Written By
Jessy Gilger
It is impossible to understand bitcoin without experiencing it. If you’re curious, the best way to learn is to jump in, and this is often the first stage in just about anyone’s personal adoption track. There’s no minimum amount of money needed to buy bitcoin.
You might want to start with an amount that would make you happy if you found it walking down the street, but sad if you lost it. For me, $20 worked just fine. The main point is to get off zero and get your feet wet. The absolute worst that can happen is you lose all of this small amount.
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After learning about bitcoin, many people next start to consider bitcoin as insurance or a “hedge” on the existing financial system. Someone in this stage might think that if the dollar-denominated system were to go belly up, bitcoin could be the top contender to replace it.
People who invest 1% to 5% of their net worth in bitcoin likely are in the Insurance stage of personal adoption. With a 1% allocation, if bitcoin goes to zero, you’ve only lost a penny on the dollar. This would not be catastrophic to your financial future. However, if it grows 100x in purchasing power, you’ve protected everything else in the portfolio.
In this stage, you might come to understand that bitcoin is not just insurance. Bitcoin helps people protect their purchasing power from inflation. Here, you might see that bitcoin is money and, therefore, a savings technology for your medium- to long-term goals.
The key to saving in bitcoin is to have a good handle on what your “free cash flows” are: your income, minus your expected expenses, equals your free cash flow. When the income and expenses are appropriately planned, savers can then dollar-cost average all or a portion of their free cash flows into bitcoin.
Bitcoin allocators tend to take a more active approach to investing in bitcoin. They internally think of bitcoin as a percentage of the overall picture and typically make decisions to buy or sell based on their investment strategy. This may involve lump-sum purchases or rebalancing their portfolio to maintain their desired allocation of bitcoin.
It’s important to note that the approach you take to investing in bitcoin, or any asset for that matter, is a personal decision that depends on your financial goals, risk tolerance, education, and investment horizon. These questions should be directed at a financial advisor.
The effects of bitcoin are best represented over the largest possible stretches of time. Bitcoiners in this stage focus on building and growing their wealth over the long term. However, sticking with a long-term outlook takes discipline, commitment, and a willingness to weather market fluctuations.
Investing in bitcoin with a long-term time horizon carries a certain level of risk. There is no guarantee that the asset will perform as expected over the coming decades. But, if bitcoin does what many bitcoiners in this stage of adoption hope and expect, it could drastically impact an individual’s life and net worth over the long term.
Bitcoiners in this stage are true believers in the transformative power of bitcoin. They see it as more than just a financial asset, but as a way to improve the world and bring about positive change. They are passionate about the potential of bitcoin to expand human freedom and create multigenerational wealth.
Despite the challenges and setbacks that may come their way, these bitcoiners remain committed to their vision. They are hardened by bear markets and are not deterred by short-term setbacks. They are in it for the long haul, with a focus on creating lasting wealth and a better future for themselves and those around them.
This article is provided for educational purposes only, and cannot be relied upon as tax or investment advice. Unchained makes no representations regarding the tax consequences or investment suitability of any structure described herein, and all such questions should be directed to a tax or financial advisor of your choice.