BITCOIN
THOUGHTS ON CRYPTOCURRENCY
Why BITCOIN?
To be clear right up front, I am not a financial advisor. That being said, I believe any good financial advisor would encourage you to have a diversified portfolio. Things other than paper-based fiat currencies like the US dollar. Traditional portfolios contain stocks, bonds, real estate, gold, etc.
So what about bitcoin?
In my opinion, bitcoin is a great way to diversify your portfolio and is actually a superior long-term store of value when compared to many of the items listed above. It's definitely better than burying coffee cans full of cash in the backyard!
It is a digital currency. This means it is an electronic (energy-powered) form of currency. It exists just like your online bank account exists. It is a real store of value.
It is secure. It has more than a decade-long track record of secure transactions over a network uptime of 100%.
It is scarce. Bitcoin is non-elastic by design, which means there is a mathematical limit to the amount of bitcoin that will be produced and once all of the coins are electronically mined, that is all there will ever be. Gold is also scarce, but nearly 2% more gold is made every year, property is taxed at roughly the same rate, and over time these investments will inflate and lose a significant percentage of their value. I don't think we need to talk about how non-scarce paper-based fiat currency is. Not only is bitcoin scarce, but over time it will become even more scarce, thus increasing its long-term value. This is not a "get rich quick" scheme, it is more of a "get rich eventually."
So should you include bitcoin in your portfolio? Absolutely yes!
Now I'd like to get to the reason I created this page to begin with. Many people have asked me "should I invest in bitcoin?" My answer is yes, but... it's complicated.
What you need to know (DEFINITIONs included)
The idiot's guide to investing: Buy low, sell high, don't get wrecked.
I do not endorse getting into a market when it is performing at its all-time high (ATH). Wait for the market correction (significant drop) because it will! There is nothing worse than making a big investment and watching it drop by 20%... be wise friends.
Before you buy...
Cryptocurrency is taxable as property, so if you try to move it back into your bank account you will get hit with a 20% capital gains tax. I do not plan on withdrawing my bitcoin... ever! I plan on growing it over time and using it as part of my portfolio. I can borrow against it if things get crazy. Worst-case scenario, I could pay the tax-rate but I'm challenging you to see bitcoin as a vehicle for generational wealth. Something you can pass down to family and it will continue to grow. There are options like celsius.network available to stake your crypto and draw dividends, but whatever you do, don't spend your bitcoin!
Where to buy (and not buy) bitcoin?
Use Coinbase.com to buy bitcoin. They will link to your bank account. They will use a know-your-customer (KYC) approach which protects you and them from fraud. At this point, you can buy Bitcoin (BTC). Coinbase offers some (not all) alternative coins (altcoins) like Etherium (ETH) but the transaction fees on Coinbase can be expensive so its not the best trading platform. It is great for buy and hold investments and will get you in the game.
Very important note: You can always move BTC to USD Coin, which is one of several "stable coins" as they maintain value based on the US dollar. The crypto market is volatile and it may be wise at times to move from BTC to USD when the market hits a state of euphoria.
Use Binance.us if you plan on trading. Binance is a crypto exchange (like a stock exchange for crypto) and as such, they do not take fiat currency. This means you will have to move USD from your bank to Coinbase, buy Bitcoin (BTC) and transfer your BTC to your Binance wallet. From there you can invest in a wider variety of altcoins with significantly lower transaction fees than Coinbase. Binance does not link to your bank account.
Note: Coinbase and Binance.us will require an authenticator app (this is a good thing)
Don't use Paypal or Robinhood. There are many ways to buy bitcoin, but you want to actually own and have access to the "crypto keys" allowing you to possess and move your crypto. Buying from Paypal and Robinhood is like calling Uber, you never get the keys... not good.
FOMO and FUD - Fear of Missing Out (FOMO) and Fear Uncertainty and Doubt (FUD) are two terms commonly associated with market manipulation tactics, particularly in the media. However difficult it may be, don't let fear drive your investment or trading actions. Do your homework and make rational decisions. The most common mistake made in trading is over-trading, especially when trades are motivated by fear.
Monitoring your investments - there are lots of great tools to monitor your investment but you have to be able to walk away and sleep eventually. You will be tempted to stare at the charts 24-7-365... don't do it! That being said, here are a few good tools to monitor the market.
TradingView - customizable real-time chart to see multiple coins at once, great for technical analysis as well
COIN 360 - an ambient way to view the crypto market
Bitcoin Dominance Chart - the total percentage of the crypto market space occupied by BTC.
Fear and Greed Index - when greed is high sell, when fear is high buy (aka "sell the hype, buy the dips")
I'm sure there is more but this is all I have for now. I hope this helps...
Current BTC price is $56,406.19 (ATH) on Feb 19, 2021