Operation Saylor Episode - 1/120

Hi there, welcome to Operation Saylor series.

I have decided to take a loan to invest in Bitcoin. I will make a series of monthly updates here to track the evolution of this operation I have dubbed Saylor (in honor of Michael Saylor, whose bold bet on Bitcoin and willingness to promote it where strong inspirations for this adventure).

My goal with sharing this experience is to allow everyone to learn whatever can be learnt from my plan and execution. I draw inspiration from Jamespunk's great blog on his bitcoin DCA path, which was and is a great example of how a real life, first person narration can be very instructive. I hope this series can fulfill a similar role for this different investment approach.

As this is the first episode, I'll provide some context so that you understand better this and future updates.

The Operation

On July 2022, I took a loan with my usual bank. This is an uncollateralized personal loan with a fixed amortization schedule. The main figures:

Principal: 33,000€
120 installments in 120 months (10 years)
APR: 5.99%, APY: 6.16%
Each installment will be of 366.20€
Total interest paid will be 10,944.33€
Early amortization penalty of 1%
No opening costs

As this loan has no collateral, there is no margin call or liquidation of any sort. The loan is completely orthogonal to whatever the evolution of bitcoin's price is.

During the first six months, my plan is to swap 5.000€/month into bitcoin. I do this instead of simply lump-suming everyting today to softly minimize the risk of picking a terrible entrypoint.

After these six months, I will have a bitcoin stack of a certain amount and around 1.000€. From that point on, the plan is to:

Pay the installments each month.
Whenever the € stash goes very low, sell a bit of bitcoin back for € to pay for the next installment. Goal here is to keep as much value in bitcoin as possible and only go back to € tactically to cover the installments.
Repeat until 10 years have passed and the loan is paid backed.

As time passes, two scenarios can take place:

In the SHTF (shit hits the fan) scenario, the bitcoin stack of Operation Saylor goes dry before the 10 years have passed and I am left with 0 btc and some outstanding debt with the bank. I will be forced to keep paying the installments from my personal pocket and Operation Saylor will have turned into a net negative for me. This could happen both in case a black swan completely destroys bitcoin and its value, or simply because bitcoin's market value doesn't go up fast enough to make a net return.
In the Moon scenario, I manage to pay all the installments by taking small bites of my bitcoin stack and I still have some amount of btc left in the end. If this is the case, I will have successfully earned value with my bet, and I am left with a nice stack of some unknown value. This would happen in a scenario where bitcoin behaves the way it typically has for the past 10 years (or with a slightly watered-down behaviour in terms of both return and volatility, but still trending upwards) and I get lucky with the volatility in the early months and years.

My hope is that Moon scenario will happen, but I am very well aware that SHTF scenario is a serious possibility.

Are you crazy stupid? Never borrow money for investing

I am aware that there is a not negligible probability of losing several thousands of euros with this operation. But, after carefully judging, I think there is also a significant chance of getting a great upside. After playing with different simulations and hypothesis, I decided that the expected outcome looked net positive and decided to pull the trigger.

I am also taking a calculated risk. Given my personal finances and life circunstances, the SHTF scenario would be a nasty blow but not a death sentence. Even if I get hacked on day 1 and lose all the money, I still expect to have a plate on the table every day and a roof over my head.

Why make it a series

There are several motivations to doing this.

Explaning and documenting my plans helps me reflect on them deeply. It's a bit like a peer review, with the only difference I am reviewing my own plans.
As discussed before, I find personal, real life stories of bitcoiners and their actions fascinating. Macro environment analysis, papers, technical and economics books,... They are all great reads. But I think sometimes we also need simple stories from regular people like us, with all the crisp of the real life and down to earth practical issues and details. Bitcoin is, after all, a grassroots, bottom-up phenomenon. It is the small actions of you, me and everyone else which compose the emergent behaviour of the network.
I think that, on most forums and communities, there is a dogmatic rejection to any kind of idea related to borrowing money for investing. I am the first one to agree that, for most people, most of the time, it is a terrible idea that should be avoided. But it is also my belief that under the right circumstances, it is a valid strategy. And so I am slightly pissed off because this automatic, parrot-like "NeVEr BorRoW tO INvEsT" comments hijack any kind of honest, open-minded debate around this option. I hope that these series can counterbalance this and get people discussing in a calm and thoughtful manner the possibility of doing something similar to what I am doing. If the angry mobs hijack my posts anyway, at least I hope that whoever is curious about the outcomes of taking this seemingly crazy and bonkers course of action can ignore the deniers and simply read my story.

Why not simply DCA with a part of your salary isntead

I am. This operation happens on top of my already regular DCA schedule. So you could say I am doubling down.

As time passes, comparing Operation Saylor to having DCA-d the amount equal to the paid installments will be an interesting analysis.

So should I do this as well

The answer that most probably fits your circumstances is no.

But, depending on your personal finances, risk aversion, other investments and what kind of loans and conditions you have access to, there is a chance that borrowing to invest might be a suitable option for you.

I invite you to run your own analysis and put a lot of thinking into this decision. During the series, I will share my own train of thought and the numbers I ran before pulling the trigger.

If you reached this far, thanks for reading. I'll be happy to discuss further in the comment section. You can find below the numbers that I will be posting regularly. I will also post some thoughts/ideas/whatever relevant comes to mind on each episode. But for this month I will close here. I already stole enough of your time and attention.