Should we all go zero fiat? I’ve seen this idea gain prominence on Bitcoin Twitter recently, discussed by people like LaserHodl and Heavily Armed Clown. Personally, I’m open to the idea, and I believe that we all will eventually #GetOnZero. But not just yet. As much as I’d love to live in the hyperbitcoinized world today, we’re not there yet. Put in simple terms, I still have fiat-denominated obligations with individuals or businesses that do not directly accept bitcoin. So, while I generally minimize my fiat exposure, there are valid criticisms and concerns about literally going to zero fiat today. And what about using the fiat system’s debt for your own benefit before it collapses? So, as I write this in December 2021, I don’t believe “the juice is worth the squeeze” for many bitcoiners sitting on something around 99%, to go all the way to 100% bitcoin and zero fiat. STEELMANNING #GETONZERO Let’s try and present the charitable version, or “steelman,” of the case. The main point of #GetOnZero is to maximize bitcoin exposure, and obviously minimize fiat exposure. The #GetOnZero gang have a good point in that by continuing to hold fiat, you have not “truly left” the fiat system and you’re in some sense supporting the fiat system. In economic terms, we could argue that if you still hold fiat, you’re still contributing to fiat liquidity by chipping in to the reservation demand for fiat. One worthwhile insight from the #GetOnZero gang is that, while there are capital gains taxes headaches associated with selling your sats, at least the reporting can be mostly automated. For example, your exchange or bitcoin broker service should provide you with a transaction export CSV list, and then you could take that to a tax accountant or automated software solution to automatically calculate taxes payable at year end. I believe this is a point that few had really considered up until recently. Still, there are many bitcoiners sitting in a solid green position, and if they had to liquidate some for an emergency fiat obligation, they would now have to pay capital gains taxes that they otherwise would not have had to. What’s the rejoinder from the #GetOnZero stance? Well, you might still come out ahead even after taxes because of the additional bitcoin exposure. So, let’s say you are a diligent saver and planner and you’ve stacked a six-month emergency fund. Instead of maintaining say, a six-month fiat emergency fund, you, the #GetOnZero adherent, would rather not bother and simply HODL bitcoin. As bitcoin is going up very quickly (155% per year on a 10-year basis as of December 18, 2021, or let’s say around 60% to 70% per year going forward for the medium term), it’s clear why you want to maximize bitcoin exposure. So, let’s say you had $10,000 in fiat stashed in an account, well you’d now be exposing that emergency fund to the 70% return per year. So, in the years that you didn’t need to draw on this emergency fund, you might well have $7,000 extra on a $10,000 emergency fund. Pretty nice, right? SO, WHERE DO I PRINCIPALLY DISAGREE? When your obligations are fiat denominated (and the person you owe does not take bitcoin payment), you will generally need to sell some bitcoin. In these cases particularly, you are bringing a whole new world of tax and reporting into your life that previously did not exist relative to paying with fiat. In other cases you might be conflicting with other objectives of using the fiat system. Let’s summarize some situations where you might be: Cushioning yourself against an extended bear market or job loss Using the fiat system for loans to stack more sats Interested in staying more under the radar by legally not incurring capital gains tax events Unable to access the services that help you stay zero fiat LONG BEAR MARKETS COULD LEAVE YOU REKT I say this because the 2014, ’15, ’16 bear market was brutal. Bitcoin went from around $1,200 in late 2013 down to around $200 or so. It wasn’t even clear that bitcoin would recover in those days. At this time, if you were zero fiat and lost your job or income, you would have been spending down bitcoin at the worst time. This is the time that a fiat emergency fund of say, three to six months of living expenses would be most helpful. While the scenario might be more on the bearish side, I’d generally prefer to keep more resilience in my overall life and not be so reliant on selling or spending down sats at the worst possible time. Consider also that you might have large upcoming fiat obligations. Would you be willing and able to sell bitcoin to meet them if you lost your job? What if the scenario is that the Federal Reserve or other central banks try (even temporarily) to raise interest rates, and the market tanks, and there are mass layoffs? Losing your job at these times would be even worse if you didn’t have a fiat emergency fund. Now, the #GetOnZero rejoinder here might be: save up enough sats such that you have enough to ride this out. But how much is actually enough? While you might think, “sure I’ve saved up two-years’ worth of sats to live on should things go bad,” what happens when bitcoin tanks 80%? If your fiat purchasing power drops to one-fifth of what it was, does that mean you now need to have 10-years’ worth of salary saved in bitcoin? How comfortable would you be trying to ride out two years without a job, spending down a significant portion of your stack? Now, in fairness, the six-month emergency fund might not tide you over for two years, but I’d view this as part of the overall mitigation approach: cut expenses down and spend fiat rather than spending bitcoin while looking for a new job or income. While the 2018, ’19 bear cycle wasn’t