Is Bitcoin In The Budget?

Sup! How are you?

Idk if it’s because I am just someone obsessed with finance talk but my feed and conversations have been nonstop bitcoin this week.

I do find it exciting that a currency that is not controlled by any government force is exploding. And I do love hearing stories about people who held through the down times and are now profiting as a result.

But, the hype is a bit much.

And I wanted to write some thoughts I have about Bitcoin because if you haven’t invested in it, you’re probably wondering, is now the time to pull the trigger??

What You’ll Get Out of This Email: The goal of this email is to help educate you on both sides of the “coin”. So you can determine if it’s a good time for you to invest in Bitcoin or stay focused on your plan.

Scroll to the bottom if you want to hear exactly what I plan to do. **This email is not financial advice and is purely for educational purposes.

What Does The Budget Man Know About Bitcoin

Great question!

Let me tell you about my experience with crypto.

I started buying Bitcoin in 2017. I had a friend who worked in Blockchain and he convinced me to just put a few hundred bucks in.

Almost immediately it went from $6k to $19k and I decided to take the tiny bit of savings I had (I was still in debt at this time), and put it all in Bitcoin.

6 months later it was back at $6k and I decided Bitcoin was a scam. Luckily! I didn’t sell.

2020 came around, and I started diving deep into the intricacies of how the blockchain and crypto work. It’s really impressive. If you don’t understand it, this video series is the best place to learn. Decentralized Finance Explained (DeFi)

I started buying tokens like Solana, Fantom, Avalanche, XRP, Liquidity Farming and some very small-cap coins. If I lost you, don’t worry. My point is that I went down the rabbit hole.

But the whole time, I kept dripping $100 here and there into Bitcoin. So when it went up, I dripped $100. And when it went down, I dripped in $100.

I never sold during the storm in 2022 and as a result, at the beginning of this year, I had about $100k in crypto. I sold almost all of it because it wasn’t stable enough for me. And right now, I’m craving stability in my investment strategy.

In Short: I’m by no means an expert when it comes to crypto, I know enough to understand what I’m investing in. The most success I had with crytpo was when I just slowly added to my position on a weekly or monthly basis.

A Tale of 2 Coins

Depending on who you speak to, you’ll either hear that Bitcoin is the future and you should have put all your money in it yesterday. Or you’ll hear someone say it’s a scam, a pump and dump and all hype.

I’m not going to pick a side here, and I want to give you some background on each answer. I’m only going to focus on Bitcoin.

Bull Case (Pros)

No Govt Interference: There truly is nothing like Bitcoin. Nobody knows who the actual founder is, it’s completely decentralized, meaning not one person owns it or the circulation of the coin. There is a limited supply of Bitcoin and while people can mine the coin to create more, there are “halving” events that reduce the amount of Bitcoin you get from mining and eventually you won’t be able to mine it. Unlike the dollar which gets printed whenever the govt so chooses.

Can’t Be Stopped: The key component of Bitcoin is that the software is run on a node. That node basically validates the legitimacy of every transaction. Similar to servers that financial institutions use. The only way to truly “take down Bitcoin” would be to destroy the node. The good news, there is more than one node. There are thousands of nodes and it’s pretty much impossible to track the exact location of that node. So it would be next to impossible to actually shut down Bitcoin.

Increased Adoption From Institutions: Bitcoin is gaining acceptance from both retail and institutional investors. Major corporations and financial entities, including Tesla and PayPal, are incorporating Bitcoin into their operations, signaling a strengthening confidence in its long-term viability and signals future demand. The market cap of Gold is about $17 trillion, the market cap of Bitcoin is a little under $2 trillion. If Bitcoin were to be half of Gold market cap that would be around $400k-$500k a coin.

Bear Case (Cons)

Bitcoin Bubble: People see others get rich fast and want to get rich too. As a result, many people are jumping in which has given Bitcoin great momentum right now. Get-rich-quick schemes don’t usually end well. If the whole reason people are buying Bitcoin is because they think it’s going to be worth something in the future, that’s going to require a lot of conviction it’s worth something when it goes back down. When most people don’t have that conviction, that’s when you see panic selling happen. So there is a chance that the bubble could blow up and we could see the price go down dramatically.

Competition: Think about the first cell phone that came out Nokia and what happened to that company. It’s not always the first mover that ends up as being the top result. There are a lot of competing tokens that could end up being more environmentally friendly.

Regulatory risks: There are a lot of people in the govt who don’t like the idea of something undermining the dollar. At any point the government could impose new laws that outlaw or ban Bitcoin transactions, they could even create their own digital currency. That doesn’t mean that Bitcoin would go away, but it could impact the market cap significantly.

Conclusion: I’m sure I’m missing some factors, but the main thing is there is certainly a ton of room for Bitcoin to continue, but the future is so uncertain that it’s not a guarantee. It’s a risky investment with a lot of potential.

So Do I Buy? Hodl? Ignore?

At the end of the day, there is no silver bullet answer.

But, I can tell you letting headlines and FOMO decide your investment strategy is never a bold choice. I tend to stray toward being greedy when others are fearful and being fearful when others are greedy. Meaning, that when everything is good news about something, I tend to be wary.

If you’re in the middle of trying to get out of debt, I wouldn’t worry about Bitcoin. Straight line. The best way to stay in debt is to chase shiny objects. Stick to your plan.

Maybe you’re new to investing. You just started consistently adding to your IRA account, but don't have anything left over afterwards. I’m not sure I’d bet my retirement on Bitcoin. I’d probably keep doing the thing that lead to millions of others retiring comfortably.

Now all of those are reasons not to invest. That doesn’t mean don’t invest. Maybe you have an extra $100 a month for higher-risk investments. Buying $100 per month of Bitcoin is a great way to dip your toe in without overextending yourself if things go south.

Whatever you choose to do:

• Think of your investments with a long-term horizon of 4+ years.

• Be ok with losing money. It’s a risky investment. With a high payoff potential.

• Do your research, and understand what you’re investing in before investing blindly

And if you’re worried about how to actually invest in Bitcoin because of what happened with FTX, I used Coinbase personally. Create an Account Here