This essay is a description of a risky, but potentially very successful plan to build FInancial Freedom by saving bitcoin, but borrowing and spending fiat. It is not financial advice, instead it is an honest record of my journey with my successes and failures. So do your own research to see if this will work or fail you.
The.. Bad ...Value Leaking Bucket
For many years people all over the world have saved their money or fiat currency in savings accounts, and borrow against assets like real estate to manage cash flow. But this practice ignores the fact that all the fiat currencies in the world suffer devaluation from inflation. This means the purchasing power of the fiat currency people save consistently decreases. So in a way saving for your future by saving fiat currency like US Dollars is like putting your hard earned savings into a leaking bucket; no matter how much you pour in, it never fills up to reach the amount of savings that can afford financial security because the wholes in the bucket represent a yearly loss of purchasing power that ribs your savings of it's value over time.
The.. Good... Value Catching Bucket
Bitcoin however acts as the bucket catching all the value leaking from your fiat currency bucket, and it grows in value slowly but steadily over time, and it does this so welll, that it has become the best performing asset in the world over the last 12 years. Strike, the leading Bitcoin-native payments application, serves as the gatekeeper to this new paradigm. Through Strike Lending and the Strike Line of Credit, users can adopt the "Bitcoin Savings" lifestyle—harnessing the power of aggressive Bitcoin accumulation to drive long-term wealth while borrowing against it to provide fiat currency to have cash to pay their bills.
The Conceptual Shift: Superior vs. Inferior Money
To understand the utility of borrowing against Bitcoin, one must distinguish between the types of money being used:
- Inferior Money (Dollars): Fiat currency is inflationary. Its supply can be increased arbitrarily by central banks. Consequently, holding dollars for long periods results in a loss of purchasing power.
- Superior Money (Bitcoin): Bitcoin is deflationary by design. Its supply is mathematically fixed. Historically, it has appreciated against all major fiat currencies over time due to its scarcity and increasing adoption.
The Core Philosophy: Never sell the superior asset (Bitcoin). Instead, use the appreciating value of Bitcoin as collateral to borrow the inferior asset (Dollars) for daily expenditures.
Mechanics of the Strategy: The Strike Practical Application
If you plan to buy twice the Bitcoin you need for monthly bills, borrow against half of the Bitcoin to cover expenses, and repay the loan with future income, you are applying this strategy in practice. Here is how that works using Strike Lending and the Strike Line of Credit.
1. Strike Lending: Structured Loans
Strike Lending allows eligible users to secure a traditional, structured loan by pledging their Bitcoin as collateral.
- How it Works: You deposit Bitcoin into a secure, non-rehypothecated account managed by Strike. Strike lends you dollars based on a predetermined Loan-to-Value (LTV) ratio (e.g., borrowing $10,000 against $20,000 worth of Bitcoin, a 50% LTV).
- Repayment: These loans have fixed terms (typically 12 months). You can choose to pay interest monthly or make a lump sum payment at maturity.
- Early Repayment: You can repay the principal early to stop daily interest accrual, but you must formally close the loan to retrieve all collateral before the 12-month term ends.
2. Strike Line of Credit: Flexible Liquidity
The Strike Line of Credit offers greater flexibility for ongoing cash flow needs.
- How it Works: Similar to a home equity line of credit (HELOC), you pledge Bitcoin as collateral, but have access to a pool of funds that you can draw upon at any time.
- Flexibility: You only pay interest on the amount you actually draw from the line of credit, not the total limit available.
| Component | Action | Purpose |
|---|---|---|
| Savings | Buy $X worth of Bitcoin using fiat income. | Accumulate the superior, appreciating asset. |
| Collateral | Deposit $X worth of BTC into Strike Lending. | Lock the asset to secure liquidity without selling. |
| Borrowing | Borrow $X/2 in USD (50% LTV). | Obtain the necessary cash to pay bills. |
| Spending | Spend USD on bills/business expenses. | Utilize the inflationary currency for immediate needs. |
| Repayment | Repay the loan + interest using future income. | Free up the collateral to add back to your stack. |
Strike Line of Credit for the Win
- I think the line of credit is best because with the loan you paay a years worth of interest, at the end and that could be pricey, but with the line of credit you pay only for what you use and you you pay it back each month, so interest althouh still payable, is negigible. I have one issue to content with now, the 60 day period for return of collateral. I need to borrow monthly, and payback monthly, so if Strike holds my capitol for 60 days, that ends my ability to borrow enough to pay all my bills. So I am working with this issue.
The Financial Loop: Compounding Efficiency and Safety
This strategy is highly efficient for both personal and business expenses. Because borrowing against an asset is generally not a taxable event, you access liquidity without triggering capital gains taxes.
When you combine aggressive savings (buying more BTC than you spend) with price appreciation, the strategy becomes significantly safer over time through a naturally decreasing LTV.
Why This Strategy Becomes Safer Over Time
As your Bitcoin holdings grow, the dollar value of your collateral increases faster than the dollar amount you are borrowing for your bills.
- Lower Volatility Risk: As LTV drops (e.g., from 50% down to 5%), the price of Bitcoin would have to drop drastically to trigger a margin call.
- Increased Borrowing Power: With a lower LTV, you have the option to borrow more in the future against the same amount of Bitcoin if you need to expand your business or cover a large unexpected expense.
Example Scenario
Assuming consistent accumulation and price appreciation.
| Stage | BTC Held | Price | Total Value | Loan Amount | LTV |
|---|---|---|---|---|---|
| Month 1 | 0.04 BTC | $50,000 | $2,000 | $1,000 | 50% |
| Month 6 | 0.24 BTC | $60,000 | $14,400 | $1,000 | 6.9% |
| Month 12 | 0.48 BTC | $80,000 | $38,400 | $1,000 | 2.6% |
Vital Risk Management
This strategy relies heavily on maintaining a safe Loan-to-Value (LTV) ratio.
- Volatility: Bitcoin’s price fluctuates. If the price drops significantly, the value of the collateral drops, increasing your LTV ratio.
- Margin Calls: If your LTV ratio exceeds Strike’s threshold (e.g., 70-80%), Strike will issue a margin call, requiring you to deposit more Bitcoin or repay part of the loan immediately.
- Liquidation: If you cannot meet a margin call, Strike will automatically sell a portion of your Bitcoin collateral to bring the LTV back into a safe range. This is a taxable event and reduces your total Bitcoin holdings.
Bitcoin Appreciation covers the cost of borrowing by
Conclusion
Strike Lending and the Strike Line of Credit are financial tools that empower Bitcoin holders to operate within the traditional economy without sacrificing their long-term position in the appreciating asset. By borrowing inferior dollars against superior Bitcoin, users can maintain their purchasing power while utilizing the flexible liquidity required for modern life, provided they maintain a conservative LTV ratio (targeting below 50%) and ensure reliable cash flow.
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