In July of 2020, I decided to convert my entire life savings into Bitcoin (BTC -1.82%). To be fair, most of my money was already invested in bitcoin. What others saw as an irresponsible financial risk, I saw as a strategic and well thought out lifestyle choice.
My decision certainly isn't for everyone, but to me, bitcoin is as much of a strategy to grow my wealth as it is a method for obtaining financial freedom and optionality. It sets me up to navigate economic turmoil now and for years to come.
The case for Bitcoin
I've been building the courage to convert my savings entirely into bitcoin for about 4 years now. Once I decided I wanted to make this massive move, I took it slowly and seriously. I did this by learning as much as I could about bitcoin and slowly integrated it into my financial outlook and worldview. Rather than getting comfortable with taking on more risk, it's been a process of using knowledge to change my perception of risk itself.
A store of value
Having been invested in bitcoin since 2015, I've been through two bear/bull market cycles. This has allowed me to see bitcoin grow from $200 to $20k, back down to $3k and then up to $69k. I've never sold, and I don't intend to. My intention is to store my value over a large span of time, not risk it by trying to time the market. Some will debate whether or not something with high volatility is a good store of value, but to me this point is moot. My time horizon is large, and the long term trend seems to be up and to the right. I now see a strong bitcoin as a store-of-value narrative playing out at all levels of society (individual, small business, institution and government, which I'll explain briefly below.).
A hedge against inflation
Canada, my home country, has one of the fastest growing housing markets on the planet. Housing prices are up 375% over the past two decades. Combine this with the two economic disasters that have taken place in my lifetime (2008, 2020) and my prospects for becoming a Canadian homeowner seem slim. These events have reduced my overall trust and faith in the traditional financial system, only increasing my desire for financial freedom. With inflation at a 40 year high, I have found myself in need of a hedge against inflation.
My aim is to beat inflation on a year-over-year basis by investing in something that is reliably limited in supply. Bitcoin seems to serve that purpose for me due to its monetary policy of exactly 21 million coins. Its supply comes into existence gradually through the process of mining. More than 90% of all bitcoin (18.9 million) have already been mined, and the remaining 2.1 million is to be mined over the course of the next 120 years.
The design of bitcoin is such that the inflation rate is automatically cut in half every 4 years, resulting in an eventual inflation rate of zero. Once the inflation rate is cut in half, it can never be increased again. When the inflation rate eventually reaches zero estimated to be around the year 2140, the total circulating supply of bitcoin reaches 21 million. This inflation rate "schedule" was set in stone when bitcoin began in 2009, and cannot be changed. It is because of this design that I believe bitcoin serves as a potent hedge against inflation in a world with ever increasing supplies of fiat money.
A superior currency
My investment thesis comes together when we forecast the trajectory of bitcoin. An analysis of the 6 properties of money (durability, portability, divisibility, uniformity, limited supply, and acceptability) indicate to me that bitcoin was built to be optimized along 5 of these dimensions. The property it lacks is acceptability, which I believe will be remedied within the decade. It comes down to bitcoin being a better transporter of value across space and time than any other form of money. Gold transports value across time but not space. Fiat money can easily be transported across space (digital transactions) but not time. Bitcoin moves value across both space and time, which solidifies my perception of bitcoin as a superior money.
Why I consider Bitcoin to be low risk
The crux of my investment thesis comes down to my time preference. I am not investing to turn a quick buck on a 3 month, 6 month, or even year to year basis. I have chosen to hold more than 90% of my money in bitcoin because I am investing for myself 10, 20, and 30 years down the road. My long time horizon allows me to change my perception of risk for bitcoin from high risk in the short term, to low risk in the long term.
A word of caution
Of course, my thesis could be wrong. I do not recommend you follow my investment thesis, as it’s risky and not for everyone. Despite my perception, plenty of financial professionals have advised my strategy to be extremely risky. It is important for most investors to have a diversified portfolio of different assets and asset types. Regardless of whether I am wrong or not, I don’t see myself liquidating my bitcoin as it provides me with a high degree of financial optionality no matter what the price.