Is investing in crypto enough for a secure financial life?
Diversifying is key. Do you mean in different crypto projects?
Bitcoin Block 780,018
000000000000000000055377600ffd11d64869bd1d648659e2c01208732a233c
So, Bitcoin is sound money and nothing can beat that. Work your way out of things, make extra money, put it in bitcoin and hold it until it reaches the moon. You are rich, they are rich and everyone prospers. Is this the ultimatum? Is this what bitcoin was meant to be? Should this be your approach towards living your life?
Now bitcoin is a superior form of cash. It has the ability to better hold value and protect your purchasing power. It fundamental property is its ability to send value across borders. That can easily be done by any payment service but the breakthrough it provides is its ability to be completely peer-to-peer without the need of a middleman. The internet eased the accessibility of information from some major firms to the whole world by innovation and experimentation. The people needed such decentralization in their online interactions which they received as a result of the inclination of progress.
To this date, financial interactions have not had that breakthrough moment where value transfer has not been dependent on a middleman. Domestic banks, commercial banks, payment providers and the central banks topped with the FED control how your money is transferred. One move from he FED and the markets start shaking. So, we need a new system of financial interactions. Bitcoin provides that but we put money into it expecting something else from it. Fiat money is designed to fail considering how the FED is running out of money and the interest rate increases is putting the US economy under pressure. If money starts flowing out of these fiat currencies, bitcoin and gold are the top contenders to receive this capital. We, as “hodlers”, are betting on that.
The reality, face it!
Most people that entered the crypto industry in 2021 were in their early adulthood. That 20 year old who has no fundamental knowledge of investing principles believed in bitcoin to pass 100K and then driven by FOMO traced it back below 20K. Now, he is left holding the bag while the smart money has moved on. Yes, you studied the fundamentals, understood what Bitcoin is and believed in the economics behind it. But if you unable to stop worrying about the “investment” you made in bitcoin, then there is a serious problem with the way you approach financial investments.
Treating bitcoin as an investment is somewhat a wrong assumption. Bitcoin is not able to generate return because it is not able to generate a return on itself. Obviously it isn’t doing any work. And here we are supposing that putting money in bitcoin will make you rich. You are changing the form of money from a monetary unit in seemingly Ponzi scheme to a monetary unit that is based on math and code bound to mathematically preserve value rather than being dependent on some external forces. To put your money to work, those rules applies here as well.
Being financially independent means you are able to sustain yourself without worrying about making extra cash. Financial independence is the primary goal for most people because money can solve majority of the problems keeping in mind that money is the part of the process not a means to an end. Hence, you have to craft your own monetary principles.
Finding the golden number
First of all, what you need is to define the money, to the exact decimal, that you would need to be living every year. That number would be your golden number i.e. if you had that amount of money, you wouldn’t have to work to get it. It would be fulfilling your needs, desires and wants and you would be doing the things you were meant to do, not for money. You’ll have to struggle to get the amount of money first and after that you’ll be able to sustain yourself.
Look, Bitcoin is a hard asset. Don’t consider it as the final deal. It is always better to diversify and conditions in each market cycle is completely different. Recently, we have regulatory concerns over bitcoin, sometime we had the technical drama, accusations over the technology. So these situations change but for you as an investor and as a self-progressing individual it is important for you to diversify your holdings to consider yourself sane in every situation. Investment is important and time in the market is far more important than timing the market. Investing in index funds, mutual funds and ETFs is far better than trying your luck on individual stocks. Using money that way and making your money to use, taking risks and finding great return is the top priority of the managers. You have to ride the wave by making the plunge.
Constructing your own self
The next more important is to free yourself from debt. Taking a loan at a low age is always dubious and then paying it off is always a hassle. Rather than rushing in to do something with extra cash and chasing the new opportunity, invest time and resources on yourself to make the best of your abilities. Stay away from FOMO and invest in simple time tested assets. Now, bitcoin gets its fair share of beating her but it is important to remember that bitcoin is a currency that is often viewed as a speculative asset. No worries, invest the amount you want to keep as your risky investment in it. When it shines, that amount will out shine all other. Only at the right time.
What is important is protecting yourself from lifestyle inflation. When your income increases linearly we tend to increase our wants exponentially. That creates a deficit and makes our life more miserable. It is important to maintain austerity and discipline even when we get that extra stimulus and keep our investment quota of our income fixed no matter what the situation. That quota depends on your age and many other socioeconomic factors but discipline must be practiced to maintain it.
In your 20s, the world feels magical. There are many things to explore and we often go out in great spending sprees. However, at this make or break period it is important to realize the importance of taking risks, responsibility for them and turning over a greater yield. In those investments it is important to factor in inflation and fees, taxes and costs. These are real numbers and demand close attention.
Work on providing value
In the end what matters is how much your skills and work ethic contributes to the betterment of humanity. This is only possible if you are willing to provide your talent and fruitful work to institutions and organizations that value it justly. Only if you generate passive forms of income, you are able to sustain yourself without exchanging your time for money. Money making is a game, what matters is how well you know the rules and how proficiently you learn to bend them. Your skills are not supposed to make money, they are supposed to make an impact. But always remember, money gives freedom and that is necessary. Just don’t make it your primary focus. Learning and exploring should be on the top.
Bitcoin is a means to confidence so that you can build your tower of progress effectively. But realities of work will always hit you and you wont be able to prosper unless you provide value in any shape or form. This value creation and searching for opportunity to express it is what makes you fulfilled and paves the way for future success.
Hope you make it well ahead.