nominal value fallacy
a friend called me last year, and told me about what he called the loan that pays itself
the idea goes like this: you put bitcoin as collateral, borrow against it at 1.2x leverage, and use the loan. maybe you buy something you want, a car, a trip, whatever, and with the rest you buy more bitcoin - matching the value of the thing with the new btc. a 2x appreciation of bitcoin over time should cover the cost of the thing you bought (plus interest), and you keep your btc
you never sell, you never trigger a taxable event. the loan pays itself because the collateral outgrows the debt
i sat with it for a while, and thought: the math can work. if bitcoin keeps appreciating and you keep your leverage low and your collateral healthy, you're essentially borrowing against the future value of something that historically goes up. furthermore, believing on it, i would keep no matter what. i didn't know at the time this is called leverage
the idea filled my mind with thought. i started projecting positions over time, made spreadsheets and comparisons, came up with new ideas
as i am more in an accumulation phase, buying a car or a house was not a possibility... however, increasing my holdings would be an interesting move. i thought: what if instead a traditional DCA, i buy in advance using my current holdings as collateral. if the price drops below what i initially bought at, i add more collateral. otherwise, i pay back the loan at a discount. i was already buying more by default. this was a no-brainer
but then i realized both strategies depend entirely on timing. if you enter at the wrong moment, you need enough risk tolerance and enough spare capital to ride it out. and not everyone has that
the broken ruler
something about the whole thing still bothered me beyond the risk. it was the framing. he talked about it as keeping value. i thought of it as increasing value. as if without the loan, without the leverage, our bitcoin would somehow lose value. as if holding wasn't enough
that's when i started thinking about what i now call the nominal value fallacy
the nominal value fallacy is the belief that a number represents wealth. that your net worth, measured in dollars, tells you something true. that if the number goes up you got richer and if it goes down you got poorer
it doesn't work like that. the dollar is losing value constantly. your salary and savings account goes up 3-5% but prices go up 8%. your number got bigger so you think you're fine. that's the fallacy: you feel like you're standing still when actually you're walking backwards. the number is not wealth. that number is a broken lying definition of value
most people live this reality without noticing it. they measure everything in dollars. their house, their savings, their time. a bigger number means more life. but the unit of measurement itself is shrinking, so the ruler you're using to measure your wealth is getting shorter every year while you keep reading the same marks on it
1 bitcoin = 1 bitcoin
i am sure you heard this before: "bitcoiners" who say "1 bitcoin = 1 bitcoin" are pointing at exactly this, even if it sounds like a meme
stop measuring your wealth with a broken ruler. the unit is the unit. one bitcoin today is one bitcoin in ten years. what changes is not the bitcoin, it's everything around it
this is impossible to imagine in a FIAT world. we are used to inflationary currencies. my money can't buy more thing tomorrow than today, i need a bigger number just to keep up
but what if there was an alternative. deflationary or disinflationary currencies are designed to change this. bitcoin is just the better example available today
1 bitcoin = 1 bitcoin is not a tautology. it's a rejection of the nominal value fallacy. it's saying: i refuse to measure my wealth with your broken ruler. the moment you stop converting bitcoin back to dollars in your head, the fallacy loses its power over you
the loan revisited
so when my friend told me about the loan that pays itself, i understood the mechanics but i questioned the premise. if bitcoin is already the anchor, you are already standing on solid ground by holding. the loan doesn't add stability, it adds risk. yes, 1.2x is conservative. yes, you avoid selling and taxes. but you're still borrowing through a centralized intermediary to do a leveraged position on an asset that was invented to remove the need for intermediaries. there's something circular about that
the real asymmetry is quieter and less clever. bitcoin is scarce. your time is scarce. as you get older your energy to generate wealth through work decreases. you have to become smarter, and then at some point even smart isn't enough. but if the foundations you built on get stronger while you get less productive, the lines cross somewhere and you're ok. that's not a strategy. that's just patience and scarcity doing what they do when you build on the right ground
the loan that pays itself is a good idea dressed up in a layer of complexity that might not be necessary. if the thesis is right, and bitcoin is the anchor, then the simplest version of the thesis is also the best: hold, don't sell, let time work. the nominal value fallacy is what makes people feel like they need to do more, trade more, leverage more, because the number isn't moving fast enough. but the number was never the point
