What it means to get your paycheck in Bitcoin

Receiving your salary in Bitcoin is the most hardcore way to invest in it (though this is probably true for anything). While many people invest in Bitcoin for the long term or short term, storing them on paper for years or considering only the next few days, I do both. Long term means you hope that in several years your savings will be valuable, while short term means that you hope to make a gain before timely exiting your position. However if you believe in both as I do, there is no reason to not keep both savings and current account in Bitcoin. With Bitcoin savings on paper as well, I also believe I am the first person in Israel to receive their entire paycheck in Bitcoin, starting in December 2013.

Receiving your salary in Bitcoin doesn’t only show confidence and commitment to Bitcoin, it is also having your entire wealth exposed to Bitcoin’s volatility. This is tricky though since my salary is not denominated in Bitcoin, rather paid in Bitcoin. With exchange rate historical weighted averages, my salary is basically tracking the exchange rate throughout the paycheck period. So if you make 30 units in your local currency per month, you would receive roughly the equivalent of 1 unit’s worth of bitcoin per day according to the weighted average of that day (or 1/24 worth of bitcoin per hour). This means that you’re constantly buying Bitcoin. Every single second, your salary is accumulating according to the current exchange rate (when the rate is low I comfort myself by remembering that I am buying bitcoins at that very moment). Another way of looking at this situation is by imagining me getting paid by the minute, and exchanging that pay immediately to bitcoin. What this doesn’t mean, is that if the exchange rate reaches $1,000,000 per bitcoin, I will not be making the same amount of bitcoins and receive a monthly salary of millions. Plus, thanks to frictionless money, I’m working independently and my counter party has a very flexible contract.

Exchange rate YTD June 2014

To remind you, December 2013 was quite the turning point in the Bitcoin Exchange Rate Roller Coaster Ride™. Starting mid-December, I pretty much started receiving my bitcoin salary in one of the longer declines for the bitcoin exchange rate. This means that I was consistently exchanging my local currency to bitcoin while the rate was dropping. To remind you, this isn’t only my savings, this is my current account – which includes money for food and bills! Recently I received my first paycheck that was worth more than the amount denominated in the local currency for my paycheck, thanks to the recent up trends in exchange rate.

I think the most interesting conclusion I have from this is how did my habits change. The answer? Almost not at all, apart from being very disinterested in the USD/BTC exchange rate (instead being more interested in the ILS/BTC exchange rate). I think this is mostly thanks to my aversion to use debt as a means of accounting, making me keep an excess of bitcoin. Not only because debt will always cost you, but bitcoin seems to benefit you if you hodl.

Learning about proper savings is something most people don’t get an opportunity to do, thanks to inflation and the war on cash. People simply can’t save without having to hand over all of your money to an trusted third party (and still losing value consistently). With bitcoin, not only do you not need to deposit it, you simply need to not spend it. And the reason this is so easy with bitcoin is because it’s deflationary. Going into this experiment I knew it was risky, but I also knew it was a sure way to be able to save money, something I haven’t really been able to do properly until now.

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