🤦♂️ No, I Don't Mean Crypto
FIRE BTC Issue #8 - Why ONLY bitcoin is FIRE Friendly
It’s that time again when bitcoin’s patented Number Go Up (NGU) technology kicks into high gear and starts raising eyebrows.
We are now in price discovery mode, setting new all-time highs, with the price above $90,000 at the time of writing.
FIRE practitioners who have incorporated bitcoin into their plan, and at the very least have built their own SBR, are significantly closer to their goal than just a few months ago.
The texts are starting to roll in. This happens every time.
Bitcoin has historically followed a 4-year cycle of bull-bust-malaise. For about three of those years, bitcoiners look like idiots. Then we look like geniuses during the one year of massive price increases that ultimately ratchets the value of the network an order of magnitude permanently higher.
And every time bitcoin pumps, newcomers who haven’t done the work to understand the space get shiny-object syndrome, hoping to strike it rich with crypto.
📡 Bitcoin is the signal, crypto is noise
Common parlance in corporate media places bitcoin as a subset of “crypto”. As a result, people new to bitcoin tend to conflate the two.
I can’t tell you how many times I’ve received the question, “How’s it going in crypto?” To which I respond, “No idea. I don’t work in crypto, I work in bitcoin.”
It seems true on the surface because they share certain common characteristics:
They both use cryptography to some degree
They both use the concept of a blockchain (whether it’s needed or not)
They typically trade on the same exchanges
But that’s where the similarities end.
While crypto was inspired by bitcoin, what makes it completely different is the problem it purports to solve.
Bitcoin solves a real problem in the world, one that has existed for thousands of years, and one that has a massive impact on the entire global population. It fixes problems with money that stem from control of the monetary system by an elite few that grants them awesome powers of control.
Bitcoin removes the need for central banks and governments to manipulate the money supply and regulate access to the financial system. For centuries, powerful interests have used the monetary system to their own benefit at the expense of the many.
This control allows for excessive, ongoing wars around the globe, corruption in our food supplies (for example), and continuous, rapid increases in the cost of essential products and services.
The decentralized, permissionless nature of bitcoin prevents direct control of the network by any individual, corporation, bank, or government. New bitcoin can’t be printed to fund endless war. It solves the biggest problem the world faces: the continual debasement of the most important economic tool we have, money.
Crypto solves none of these problems. Instead, these projects are solutions to problems that either don’t exist, are trivial in nature, or inherently can’t be solved by “the blockchain”.
Decentralized Finance (DeFi) is neither decentralized nor finance.
Non-Fungible Tokens (NFTs) are impractical at scale and at best solve a trivial problem of pretending to transfer an infinitely copyable monkey jpeg.
Tokenizing real world assets (RWAs) like real estate makes absolutely zero sense because there is an inherent conflict in two different consensus mechanisms.
If these terms are new and make no sense to you, don’t worry. It’s not worth your time to figure it out, and it’s not worth my time to write in detail about them to explain.
There is one use case that has gained some adoption and solves a problem for some people: stablecoins. A stablecoin is a crypto token pegged to the US dollar that runs on one or more of these networks.
Since the dollar is currently the primary global settlement medium, it is widely demanded and accepted across the world. There are many places where it is difficult to access dollars, and stablecoins give those local populations a synthetic dollar-based tool. Holding dollars is preferable to the people of Argentina and Lebanon than holding Argentinian pesos or Lebanese pounds, which are debased much more rapidly than dollars.
However, stablecoins have a centralized chokepoint and are subject to the same issues as regular dollars. For the purposes of achieving FIRE, they are irrelevant, because we already know holding dollars is a guaranteed way to get poorer.
🤑 Ok, but what if I strike it rich?
When bitcoin is in its bull market phase, like it’s beginning right now, there will inevitably be crypto tokens that pump wildly on bitcoin’s coattails.
You’ll hear stories of a punk kid who turned $500 into $5 million buying a trendy dog coin. If you’re new to bitcoin, it can be easy to feel the FOMO and be tempted to give it a shot for yourself.
After all, if you get lucky, you’ll hit that financial independence number real quick, right?
Here’s why this won’t happen for you:
There are tens of thousands of these coins out there. You’ll need to find the one that will pump.
You’ll need to have good timing when you buy. Most of them have a massive pump, then fall to zero and never recover.
You’ll need to have good timing when you sell. This is very difficult emotionally when it seems you have hit it big. You’ll get greedy.
The markets for these coins are extremely thin with low liquidity. Any large sellers will crash the price.
Issue 3 of FIRE BTC, The Power of Compounding, began with this:
Chasing FIRE is a low time preference game.
We’re not looking for a windfall of wealth to come from a single investment or business opportunity. Sure, that’s a proven way to generate riches if you can pull it off, but it comes with a much higher risk level and offers no guarantees of success.
Sure, we all like to gamble, but that’s not at all what FIRE is about. Instead, the FIRE method employs a methodical way to build wealth over time, keeping risk to a minimum.
💭 A final thought…
Crypto exists on a spectrum, from misguided and infeasible on one end, to outright scam on the other. And it skews toward outright scam.
Don’t get distracted by new shiny objects. Stick to what works.
If you’ve adopted bitcoin as a savings vehicle for your FIRE journey, you are already on an accelerated path towards financial independence.
As the saying goes, “Stay humble, stack sats.”
That’s it for this week. Thanks for reading!
💡 Enjoyed this content? Share FIRE BTC with someone who’d love to learn about financial independence and bitcoin!
Until next week,
Trey ✌️
P.S. I recently had the pleasure of being a guest on the Bitcoin for Millennials podcast with Bram Kanstein. We focused primarily on why bitcoin fits well within a FIRE framework. You can watch the full episode here. Enjoy, and let me know what you think!