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There Will Never Be More Than 21 Million Bitcoin
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Tag: Stacking Sats
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The Habits Of Highly Effective HODLers
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Is It Time For Bitcoiners To Get On ‘Zero Fiat’? Not Yet
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Think You’re Late To Bitcoin? Think Again
Upon one’s first encounter with Bitcoin, a mixture of feelings, actions, and thoughts usually take place. They might feel empowered to have money they can fully control or satisfied for having secured a piece of the limited amount of bitcoin that will ever exist. But they can also feel both, and often a wide variety of other feelings find a new home in the now-Bitcoiner. However, every person who buys bitcoin feels like they are late — that one bitcoin is now too expensive and number go up (NgU) will not work in the future.
The “I Missed The Bus” Bias
As a Bitcoiner looks back, they realize how much one bitcoin has already increased in value compared to the dollar or other fiat currencies. The first recorded transaction of bitcoin for U.S. dollars happened in 2009 through New Liberty Standard, a primitive bitcoin exchange created by a BitcoinTalk online forum user that went by the same name. In that transaction, 5050 BTC were purchased in exchange for $5.02 paid through PayPal, putting the first recorded bitcoin price at $0.00099.
By 2010, bitcoin was more widely traded, and 1 BTC cost around $0.07. It was also in that year that bitcoin was first exchanged for everyday goods. BitcoinTalk member Laszlo offered: “I’ll pay 10,000 bitcoins for a couple of pizzas… like 2 large ones so I have some left over for the next day.” After the transaction, the Bitcoin Pizza Day was established and is widely celebrated to this day. But perhaps one of the most iconic BitcoinTalk posts in 2010 was from a user, ichi, who said they felt like they were late to the party then and didn’t have enough bitcoin.
That’s right — ichi thought they were already late and that 600 bitcoin was not a lot. But in dollar terms, that wasn’t a big stack indeed; 600 BTC would cost you less than $50. However, in the last 11 years, the bitcoin price has increased by over 700,000% to the current $50,000 level. So now, that 600 bitcoin stack is undoubtedly a huge stack. Moreover, it might seem absurd to think that such an asset might keep appreciating in the future, and similarly plausible to believe that if you’ve purchased BTC in 2021, yes, you are late.
But you might be looking at it from the wrong angle. To consider the appreciation bitcoin has had since that forum post is essential but more important is to realize that ichi genuinely felt like bitcoin was already valued too much, causing them to feel like they had missed the bus. Yet, in hindsight, we see that ichi had actually not missed the bus and that their “small” bitcoin stack became a huge one about a decade later. So by thinking you’re late now, you might end up walking through ichi’s steps.
Mind Your Perspective
Something that can be counter-intuitive for newcomers but can help a lot in the process is thinking about bitcoin in bitcoin terms. We might now look back and judge that ichi might’ve been naive to believe that 600 bitcoin were not enough back in 2010, but you see, we do that because that 600 bitcoin has increased in dollar terms. They haven’t increased in bitcoin terms. In bitcoin terms, which solely accounts for the fixed total supply of 21 million BTC, 600 bitcoin were, and will always be, the same amount. The mindset is everything divided by 21 million.
Although it is expected that bitcoin continues to be adopted more widely as time progresses and more people realize its distinctive characteristics and superiority as a store of value and medium of exchange, it can’t be known for sure. So, in 2010, when much fewer people knew about and used bitcoin, 600 BTC were easier to get, compared to 2021 when 1 BTC costs nearly $50k and it seems most of the world already runs a node, CoinJoins regularly, and pay for their haircut with sats through the Lightning Network. But that is not the case; we need to step back and evaluate adoption.
We Are Still Early
In Bitcoiner circles, we can often forget how most of Earth’s inhabitants are still clueless when it comes to Bitcoin. And you don’t need fancy statistics to realize that; note how mainstream media regularly says that Bitcoin has no use as money, citing the already-too-old arguments of volatility and scalability. Bitcoiners already know volatility will take care of itself as adoption grows, and the Lightning Network is already solving scalability; however, the rest of the world does not.
