, individual monetary units lose purchasing power.
Over the past 50 years, the depreciation of money has been so significant that entrepreneurial ventures in the fiat economy typically require borrowing to meet capital requirements. The value of the US dollar has been eroded by over 90% due to monetary inflation during this time period. Consequently, in an economy based on fiat currency, being productive and holding onto money does not yield rewards, as the purchasing power of fiat money diminishes over time. It fails to serve as a reliable store of value and hinders the creation of a capital foundation from which we can finance businesses and foster innovation. This prolonged reality has left the majority without a clear understanding of how to prosper within a financial system rooted in sound money principles*.
*Sound money is money that is not prone to sudden appreciation or depreciation in purchasing power over the long term, aided by self-correcting mechanisms inherent in a free-market system such as Bitcoin.
We do not need credit to become productive with sound money. By accumulating bitcoin, we can create a capital base from which we can become productive. As Bitcoiners, we are very fortunate that we can work independently of the inflationary fiat system. It is imperative that we recognise this privilege. We don't need to go into excessive debt and make ourselves largely dependent on others.
The rationale of every successful Bitcoin company and every Bitcoiner I've encountered has been long-term accumulation of bitcoin. This allows us to be most productive and create the greatest value for society, our company and ourselves, because, for example, we can continue to offer services on the market, use services, fund innovation and pay our employees when we run a business.
To illustrate this, I would like to ask you a question: Which of the following companies do you think has been more successful and added more value to society over the last 10 years?
Company A, founded in 2013 with 10,000 bitcoin on its balance sheet, borrowed too much, hired too many employees during the bull market, had to spend its bitcoins to cover costs during the bear market, and ended up with an unpayable amount of debt that finally resulted in bankruptcy as bitcoin fell from 69,000 to 16,000 in 2021.
Company B, founded in 2013 with 10,000 bitcoin on its balance sheet. Still owns 8,000 bitcoin, has grown slowly, mainly financed by own income, manageable debt and employees were hired in the bear market. Excess profits generated in the bull market were used in the bear market to accumulate more bitcoin.
The answer is clear: Company B, which has not only made a more positive contribution to society as employees are still being paid and the company continues to provide services to the market but it has also not wasted money from debtors.
Over the years I have established four principles for executing a successful bitcoin business strategy:
Slow but steady growth.
Always have enough liquidity to be able to accumulate bitcoin at a discount in the bear market and thus secure a capital base in the long term.
Sell as little bitcoin as possible.
Don’t over leverage.
However, it makes logical sense to borrow responsibly during a bear market in order to amass bitcoin. This strategy carries minimal risk as long as bitcoin appreciates at a faster rate than fiat interest rates and you possess sufficient cash flow to cover the interest. In fact, it presents an opportunity rather than a risk. We can take advantage of borrowing inflationary fiat currencies to purchase bitcoin.
Over time, one can even consider borrowing fiat against their existing bitcoin holdings. It is advisable to do this during a bear market to minimise the chances of a margin call and maintain a low loan-to-value (LTV) ratio (1-15%). Currently, the interest rates for borrowing fiat against bitcoin are relatively high. However, as more service providers recognize the potential, competition will drive down the interest rates.
With bitcoin, a disinflationary currency that increases in value over time due to its superior monetary characteristics and the resulting growing demand, we can ride the wave of a deflationary money and gradually expand our business without unnecessary debt or the complexities of fiat-based business structures. In my opinion, this independence is one of the greatest advantages that Bitcoin offers.
Accumulating bitcoin should be the core of any Bitcoin strategy and will ultimately determine the long-term success of a company or investor. Bitcoin serves as the unit of account for all Bitcoin entrepreneurs.
WORTH TO KNOW
Bitcoin Conference Miami 2023
I recently attended the Bitcoin Conference in Miami, Florida, which took place from 18 to 20 of May. The conference provided a great opportunity to connect with fellow Bitcoin enthusiasts from around the globe.
One standout experience this year was the PubKey bus, organized by our friends from PubKey, a newly opened bar near New York University in Lower Manhattan. The bus was parked inside the conference venue, serving as a recording studio for various Bitcoin-related content.
Regarding the debate on ordinals and Bitcoin as an incorruptible database, I believe it offers a multitude of possibilities. For instance, it allows for the recording of historical events in an unalterable manner, ensuring the preservation of truth amidst a world of deceit. However, I prefer not to delve further into discussions driven by personal ego or politicians seeking to exploit Bitcoin for their own gain. Instead, I believe our focus should always remain on Bitcoin as the separation of state and money.
What truly fascinates me is the Nostr protocol, which enables censorship-resistant information exchange. When combined with Bitcoin, it empowers market participants to collaborate outside the control of any central authority, leading to the emergence of a free market not seen in a century. During the conference, Michael Saylor shared insightful thoughts on Bitcoin's relationship with energy, thermodynamics, our priorities, and our way of life. Jeff Booth, author and Co-founder of Ego Death Capital, participated in a captivating panel on investing in Bitcoin companies. Saifedean Ammous shared his personal journey from the fiat academic world to becoming a best-selling self-published author, emphasising how Bitcoin can revolutionise the education system. Dhruv Bansal and Tuur Demeester explored the intersection of Bitcoin and Artificial Intelligence. Below, you can find a list of my personal highlights from the conference.
IDEAS OF INTEREST
Highlights from The Bitcoin Conference 2023
Nostr vs Everything WATCH
Michael Saylor: Thermodynamic Savings WATCH
Investing in Bitcoin Businesses WATCH
Principles of Economics WATCH
Will AI Dream of Electric Bitcoin? WATCH
If you want to support me. Feel free. You can send me some satoshi/bitcoin.
My lightning address is: law@getalby.com
My bitcoin address is: bc1qyc9q89wjzmvaw729tj3wsrsfhft53mjycrjxdk
Nostr PubKey
npub1v5k43t905yz6lpr4crlgq2d99e7ahsehk27eex9mz7s3rhzvmesqum8rd9
Resources
The Senate Passes the Federal Reserve Act
US Dollar Devaluation Since 1913
What is Sound Money
How Bitcoin uses energy
Photo Credit: MemeingBitcoin
Disclaimer: the content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Make sure you do your own research before making any investment and be aware of your own risk tolerance. If you like to build on my thoughts, feel free, but please cite me as the source. 2023 - Leon A. Wankum.