The Way Forward - # 110
tl;dr - An open letter about my own experience with internal FUD and my outlook for the future.
Dear Reader,
I want to take a moment to express my gratitude for the many blessings that I’ve had in my life which have lead me to this point, for the events of the past week which has given me the time and opportunity to reflect and gain some perspective — and introspective — that I might not have come to other wise, and for the opportunity to write about my experiences and thoughts with you.
With each letter, I do my best to earn your time and attention by providing something of meaning and value which I hope you’re able to benefit and profit from.
Unlike my usual structured writings, I hope you’ll permit me to express myself a little more freely and candidly as I’m still working through some of the events from this week and what it means moving forward.
I’ll be the first to admit…
The FTX implosion and subsequent fallout, did shake me a little. After all, I am living entirely on Bitcoin right now and this does impact me directly to a certain degree.
Just to get some things out of the way:
I don’t “buy” Bitcoin directly, my company does, and I earn Bitcoin as my net wage. My earnings are sent directly to my hot and cold wallets, which are verified via my own nodes, that I manage my funds. You can read more about how I manage them here.
The only time I use an exchange is when I have to convert to fiat in order to pay an ACH bill.
With that said…
When I set out to live entirely on Bitcoin I understood the risks of potential bear markets and Black Swans. My thinking at the time is that earning Bitcoin would be effectively default dollar-cost-averaging where I would earn less Bitcoin in bull cycles and more Bitcoin in bears; so I would be OK either way.
Regarding Black Swans, what I understood was that they do happen but no one knows when or where they’ll strike.
In a nutshell, I tried to think of the worse case Shit Hit The Fan (SHTF) scenarios and diversified accordingly both asset and location wise giving me a 6 month to 1 year buffer. It’s a diverse “portfolio” of SHTF assets because when you’re in a liquidity crisis you sell what you can, not what you want.
You would think with this much thought and preparation you would feel a sense of security during the apocalyptic catastrophe that was FTX…
The Fear
I couldn’t help but thing of about the regulatory storm that’s on the way. What would regulation mean and what would it look like moving forward?
With Library losing its case to the SEC, the verdict still out on the XRP v SEC case, FTX blowing up and multiple exchanges crumbling in real time; the regulators have been salivating for years now to control the cryptocurrency space.
The regulators are at the gates and the FTXs of the world just opened up the door.
My thoughts go to the idea that regulators, politicians and unelected bureaucrats such as the WEF, IMF and more would seal the on and off ramps for people, setting up barriers to entry such as being an accredited investor, hedge fund or institution.
Maybe they would create a walled garden similar to platforms like Fidelity, Robinhood and the likes… you know… for the peasants. You could only buy and trade, but you wouldn’t be able to withdraw to your own wallet.
If that was the case, how would businesses who want to pay their employees and vendors gain access to Bitcoin if the regulatory framework constructed those entry levels so high it prevented them from even getting started?
Would they make Bitcoin in business transactions illegal?
The Uncertainty
Knowing that the purchasing power of my Bitcoin has dropped considerably, I would end up spending more Bitcoin than I would like.
Plans for trips and outings would need to be put on hold until the next pay day or until we’re in a bull market cycle.
I’ve learned over the year to take advantages of small fiat price appreciations by buying the necessary (and unnecessary) goods or doing something fun with the family as a way of “taking profits.”
Jokingly, I told a friend that the only thing that sucks about living on Bitcoin, is that when markets dump or crash, I don’t have any fiat to make any purchases and hope that the fiat price stays low until pay day. “Asset rich, fiat poor” is the phrase.
Even still, I questioned myself and this decision. I knew that going through the bear market, my net-worth would diminish with each drop and wondered if this would be sustainable enough to really retire on as the future was looking a little dim.
The Doubt
I had made the decision last year to start accepting Bitcoin as payment for the goods and services my business provided. Then I offered to pay my workers in Bitcoin if they wanted too. In fact, my business’s 3rd quarter report showed that 50% of my team were taking their pay in Bitcoin and that made me feel a sense of optimism even though we were in a bear market.
