Why Everyone Should Own At Least A Little Bitcoin
Over the long term, Bitcoin is a proven investment
Don’t Understand Bitcoin?
That’s Okay, You Should Still Buy Even A Small Amount, Regularly
Why? There are two key reasons:
1. Because it can be a valuable hedge against the depreciation (loss of value) that the U.S. dollar and other fiat currencies experience over time.
2. Because, over any period of three years or more, Bitcoin tends to outperform almost any other possible investment.
The U.S. Dollar Is A Very Bad Investment
Over the weekend, I saw a tweet “I’m not buying Bitcoin — I’m selling fiat”.
“Fiat” refers to national currencies, such as the U.S. dollar, that can be increased by fiat, by decree, and which are not backed by any hard assets, such as the gold that backed the U.S. dollar, historically.
It makes sense to think of it that way because unless you know you’re earning interest or returns on the number of dollars in question that’s greater than the depreciation in its value over the time you have those dollars, you’re losing money on those dollars every year.
And when it comes to Bitcoin, as long as you hold that Bitcoin for at least three years or so, you’re making more, and usually a lot more, than if you had held those dollars, or put them into any other standard investment vehicle.
Bitcoin first became available for purchase on October 5th, 2009. So what if you had $100 to invest at that time, and had put it into a single, extremely successful stock, such as AMZN (Amazon)?
You’d have made $1,866.84 profit on your $100 investment, with an annual return of 36.13%. Not bad at all, right?
What if you had put that same $100 into Bitcoin, which was trading at 1,309.03 BTC to the U.S. dollar on October 5, 2009? Per that price, $100 would have purchased 130,903 BTC (Bitcoin) at that time.
And today, that 130,903 BTC would be worth $1,039,664,351.75. You’d have made $1,039,664,251.75 profit on your original $100 investment, with an annual return of roughly 405%.
Now, granted, that’s an extreme example, and not many people knew of Bitcoin, or where to buy it, in 2009 — but it’s also a very real one.
And what if you had just kept that crisp $100 bill, acquired in 2009, in a dresser drawer, until today? It would have lost19.1% of its value. It takes $119.12 in 2019 to buy what $100 would have purchased just ten years ago, in 2009.
What if we took a more likely three-year time frame, per the general recommendation to hold Bitcoin for at least three years? How about the most recent three year period?
If you purchased Bitcoin, exactly three years ago, today, which is June 10, 2019, back on June 10, 2016, when Bitcoin was trading for $577, you’d have been able to buy 0.173 BTC for $100. That $100 would now be worth $1,375, per Bitcoin’s current trading price of $7,950.
Or, stated even more simply: if you had purchased 1 BTC for $577, three years ago today, it would be worth $7,950, today.
Caveat — Yes, Bitcoin Is Volatile
But what about in 2017, when Bitcoin briefly spiked to $20,000?
That happened for a small part of one day, on December 17, 2017. If someone bought Bitcoin on, or near that day, they’re not in a profit position, currently. That’s why a minimum three year hold period is recommended when buying Bitcoin: to date, that approach has ensured a significant profit.
And that was also the effect of a speculative bubble, based on the many media reports of about how blockchain and Bitcoin were booming. And just as happened with tech stocks in the late 1990s (the “dot com” boom and bust, aka the “dot com bubble”), the solid stocks (example: AMZN) recovered from the bust, and are worth more now than they were worth at the height of that bubble, by a significant amount.
However, an important note: this is why the title of this article is “Why Everyone Should Own At Least A Little Bitcoin” and not “Why Everyone Should Own A Lot of Bitcoin”.
In relatively small, young, volatile markets, it makes sense to put in just a little bit of money at a time, hopefully regularly, and never more than you can afford to lose. With this approach to Bitcoin, specifically, there’s a very little downside and a significant amount of possible upside.
Bitcoin Isn’t Expensive Or Hard To Buy
Bitcoin might seem expensive at $7,950 or so per Bitcoin (“Or so” because the price of Bitcoin fluctuates on an ongoing basis, just as stock prices do) until you understand that Bitcoin is divisible to eight decimal places and that you can buy any amount of BTC with any amount of USD.
Here’s a breakdown from the popular Coinbase exchange that will give you an idea as to the types of fees you can expect when purchasing relatively small amounts of Bitcoin.
- If the total transaction amount is less than or equal to $10, the fee is $0.99.
- If the total transaction amount is more than $10 but less than or equal to $25, the fee is $1.49.
- If the total transaction amount is more than $25 but less than or equal to $50, the fee is $1.99.
- If the total transaction amount is more than $50 but less than or equal to $200, the fee is $2.99.
And I do recommend Coinbase for people who are just starting out buying Bitcoin and other cryptocurrencies. It’s fairly easy to set up, and link to your bank account, and extremely easy to use, once setup is complete.
You can get started with Coinbase by clicking this link.
Because Bitcoin is an applicable hedge against ever-devaluing fiat currencies such as the U.S. dollar, and because Bitcoin has demonstrated such a significant return on investment over any time period of three years or more, it is rapidly becoming a recommended part of any long-term investment portfolio.
And you can easily buy Bitcoin in increments as small as $25-$50, as frequently or infrequently as may suit your investment goals, current finances, and risk tolerance. It is also worth noting that you can buy Bitcoin in far larger amounts, as well, with essentially no upper limit. The OTC (Over The Counter) trading desks which support larger Bitcoin orders often have minimum order requirements of $100,000 or more.
And, once again: the general recommendation is not to invest more than 0.05% to 1% of your investment portfolio in Bitcoin until your own research and experience may suggest that an increase is in order, and of course, never more than you can afford to lose. And if you are fortunate enough to make gains over time, it never hurts to take some of your profit from Bitcoin and re-balance, with the rest of your overall portfolio.
Disclaimer: Please note that any mention of investment or trading is solely my personal opinion, and is not to be taken as investment advice, in any way. Also, please note that some posts may contain affiliate links for services that I use and recommend, which pay a small amount for the referral.
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Doug Sandlin is a performance optimization consultant for startups, blockchain projects, and digital asset projects and investors. For more information, please visit https://dougsandlin.com