Thread by @LibertyMugs

Thread

A popular objection to #GetOnZero is the idea that you should keep a "small" (whatever that means) fiat balance to manage unexpected events so you don't have to dig into your #Bitcoin savings.

If you need to pay for something that exceeds your available fiat, you have

two main options: use credit or liquidate other assets into fiat. If you use credit, you have to pay interest on what you borrow. To liquidate, you might have to pay capital gains taxes and perhaps a fee to liquidate.

Everyone always thinks about those costs (for good reason).

If you have lines of credit and/or assets, while you might not have a large holding, if any, of fiat but you do have good access to fiat. You'll be able to service these larger, unexpected expenses as needed even if it does come with the previously identified costs.

But what people fail to take into account is the cost of holding fiat. Holding fiat in your checking account may give you "instant" access to it, but the cost associated with inflation is high.

Let's say you have a $10,000 emergency fund in fiat. What do you think a reasonable

rate of inflation is? Could it be as high as 30%? In order to maintain the purchasing power of that fund, you need to add 30% each year. That reduces available cash flow into Bitcoin or other useful purposes--and it happens regardless of whether an emergency ever occurs.

And the cost is against the entire value of the fund.

On the other hand, if you used a line of credit for the fund, you're only paying interest on the amount you use and only when you use it. Even if you use a credit card and carry a balance month to month, you're likely to have

a lower interest rate (20%?) than the rate of inflation that has a discrete length of time that it will be paid as opposed to paying for inflation in perpetuity.

If you need to liquidate an asset, #Bitcoin, then you're paying up to a few percentage on the exchange and taxes only

on the gains, not on the full amount. If you convert your emergency fund into Bitcoin and end up having to pay a large amount of taxes on it, that means your fund goes a lot longer. So even if you have to liquidate $10,000 with a big tax bill, you still have a fund!

If course, Bitcoin could drop in value when you need access to your emergency fund, so you might have to increase the size of your fund earlier on to manage that risk. Over time, you can adjust.

But the main point here is that you should understand that while credit and

liquidation have costs, holding fiat is not costless. In fact, holding fiat may be the costliest strategy!