Rinse, Lather, Repeat.
Hello.
So I have been living off my stack for some time. I am not a trader. I also live a VERY simple and minimal life. So it is not expensive. At the current burn rate I could live well beyond my expected expiration date.
That said there are better ways to do this, and since I have bought myself the time to look into them I am formulating ideas. Thought I would share them here.
Though I would warn you.. as some of you already know these are the musings of a madman, and a fool. Not advice. In fact I welcome help understanding where I could be going wrong.
First of all my objectives are simple:
1. Retain the mass of my wealth as BTC.
2. Pay for my living expenses.
3. Keep those expenses as low as I can.
4. Reduce risk. (but try not to eliminate gains)
5. "Diversify" along the way into direct benefits to my life, that also are good value stores like real estate. But see #1. Not as investment. But as quality of life enhancements.
6. Take the low hanging fruit. Trips... Dates with my wife. Fine foods. An orange corvette or maybe even a Mclaren. OK not really those last two. But lets leave those there as ways I would spend frivolously from time to time for my own pleasure.
7. Give something to my kids once I am gone.
I am not very interested in gambling, or trading to the next strata of standard of living. Though I do plan to buy my brother in law into the WSOP since he is indirectly responsible for me being able to in the first place. I am fine to just live here on out.
So... why not sell just a little at a time?
None of what you describe are outside of reasonable boundaries, yet I wonder if you are able to apply my sustainable withrawal formula to whatever your stash might be in order to only withdraw within the formula?
So, for example, if you were to have at least
14.8446 BTC, then you could start withdrawing $80k per year or perhaps $6,666 per month, and you could do that perpetually with a 7% raise each year.
Of course, if you were to have more, then you have more of a cushion and/or your withdrawal rate could be higher, whether your bitcoin are your complete income or if they happen to be supplementing any other income streams that you might have.
Once you know your withdrawal rate, then you work out the various spending that you choose to do to make sure that you are not spending beyond your budget..
Well there are several obvious reasons. But the most obvious is there are simply better ways that will let me achieve the above list better... particularly #1.
So here is one possible VERY simple plan.
A. Take out a loan against my held value.
This is a huge topic in itself. the OBVIOUS reasons for it are the same as why high net worth folks always do this. I mitigate against taxes, and smooth out the variance of the bull/bear nature of BTC. While hopefully preserving my stack. There are not very many options available now (Strike Ledn etc) and most of them have ridonkulous interest rates. But as nations begin to recognize BITCOIN as a real asset, other ways to borrow at lower rates may be possible.
I am not completely against the idea of loans, yet I think that any loans would supplement some variation of my sustainable withdrawal ideas... so Maybe if you were to have 20 BTC, then maybe you could plug the 14.446 BTC into the sustainable withdrawal plan and then you plug the other 5.15-ish BTC into whatever loan terms that you would enter into. Nothing wrong with potentially having a diversification of ways that you might receive income, whether on your bitcoin or any other income sources that you might have.. some of them might be more passive than others... yet even with my own management of various cashflows, I still think that I spend a couple of hours a week, so maybe 8-10-ish hours a month managing cashflows..
B. Buy Put options against Bitcoin.
Beyond my experiences.
C. Repay loans as needed during bull markets as possible.
Sure, you can have price based and time based withdrawal practices.
Lather, Rinse, Repeat. --- and keep the stack healthy and perhaps even GROWING.
Many of us likely already know that the dollar value of the bitcoin will likely continue to grow, even if we withdraw from our bitcoin on a regular basis, as long we are withdrawing at a rate that is lower than the rate that the bitcoin is growing in its dollar value.
The trick is setting this up as as well as possible... but lets consider the mechanics.
First... we avoid tax. This is a huge boon since the rake to the gvmt is HUGE. It is like giving myself 15%+ head start. And the less I sell the more the value I hold can work for me through the mechanism of NGU we all love.
