My portfolio is up to 50% Bitcoin. Is that too much?
I want to break it down to the basics.
First off, what is money? People must understand this to understand bitcoins value. Money is a way to store value/wealth over time and space.
It allows you to trade with people around the world and trade with people in the future, it allows you to work now and consume later.
Many things have been used as money, seashells, rocks, silver, gold, paper, and now bitcoin.
If gold and silver were used for money and not paper, would having 50% of your money in ‘cash’ (gold and silver) be too much?
Inflation is the primary reason that people invest their money into things like the S&P 500 or gold. People want to put their money somewhere that will grow or at a minimum keep up with inflation.
We don’t want our money to lose value. We worked hard for our money and we would like to be able to save that money and build our purchasing power over our lifetime. Nobody wants to save for 40 years and realize that all these years of savings can’t even support them for more than a few years. This is why we invest and don’t keep all of our money in dollars.
Most of us also want to be able to eventually retire or pass on wealth to the generations that come after us.
21 million bitcoin is the maximum amount that will ever exist. It is extremely scarce and deflationary, not inflationary like the dollar. If someone is purchasing more bitcoin, less will be available per person, which makes it even more scarce.
As more people buy bitcoin, less will be on the market, and its purchasing power will increase. The same thing happened on the gold standard, but with gold you can hit a jackpot gold mine and produce a lot of gold at once, which will temporarily crash the price. With bitcoin, this will never happen because it has a fixed distribution schedule, only a certain amount is created at a time.
Bitcoin is the perfect location to store value over decades or even centuries because it can’t go bankrupt, it can’t be inflated, and it can’t be stolen from you if stored properly. I can’t say the same for dollars, gold, or a companies stock.
So, like I said earlier if gold was still used for money, and each year it went up in value, would it be ‘crazy’ to have half of my worth in gold?
I think the answer to that question is NO, it’s not crazy at all.
At any moment I can sell my bitcoin for any other currency or good. At any moment I can send my bitcoin across the world for very low cost and very quickly. At any moment I can bring 50% of my wealth (all of my bitcoin) with me globally by memorizing my bitcoin wallets’ seed phrase.
50% of my wealth is in liquid bitcoin, and about 50% is in cash generating assets. #cashflow
A few hundred years ago, before fiat, having 50% gold and 50% assets might also be a good strategy. There was a point when most people would save in gold, no stocks, no bonds, no real estate. The average person could just use their hard money (gold) as savings and that’s all they needed.
In the 1980’s having 50% in a savings account that generated 8-10% interest and 50% invested might of also be a good strategy. These things just don’t exist anymore in our current financial system.
I have chosen to be at the forefront of a new technological era. I believe bitcoin is the hardest money ever discovered. I don’t think it’s crazy to have half of my wealth in a hard money. (hard money means it is difficult to create more of it, bitcoin of course has a 21 million limit, but currently you can mine bitcoin because there is only about 19 million in circulation)
One of the scariest things about the modern western world is that if you plan to retire, or even hang on to some of your wealth, you must speculate on something. You need to trade stocks or buy bonds and hope the government doesn’t inflate your money away or buy something like real estate and hope you can cash flow the property and not go bankrupt by purchasing a bad investment.
If you want to retire, you must continue to be an investor, I find that terrifying and it’s honestly a failure of our system.
To store your wealth, you must become a speculator. Real estate is
speculation and comes with large amounts of risk, people leverage themselves,
they re-finance to purchase more properties, annual taxes, repairs on the property,
bad tenants, etc.
Any stock, including an ETF or mutual fund, is risk. Markets can crash,
companies go out of business, etc.
Not investing is typically the highest risk, saving in cash is nearly pointless.
It is almost a guarantee that your money will be slowly liquidated due to
Bonds are riskier than cash (in my opinion) because you are tying up your
money in something that is guaranteed (in 2021/2022) to have a negative real
yield, meaning if you get a bond at 2 percent yield, but inflation is 7
percent, you are guaranteed to lose 5 percent per year on your money.
This means that if you are person in your 50s or 60s, who is planning to
retire soon, you have almost NO OPTION except to be a speculative investor and continue to have a ‘risky’ portfolio, dollars simply don’t work unless you are very rich.
In 2022, $100 can buy you and your friend a relatively nice meal and maybe a drink at a restaurant.
In a decade, 2032, you might be able to buy a meal, no drinks.
In 2050, it may only buy one meal or maybe just one drink.
So, down to the question of “Is a 50% Bitcoin portfolio too much?” Once more I would say no.
Dollars are not the answer, gold doesn’t work in a digital era, so bitcoin is how I choose to store my wealth for the next 10 generations.
Bitcoin is finite, there will only ever be 21 Million coins. Bitcoin is
extremely secure. Bitcoin cannot be confiscated by anyone if you are careful
with how you store it.
Bitcoin is harder money than gold, and it is more salable than gold (meaning it can travel across time and space much more efficiently)
Bitcoin is my ‘cash savings’; I like having cash savings.
Having 50% cash makes me feel safe and secure, and the fact that it’s averaging over 150% appreciation each year for the last decade doesn’t hurt.
Even if Bitcoin only beat inflation by around 5%, there is a good chance I would still keep half of my portfolio in the world’s greatest money.
If bitcoin fails, which of course I do not think it will, I’ll still be ok.
The other 50% of my portfolio in traditional assets will be enough to live the standard American retirement. I will still retire at 60 or sooner. It realistically won’t impact my retirment time frame at all, which is why I’m willing to take this ‘risk’.
If you have any questions about this, or if you disagree, feel free to comment or message me on twitter @jdchristal!
Thanks so much for reading, I look forward to any messages. This is a very unorthodox approach to investing, but in 2022 when housing prices are at all time highs, when the stock market has been going straight up for a decade, when bonds don’t make any mathematical sense, bitcoin seems to be the only logical place to store wealth for the next 50+ years in my eyes.
This is not financial advice; this is for entertainment purposes only. This article is just my personal strategy and my thoughts which could change at any time.
I’m choosing bitcoin.
Bitcoin is hope.
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