You Should Be Your Own Bank

Most folks would be surprised to learn that their bank doesn’t actually have their money. We live in a time of “fractional reserve banking,” in which banks are required to retain none or very little of the actual cash that is deposited with them.

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A typical bank, of course, keeps enough cash handy for daily withdrawals, but if every customer demanded the entirety of their deposits at once, the short answer would be “no.” This is what makes a modern banking crisis so perilous - the banks simply can’t cough up all that they’ve been given.

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As we saw with Silicon Valley Bank and others in recent years, bank runs lead to bank failures. Or at least to government bailouts or quasi-bailouts describes by the authorities as “definitely not a bailout.” FDIC insurance will cover you up to $250,000, but many Baby Boomers, in particular, are sitting on much larger piles of assets, leaving them exposed.

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Simply put, relying on banks brings with it significant counterparty risk, the risk that another party (the bank, government, whoever) might not come through in a pinch. Or, the bank just might opt to not give you your money regardless “just because,” as someone in the UK found out recently.

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But with fiat money (government money, such as dollars, euro, or yen), using banks is the only option because fiat money loses value over time. You need to earn yield or returns somewhere just to break even or, hopefully, outpace inflation. You can’t store dollars under your mattress without losing enormous amounts of purchasing power.

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Bitcoin fixes this.

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Not only is Bitcoin making life cheaper for those who hold it, but it also offers the promise of evading a broken financial system: you can be your own bank.

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With Bitcoin, you can take full self-custody of your money by simply remembering or securing 12 or 24 words. How that works in practice is beyond the point made here, but it’s the reality.

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You can stay at home or travel to the ends of the earth with complete access to your Bitcoin with no counterparty risk. No banks to be bailed out, no claims to file with the FDIC about cash that was lost.

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This is a real and critical departure from normal for most, but it is also essential to the promise of Bitcoin: permissionless, self-custodied, secure, immutable money wherever you are in time and space.

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For those who neglect to understand why this is important, the lesson will come by economic force eventually.

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In the meantime, the best option is to digest as much about Bitcoin as possible and, as conviction grows, allocate to it and secure it properly and self-sovereignly.

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If you need help doing this the right way, The Bitcoin Way is always available to chat.