If we are not sure about how long we might need to withdraw, the sure, we likely want to be able to continue to withdraw at the same rate and/or increase for the cost of living increases without overly depleting our stash... . at the same time, if we are getting closer towards knowing our days are numbered, then we might be o.k. to deplete our stash... but yeah, no one really wants to outlive their stash and then end up in some kind of a poverty situation, in the event that they still need more money.
Well why bet against BTC with put options? This is using the financial instrument of options in the way it was intended. Options were designed to help farmers avoid being bankrupted when there was an extremely dry year. Or during other times where crops were not as bountiful. The farmer is setting aside an amount of future profits in a bet that pays him when times are tough... thus calming variance and keeping him afloat.
I might be overly concern that something like a put is not necessary, yet again, I don't understand it well enough to know if it might be helpful.
I personally think that if a person is withdrawing from the sustainable withdrawal, and take my earlier example of 14.8446 BTC, and if the person has 20 BTC, then he can just fuck around with the extra 5.15 BTC in order to splurge in various ways, but the 14.8446 is supporting him no matter what... and sure, maybe there could be some need to have some extra money so that if the BTC price drops very low, then there would not be any need to withdraw from the stash during those low price periods.
Depending on our needs we can reach a place in which capital PRESERVATION becomes VERY attractive. As in I have only so many more years to live, but I would like to live them doing my list up there.
So... I am creating the following scenarios. Based on the situation in which I have a loan to live off of, and put options as insurance.
1. Bitcoin does another big cycle bear (likely 30-50% this time... but who knows?) while I have my loan. The Put options PAY ME. And I can continue paying off my debt while waiting for the next bull AND living my life. In the end lost less... perhaps even none.
2. Bitcoin continues to go up... we break, or soften the 4 year cycle and we see it at $250k next year. Well my options were a waste. And the money I spend buying them is simply gone. But I am now 2x richer than I was before, and can EASILY pay off my loan. My options losses are barely a regret.
I can see how the put can offer you an ability to be covered either way, yet lowering your upside...
Personally, I have no problem selling enough to cover any bear markets that might come, including that largely if we already had enough to live off of our BTC since $5k-ish, then if the price is $100k then it is still 20x more than the amount needed to live on.
Of course, I understand that each of us might have had reached our fuck you status at differing prices, so then the surplus that we have to work with is likely less, yet I get nervous about loans and puts, since we can also live with the stash that we have as long as our stash is greater than our minimal needs, and the higher our surplus then we already have plenty of options.
I have a hard time imagining that you don't already have more than 5x the amount that you need, so then your trying to hedge with loans and/or puts may well end up overly complicating your already good situation in which you already have a decent amount of surplus that can be used to buttress whatever system you put in place that could merely involve various forms of price-based and/or time-based sustainable withdrawal practices.
3. Bitcoin crawls along sideways and my options come due, I lose the money, but my stack is basically what it was before... I have the money I need to live, AND I can continue to pay off my loan. This is potentially a worst case scenario. But it is WAY WAY better than having a loan I can only pay by selling my bitcoin after a crash.
Then just repeat the process till I am dead, and leave the well oiled machine to my family.
The details are, as usual, the hard part. How do I architect it? How much x? How long y? (loans, expenses, corvettes, and options) How to manage this? And what combination of the details is the most optimal?
Anyway. Here's the thing. Most of us were not born into this machine. And we may not realize that the best path forward is quite a bit more complex than simply "live off the stack". And even if we could??? Why not take as much into the grave as we can? I mean... I owe you guys that much.
Sorry for a very long post.
I suppose the punchline is to figure out how to play with as many of the financial instruments that are comfortable to our situation, and maybe any set of financial instruments can start to feel straight-forward and simple to the extent that we are using them all of the time, yet I doubt that we can necessarily pass down our systems to any heirs or that heirs would necessarily respect our systems, unless they were locked into having to follow it by some kind of a trust that is not going to get broken after our passing.
