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Good article and in principle correct, but I disagree with both the "rule of thumb" and general conclusions around risk.

At a first glance, it appears sound, but the flaw is that bitcoin is actually the *only* thing in the universe that is perfectly ELASTIC, whereas "fiat liabilities" always have optionality and inelasticity. In practice, you always have the choice to not spend bitcoin... how painful that is depends on circumstance, but to suggest fiat liabilities simply "liquidate" bitcoin as if it were automatic is disingenuous.

The variance across circumstance is rather large. Moreover, I would say the biggest mismatch is in the opposite direction most of the time. The real mismatch is the perceived circumstance one thinks one is in and how they imagine it might play out. People are overl fearful, yet will put zero weighting on the possibility of their fiat going poof overnight, say, due to being personally targeted. Low, but not zero risk.

The more compelling and robust version of this article focuses on the corporate balance sheet where the liabilities are more pressing and much shorter duration. Similarly, the elderly retiree. From the mismatch problem it can be pointed out that an index that actually tracks the liabilities directly would be superior to fiat. You want food? Ok, you are a fool to only hold dollars and zero CALM shares for food you want in 3 months for fear of volatility, especially if you want to eat eggs.

seha⚡️ 2y ago

Agree the variance around circumstances is large, but those that can responsibly get close to zero are the exception, not the norm. You’d have to be willing and able to make sudden and significant changes to your lifestyle, which itself would result in a sense of uncertainty.

Saving in bitcoin is meant to help deal with future uncertainty, but that alone won’t be the case until after bitcoinization takes place. Getting on zero during the transition can itself be a source of uncertainty and introduce the very problem we hope sound money helps us avoid in a bitcoinized world.

It doesn’t become prudent to move towards zero fiat until a significant portion of the world’s cash balances are in bitcoin and where it starts to factor into the unit of account for most goods and services in the world.

The path to get there is to be productive, thrifty, and prudent in asset-liability management while growing one’s cash balances in bitcoin. Over time, if bitcoin does what we think it will do, it should move bitcoiners to zero naturally. For instance, OG bitcoiners with large stacks are already effectively on zero even if they hold an epoch’s worth of modest fiat expenses.

seha⚡️ 2y ago 💬 3

Be your own bank, but avoid runs on your bank.

I discuss how #GetOnZero is a myth and situations where 6.15 BTC may be better for you than 8.15 BTC.

https://seha.cc/the-myth-of-getting-on-zero-fiat/

Replying to Change this if you want

Let’s go 🥩

seha⚡️ 2y ago

i don’t know about you but the marrow is the most exciting part of this

seha⚡️ 2y ago

Free fractional reserve banking has failed each time it was attempted, not necessarily because a truly free market doesn’t exist, but because the market has repeatedly rejected this product.

Thanks to Saifedean for the comments and reading recommendations.

https://seha.cc/i-like-bitcoin-buy-my-fractionally-reserved-bitcoin/