Along those lines, a recent Gallup survey found that only 6% of U.S. investors — defined as adults with $10,000 or more invested in stocks, bonds, or mutual funds — own bitcoin. That is less than 10 percent of an already restricted sample universe — those in one of the world’s most developed economies that also have a considerable amount of money invested. However, adoption can be more significant in other countries. In Singapore, for instance, 40% of citizens said they own bitcoin, and awareness there is vast.
But, stepping back, we notice how Bitcoin is only a little over a decade old. It is nascent money, still finding its way in a complex world with different cultures, backgrounds, and needs. So, Bitcoiners, who have put in work to understand the network, economic incentives, game theory, societal and political implications, and the technical side of the protocol and its nuances, think Bitcoin is already wholly known by the entire world. However, that is not the case.
Most people, companies, and countries will adopt bitcoin as the result of an adoption domino effect. And, naturally, it takes time for new entrants to fully grasp what Bitcoin is, how it can improve humanity, and the things it can—and cannot—fix. But as more people fall down the Bitcoin rabbit hole, society will come to understand the benefits of holding onto the best form of money ever created.
Think In Bitcoin Terms And Stack Sats
The bottom line is, beware of the “I missed the bus” bias, switch your financial perspective to price everything in bitcoin or satoshis, and enjoy that global adoption is still really low to stack cheap sats. We might not be as early as in 2010, but we are certainly not late. There are over 7 billion people on Earth, out of which over 50 million are millionaires, but there will only ever be 21 million bitcoin. As more companies put bitcoin in their balance sheets, more billionaires notice the uniqueness of bitcoin, and more education is spread on Bitcoin, the more adoption will grow and the less bitcoin there will be for those interested.
Do you remember when the internet wasn’t widely used at home, and mainstream economists saw little value in it, only to suddenly everyone, and every place have internet connectivity, leading us to where we are today? Bitcoin is not yet widely used, and mainstream economists see no value in it, but it is being adopted faster than the internet. So perhaps thinking about that next time you feel like you’ve “missed the bus” might help.
Bitcoin IRAs Enable Tax-Shielded Investment And Propel The Circular Economy
In May 2021, I had just finished a pretty intense 12 months of helping take OC Bitcoin Network from a monthly meetup to a weekly meetup. In addition to the meetup work, over that same 12 months I independently consulted with over two dozen small businesses on how they could begin to implement Bitcoin payments and personally installed BTCPay Server at four brick-and-mortar restaurants as well as multiple e-commerce businesses.
All of 2020 felt like a real grassroots war to me. It made me open my eyes to the fact that the circular economy is at hand. It made me realize that Bitcoin isn’t a thing that’s happening in the future. Bitcoin is a thing that’s happening right now.
When the opportunity to come work at Choice App, a bitcoin-based individual retirement account (IRA) service, presented itself, I was obviously excited because I like talking about all kinds of Bitcoin products and my wife was thrilled too for us to get back to dual-income stacking after she had led the charge for a full year. But, I have to be honest, there was a small voice in my head telling me that I was selling out and going corporate, which caused me to think about a lot of things. It caused me to think a lot about what our path is to making bitcoin circulate as the currency in our lifetime and it caused me to open up the tactics that I had been focusing on.
Bitcoin fixes retirement accounts. This is obviously positive, but on its face can also be met with resistance and questions such as “why do I need an IRA if I have bitcoin?”
I asked myself that same question. The concepts of IRAs and retirement accounts in general feels like a vestige of the old world. To young people or old people who watched 2008 happen and who read the Bitcoin genesis block, the words do not leave a good taste.
The whole concept of a retirement account doesn’t make any sense when fiat is the base layer. This realization made me stop contributing to one a long time ago in favor of stacking bitcoin instead.