A goal I’d been contemplating was to find a way to get my entire company completely on a Bitcoin standard as the cost benefit analysis showed that it would make sense considering we’re a remote company with teammates all around the world.
We even started our first treasury plan for the business and when the price pumped a little, it gave us a sense of confirmation that our decision, as a business, was the right one. The fiat price crashed and it made me question myself…
We’d been talking with our local Chamber of Commerce, the Economic Development Council, other entrepreneurial associations and small businesses about accepting Bitcoin for over two years, and we took steps to lead by example that it is possible to use Bitcoin in day to day transactions, for wages and to buy business goods and services. We definitely put our money were our mouth was.
I couldn’t help but think that this collapse might have knee capped the businesses purchasing power, or that my decision has now put the company at risk.
At the end of the day, I’m responsible to my clients and workers in making sure that the business is in good standing and operating appropriately.
Did I make a mistake?
Ye of little faith
As the inferno of FTX raged pushing truth to the light; it dawned on me that what I was witnessing wasn’t collapse of an industry or of Bitcoin… It was the exposure of fiat.
In 2008, the fractional reserve banking system was exposed for what it was: a house of cards. Mortgage Back Securities (MBSs), Credit Default Swaps (CDSs) and Collateralized Debt Obligations (CDOs), packaged sold and repackaged and repackaged again, lead to the collapse of the housing market. The world discovered that all of these investment products were made of pure vapor-ware. My generation, or at last those of us who took the time to look and seek, witnessed the fraud that is fiat… something that the precious metals community had been screaming about since the 1970s.
Since that time, the fiat banking system, along with their cronies in government simply picked up the pieces, rearranged some words and out came the Dodd-Frank Act which then lead people to feel comfortable again to trust the banks.
Around that time, Bitcoin came onto the world stage in humble beginnings.
The fiat system, full of Wall St and Jane St suits saw an opportunity to get into the cryptocurrency space not as a means of making revolutionary change to our monetary system, but to further exploit the remaining vulnerabilities within the already fragile system. And the regulators and politicians helped them along the way for a fee.
2022’s implosion of 3 Arrows Capital, Voyager, Celsius, BlockFi, Terra Luna shown the light on charismatic cult-of-personality CEOs similar to Mt Gox and BitConnect. But when the light was cast upon FTX, it not only exposed the CEO, Sam Bankman-Fried but also all the ugliness that presided within his companies. The shit hit the fan, and in that explosion, anyone who was in the room with FTX was plastered in it.
FTX’s and Alameda’s scheme though wasn’t anything new. In fact, it was a similar page out of the CDO playbook which nearly brought the economy to the brink.
With the curtains pulled back, it was brought to people’s attention that FTX held zero Bitcoin on their balance sheet yet had an outstanding $1.4 billion in Bitcoin claims. This meant that for everyone who believed they had bought and purchased Bitcoin, who left it on the exchange for interest yield, hadn’t bought Bitcoin at all. Only a claim on Bitcoin. This shows the importance of taking self custody and verifying coins through your own node.
Doom scrolling through Twitter, listening to podcasts, reading Stacker News and other articles about this entire freak show; I was reminded by a small voice in my head… “This is why you opted out o’ ye of little faith.”
The entire idea of Bitcoin was and still is “A Peer-to-Peer Electronic Cash System1.”
There were a few reasons why I made the decision to unbank myself and live on Bitcoin.
The first reason was that I was having banking issues with both my business and my personal accounts. It was frustrating to deal with and there seemed to be problems every other week which was just not conducive to a productive life. The second reason was that during the 2019-2020 presidential election and cancel culture movement, I witnessed the businesses of friends — who were mildly liberal — say something out of party lines and soon found their business banking abilities closed or frozen.
Coming from the precious metals side, I knew about fractional reserve banking but after I finally finished reading Dodd-Frank2 — a nearly 850 page piece of legislation — it was clear to me that being in fiat, being in the fiat system, is an catastrophic liability with an insolvent FDIC bandaid coverage for insurance.
