Bitcoin HODL’ing vs. Spending

Bitcoin University

Bitcoin University is an educational channel devoted to Bitcoin, financial freedom, and self-sovereignty. Matthew also covers relevant macro and financial news.

Bitcoin HODL’ing vs. Bitcoin spending

This is a follow-up to the previous video, which I called “Bitcoin’s HODL Culture” discussing Bitcoin’s culture of HODL’ing, holding for the long term, and how important it is for building strong individuals and families and for creating the necessary preconditions for a Bitcoin circular economy to develop. 

Bitcoin’s HODL culture is unique. 

By contrast, crypto is all about gambling, musical chairs, and the hopeless quest to find the next fastest horse.

So these were some takeaways:

• Don’t trade in and out of Bitcoin because most returns come from a small 36-hour window every year that you don’t want to miss.

• If you’re trading in and out, it’s quite likely you will miss this alpha period where all the returns come. Also, don’t take profits on your Bitcoin.

Taking profits is a funny phrase in itself. It’s not as tax-efficient as HODL’ing. 

Obviously, it’s also really dumb when you think about it because taking profits really means converting your savings from a very strong, scarce, censorship-resistant currency, which is Bitcoin, to a very weak currency, fiat money, which is a melting ice cube.

People say:

• “Hey, look, I just made $10,000 in profits by selling my Bitcoin. Now I’m going to take that cash and put it in a bank that may or may not let me withdraw it when I really need it and where its purchasing power will be totally eaten up by inflation.” 

This just doesn’t make any sense. You’re much better off just HODL’ing Bitcoin for the long term.

Also, don’t take your fiat and store this cash under a mattress, either. You’ll have full access to it, but its purchasing power will also be destroyed by inflation, and that’s not a smart thing. So in general, you shouldn’t be moving your money from “Bank of Satoshi” to “Bank of America.”

Instead, you should be moving your money from “Bank of America” to “Bank of Satoshi” if you understand what’s coming. As they say, only leave as much in fiat as you’re willing to lose.

There are a couple of follow-up questions:

• “I completely agree with you, but I remember in one of your videos you said that if you bought super early, in other words, if you invested in Bitcoin super early on, then it’s definitely normal to take some profits. I find this contradicting.”

And then this question from d.batta8952:

• “What do you think about the motto 'spend and replace'?”

I think these are great questions, and I think you should have at least two separate Bitcoin buckets.

You should have your deep cold storage Bitcoin, where you hold your private keys on a hardware wallet like a Coldcard or a Blockstream Jade, either using single-sig or multi-sig, which I talk about in my more advanced classes.

This is the bucket that I’m referring to when I say that I’m never selling my Bitcoin, and it’s where I have most of my net worth. This cold storage Bitcoin is your long-term savings account that you should try to HODL as long as possible to create intergenerational wealth. 

Bitcoiners are interested in intergenerational wealth because they have very low time preference thinking, which Bitcoin teaches you.

When I say that you should never sell your Bitcoin, you have to understand the context of why I’m saying that. I’m saying that here on YouTube, and I’m speaking against a culture of trading, flipping, short-term time horizons, degenerate trading, and high-time preference thinking. 

I’m certainly not saying that you shouldn’t spend some of your Bitcoin on a sick child or a sick parent, or some other medical emergency, or on something that will really make your life better.

After all, Bitcoin is freedom money, and your Bitcoin is your Bitcoin and your money to do with as you see fit. But all I’m arguing on this channel is that I just think it’s dumb to sell it for something superficial like a Lambo when Bitcoin is only at $55,000 per coin on its way to multi-millions of dollars per coin.

But if you love Lambos, have at it. Again, Bitcoin is your money, after all, and you can do with it as you wish. But if you have the patience, Bitcoin will probably be worth more than 10x in a few years, so keep that in mind.

That buys a lot more Lambos if that’s what you’re into.

There’s this huge opportunity cost; obviously, that comes with spending Bitcoin today rather than waiting a few more years or even a few more decades if you can. 

So, you should have these two separate Bitcoin buckets.

1. The deep cold storage bucket.

2. The second bucket should be a spending wallet, like a hot wallet on your phone, a hot wallet like Strike, Aqua, or Mutiny. 

Then, you try to spend Bitcoin from your spending wallets as often as possible to help increase Bitcoin adoption. You spend because you’re spending already. You have bills, you need to buy goods and services, and you need to pay people and corporations.

So going forward, whenever you need to pay someone, maybe a handyman or a babysitter or a friend, you need to pay back for dinner, offer to pay them 110% of the amount that you owe them if they accept it in Bitcoin.

Then, show them how to download the Aqua wallet, the Mutiny wallet, or the Strike wallet on their phone. This hot wallet should be treated as a spend-and-replace wallet.

So, I do like the phrase “spend and replace.” 

You can buy $10, $50, and $100 worth of Bitcoin for this wallet. Spend it, try to find Bitcoin merchants who accept it, or create your own Bitcoin merchants by orange-pilling people.

Then buy another $100 worth of Bitcoin for this wallet when it’s almost run out of sats. I want to thank Matt Odell and Marty Bent. 

The phrase “spend and replace,” and I think it’s the perfect complement to Odell’s most famous maxim, which is “stay humble and stack sats.”

So, spend and replace describes your hot wallet, your one bucket of Bitcoin, and then stay humble, and stack sats really describe your deep cold storage. If you’re looking for places to spend your Bitcoin, you can do it at BTCmap.org, which I will link to in the description notes below.

A final note for those less experienced Bitcoin users who are not familiar with the intricacies of chain analysis and the footprint that you leave when you do transactions on-chain with Bitcoin…

If you do it in a naive manner, if you’re not familiar with CoinJoin and the differences between non-KYC Bitcoin and how traceable they are versus KYC Bitcoin, you should probably never send Bitcoin directly from cold storage to your spending hot wallet.

Likewise, vice versa, you should probably never send Bitcoin directly from your spending hot wallets to cold storage. It’s much better to keep these two buckets separate, your cold storage sats and your hot wallet sats. 

When you run out of sats in your hot wallet, just use some fiat, U.S. dollars, pounds, or euros to buy Bitcoin whenever you need to top up that hot wallet.

I would say the Strike app is especially great for fiat on-chain Bitcoin and Lightning Bitcoin, learning to use all three of them in a mobile wallet. The Strike app is custodial, thus not private or self-sovereign, but I think it’s still a good tool to use when you’re just getting started learning how to spend and replace your Bitcoin. It’s available both for iOS and Android.

So, if you haven’t yet, keep your sats in cold storage, but also try to create a hot wallet and start spending your Bitcoin. This will help spread Bitcoin adoption in a circular economy.

Bitcoin University is an educational channel devoted to Bitcoin, financial freedom, and self-sovereignty. Matthew also covers relevant macro and financial news. 

Learn more at: https://www.bitcoinuniversity.com/  
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