And I know from talking to lots of other Bitcoiners that some had gone this route as well, while others had taken the time to set up self-directed IRA accounts and were beginning to blur the two worlds. I didn’t hate that idea but I was just having a hard time wrapping my head around where that type of account fits into my bitcoin stacking plan.
Bitcoin Retirement Accounts, Capital Gains Taxes And Tying Both Worlds Together
To this day, talking about onboarding businesses to BTCPay Server and about using bitcoin as money is still a hard thing to work on. It’s work that you do for the love of the game and not for the paycheck. It’s work that you do for your kids and grandkids, who will hopefully live in a world where the Bitcoin circular economy has won and has become the standard.
Even with the advancement of Strike and the clever tool it has built, the “what about cap gains?” replies still come fast and furious on Twitter anytime the topic of circular economy is discussed.
The persistent capital gains tax problem and the IRS’s treatment of bitcoin as property instead of currency is a major hurdle between us and the Bitcoin standard.
The more I thought about the capital gains tax’s chilling factor on the circular economy, it made me start to see an overlap between what I had been doing with bitcoin payments consulting and my new role talking about Choice App.
Starting to see the overlap, I started to reinterview the Bitcoiners I knew who had been stacking bitcoin in their Roth IRAs and asking them more about it.
Certain self-directed IRAs come with what is called “checkbook control.” This means that you have a bank account and you have a checkbook and that outside of two to three prohibited transactions, you can literally invest the money in whatever you want and hold that investment and trade in and out of that investment, tax free.
Take this idea and now apply it to an IRA in which you set up an LLC or trust and then with that LLC or trust you purchase bitcoin and hold your own keys and have control over bitcoin in your own wallet. You now have bitcoin wallet control and, outside of those same two to three prohibited transactions, you’re now tax-shielded to use that bitcoin as money to make investments.
This is how the worlds collide. This is how you can begin to use bitcoin as your base currency now, in the present. and continue shifting yourself toward a personal Bitcoin standard.
Why Mining Bitcoin In An IRA Is Doubly Interesting
Among many, one of the things that’s most interesting to me about Bitcoin mining is that the revenue is denominated in sats. There are not many ways to get paid in sats available yet, but mining is one of them, and we know that getting paid in a currency is the number one way to start thinking in that currency.
When all of the mining infrastructure and hosting is wrapped in a tax-advantaged account, you can use bitcoin as the base currency on the income side as well as the expenses side with no penalties. The simple mindset shift on this will be enough to make this a good move for a lot of people. Seeing this type of budgeting in action will make your brain progress toward a personal Bitcoin standard.
Roth IRAs As Your Third Bitcoin Stack
Having bitcoin in a Roth IRA creates a guarantee that those sats can circulate as unencumbered currency in our lifetime. We have no idea what the future holds, but the landscape of Bitcoin apps and services is getting better every single day.
Imagine where BTCPay Server will be when a lot of us turn 59-and-a-half years old. Imagine, no matter what the political landscape throws at us, having a third stack to be able to use in the circular economy. (I have bitcoin from regular exchanges like Coinbase and Cash App as the way I started stacking bitcoin; and then I also stack bitcoin by earning it, mining it at home and from Bisq and ATMs; my Roth IRA stack is my third.)
My Roth IRA stack doesn’t replace anything that I’ve been doing, but it perfectly compliments it and it perfectly compliments the other ways that the Bitcoin standard is being pushed forward by showing that Bitcoin is taking ground in retirement accounts while also achieving circular economy goals.
There is a long, winding road filled with what I would consider “semi-advanced Bitcoin game theory” to get there, but I can honestly say I’ve never been more excited for the state of the Bitcoin circular economy. I can see clearly different stacks of bitcoin for different things and I can feel my budget and my family’s budget beginning to get denominated in sats.