Then the straw that broke this camel’s back… Through a tax dispute, my personal account and all stock assets were frozen; I had bills to pay and loved ones to take care of.
When the State confiscates or freezes you ability to transact, the only feelings you experience are terror and powerlessness.
By the good graces above, I had Bitcoin.
Outside of how to store it, I had no idea how to use it. I learned quick. I learned how to pay bills without going to an exchange, how to barter a trade in order to obtain goods, and how to use Bitcoin on Lightning.
After a couple of months, the dispute was resolved, my bank account and assets were accessible again but all trust in the banking system, and the system at large, was completely and utterly destroyed.
If I had to give a single vote, my one and only vote I would be of no confidence.
I’d seen my parents go through something similar. They lost everything in the 2008 crisis and it took 10 years for them to get back to where they where. Along the way they faced bank seizures, frozen and locked accounts, as they tried to rebuild from the ashes.
When Covid hit, and banks pulled policy stunts to limit people’s withdrawals from their accounts… I felt for them. When the Canadian government froze the bank accounts of its own citizens for expressing themselves, my heart bled for them.
With FTX and all the other casinos that collapsed with it; I understand the why of many people who were impacted and felt sad. The actions of a few, destroying the lives of the many. We see this time and time and time again. Whether in the crypto world, the fiat world, or in politics. Same shit, different toilet.
Bitcoin itself is just a thing, a tool, but giving a person a sense of empowerment and control of their resources is incredibly invaluable.
Few understand this.
This is why I opted out if fiat and opted into Bitcoin.
Fiat is a nihilistic weapon.
Its creators and promoters value nothing. The gains they seek are nothing more than numbers on a screen with the illusion of riches and wealth. The interest and yield seeking groups don’t understand that yield comes at the expense of others and for the most part could careless.
The wolves in sheep’s clothing know that trust is baked into human DNA, and lure the trusting sheep into its jaws. They take advantage of the trust, make you feel warm and fuzzy with promises of plenty, then all they feel is the piercing bite of teeth upon them.
“Don’t trust, verify” is the motto.
“Self custody” is a call to action to take possession of your property.
“Not your keys, not your coin” is a war cry to establish your ownership of your property.
“Shitcoin” is a reminder to discern that which is true from that which is bullshit.
Nihilism already runs rampant across many societies. You can see it in the destruction of the family and unity among a people.
Faith that there is value to human life, that there is objective status for ethical ideals and truth is the counter to all of this. Bitcoin is one of many resources we have to repair and rebuild.
The way forward
Battling the internal FUD (fear, uncertainty and doubt) has required a lot of introspection and if anything, I feel as though I’ve been mentally and emotional refined by fire into a resolve of hardened steel.
I doubted myself and questioned whether I should continue or not, but after going through the motions with you, dear Reader, I feel even more compelled to keep going, to keep learning and to do my best to help educate others. Even though I am but a grain of sand on the beach of the space, I still believe that its important for all of us to help one another and to keep the movement going. A lot is at stake, and to give up now would be disappointing at best.
Presently, I’m working on other possible means to do more for the space. I don’t know what exactly, but it feels like a mission right now. I’ll figure it out eventually.
The crypto industry and exchanges at large will be regulated. The investors, hedge funds and institutions will come in and bring their fiat snake oil with them. Another FTX will rise and fall again.
But next time, I think we’ll start to see the emergence of a parallel economy divorcing itself completely from fiat.
More and more businesses and workers will demand payment in Bitcoin. Goods and services priced in Bitcoin. Savings will increase and maybe, just maybe we might for the first time in modern human history get to experience what a true sound money standard feels like.
For now, let the crypto forest fire burn.
Until next time.
https://bitcoin.org/bitcoin.pdf
https://www.cftc.gov/sites/default/files/idc/groups/public/@swaps/documents/file/hr4173_enrolledbill.pdf