This is a guest post by Brian Harrington. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Garnish Your Own Wages
Unless you buy bitcoin with your paycheck first, you can always find another purpose for your excess income. I’ve been an advocate of “paying myself first” my entire life, I started investing in my early 20s using auto asset building via no-load mutual funds, and in my 40s, I continue to do the same, although I have altered my asset allocation to predominantly bitcoin.
Routine dollar-cost averaging (DCA) makes HODLing for the long term easier to accomplish for me. Rather than focusing on the value of what I have (which I’m not going to spend as long as I have fiat cash flow), I focus on adding to my satoshi stack. Time is your greatest asset and if you’ve been routinely stacking for the last few years, you have a receipt and equity in your future.
Bitcoin’s scarcity is its most valuable property. The monetary policy and decentralized enforcement of it by the holders and full node operators is key. No longer do we need to trust individuals, instead, we can rely on human action and incentives to do what’s best for Bitcoin and ourselves.
There are many ways to stack bitcoin; there is no right or wrong way and time and price appreciation will make anyone who does so look like a genius. The point is, just keep adding to your stack; at present, one can acquire 10,000 satoshis for $5, an amazingly large amount for such little fiat. In addition, one can begin an auto-DCA which will continuously add to one’s stack.
If you’ve committed to HODLing, you evidently understand bitcoin’s long-term value proposition, and you should also be stacking no matter how much you already have.
Bitcoin is limited in supply and demand is almost infinite as long as fiat currencies continue to cannibalize themselves via excess production to satisfy the debt-laden economy.
I recently read “When Money Dies” by Adam Ferguson about the hyperinflation that took place in Weimar Germany post-WW1. The parallels with what we are living through today are astonishing. The German people were absolutely powerless; their life’s savings, the storage of all their lifelong hard work, was destroyed by their leaders. The same is happening now; it’s tough for most people to identify, but if you’re paying attention, it’s happening. Fortunately, unlike the Germans of the early 1900s, we have “Fuck You” money, a money that can’t be debased and or altered. Don’t let a day go by that you earned a cent and didn’t stack a sat to show for it.
Garnish your wages, pay yourself first. Listen to me now and believe me later.
Your pal, FF2K.
This is a guest post by FF2K. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine
Stacking Sats: How Small Weekly Investments Can Offer Decent Returns
Sats, short for Satoshi, are the smallest subunit of a bitcoin, which is divisible up to eight decimal places. “Stacking Sats” has become a common term in the Bitcoin community for building your holdings by purchasing small amounts of bitcoin at a time.
Investing in bitcoin may seem daunting at times. Not only are there constant price fluctuations, but with a single bitcoin exceeding $55,000, it may seem as if you’ll never be able to build a decent-sized investment. To illustrate the power of “Stacking Sats,” I created the following infographic:
Image via Bitcoin Magazine
The idea is fairly simple, purchase small amounts, when you can, and slowly accumulate a decent position. Had you purchased just $5 worth of bitcoin a year ago, on March 29, 2020, when bitcoin was trading at $6,245, and continued purchasing $5 worth of bitcoin every Monday for the next year, your holdings would be 0.02030253 BTC, worth roughly $1,184, having only investing $260 over the course of a year.
Of course, over the past few months, there has been a bull run in the bitcoin market, with bitcoin reaching new all-time highs as more institutional investors have started to embrace bitcoin, and the rapid increase in value has prompted more people to consider bitcoin as an investment. This has affected the price and returns displayed in the image above.
Investing in bitcoin is a long-term endeavor and short-term price movements should not deter you from pursuing an investment, no matter how small. Many have predicted that a single bitcoin could someday be worth well over $1 million, which in turn would make a single Satoshi worth $0.01 and having stacked as many as possible worth it.
So, you don’t need hundreds or even thousands of dollars to start investing in bitcoin. By simply starting with a few bucks here and there when you have some to spare, you can start investing in bitcoin and build a decent-sized holding over time.
This is a guest post by Dion Guillaume. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.