Bitcoin is here to stay
Bitcoin is eleven years old, yet the language we use to describe it lingers from its earliest days when some of Bitcoin’s first users leveraged it to circumvent the existing financial system and engage in nefarious commerce in the darker corners of the internet. More recently, it has been portrayed as a risky investment, a gamble on questionable merits. Is it the most technologically innovative Ponzi scheme ever or a grassroots attempt at an internet-native currency? Either way, it is often portrayed as risky.
The language used to describe Bitcoin carries forward from these earlier eras. In society’s collective consciousness, the word “Bitcoin” reflexively recalls criminality, unknowable complexity, and above all investment risk. Colloquially, we still talk about “taking a risky bet on Bitcoin” or “putting some money into Bitcoin just in case it takes off,” implying that Bitcoin is a risky investment with long odds — like putting chips on one Roulette wheel number.
These are all outdated notions. Bitcoin is now a player on the global stage. The US government is embracing Bitcoin as a legitimate asset. Prominent macroeconomic investors like Paul Tudor Jones, Raoul Pal and Lyn Alden are publicly investing in Bitcoin. Companies such as Square, Visa, IBM, JP Morgan, and Fidelity are investing in Bitcoin projects. The list goes on and on, and the message is clear: Bitcoin is here to stay. In other words, the downside risk of owning Bitcoin has never been lower.
Investing in your future
You likely already save for your future. Every paycheck, you determine how much of it to spend and how much to save. Many people keep money in their bank account as it feels nice to have a financial cushion sitting there in cash. But, because of inflation, money sitting in a bank account loses purchasing power over time. That’s why the generally accepted financial advice is to invest your savings in assets that will grow in value over time.
There are two common ways to invest your money to build personal wealth: buying a home and investing in companies. Building equity in a home by paying down a mortgage is a safe and steady way to deploy your savings into an asset that historically gains value over time. Investing in a diversified portfolio of stocks has been the most surefire way to outpace inflation over the last 50 years. Historically, the best way to do this has been through 401k retirement accounts, because of their tax-advantaged status and because you contribute to them consistently over time.
These two types of investments have something in common: they both are designed to ensure a consistent investment month after month. If you own a mortgage-backed home, the first thing that happens when your paycheck comes in every month is you pay your monthly mortgage. It’s automatic so you don’t even think about it. The same is true for your 401k. When you set up a 401k, you specify how much you would like to automatically contribute to it each month. In both cases, the key to success is making a one-time decision to prioritize the monthly allocation of your paycheck to these assets. By owning a mortgage or setting up a 401k, you are automating the contributions to your investment.
The shifting landscape
While home ownership and stock investing will continue to be part of the bedrock of individual financial security and wealth building, structural changes have complicated the surrounding financial landscape.
We are entering a period that legendary Wall Street investor Paul Tudor Jones has dubbed “The Great Monetary Inflation”, which really began in earnest when the United States ended the US Dollar’s gold standard in 1971 and began to manage money supply by decree of the US Treasury and the Federal Reserve Bank. Central banks are printing money whenever credit begins to contract in order to artificially stimulate growth. However, this solution is simply not sustainable.
This money printing has consequences for building equity through a home mortgage and investing in stocks. They will likely to do well in US dollar terms. As the purchasing power of a dollar sitting in your bank account decreases, the nominal value of your home is likely to rise accordingly. The same is true of your stock portfolio.
But therein lies the structural change: the nominal dollars in your portfolio (in your checking account, in any certificate of deposit, and any bonds you hold) are likely to see their real value eroded during the Great Monetary Inflation.
The single best hedge against the deteriorating value of the dollar is Bitcoin. As a non-sovereign, hard-capped supply currency, the more that the long-term viability of the dollar deteriorates, the more the value proposition of Bitcoin has appeal. What does this mean for saving for your future now?
Approach Bitcoin investing like you approach your 401k
The answer lies in what has driven financial security over the last half-century: automated, scheduled savings. This has meant building equity in real estate via a home mortgage and building equity in your ownership of the global economy via a 401k stock portfolio. Now, it can also mean building equity through accumulating an ever-greater % of the hard-capped supply of Bitcoin.
There are simple truths at the heart of this winning formula:
- The idea of a diversified portfolio is to stabilize your financial security by not having all your eggs in one basket.
- The value of home ownership and of stock ownership is that you are building your % ownership of the assets in the world that people value.
- The genius of the home mortgage and the 401k is that they allow you to prioritize saving for your future and enforce that prioritization through an automated system.
These truths remain. The only difference is that the world is digitizing at the exact same time that the fiat-based currency system heads towards a collapse. In this shifting landscape, the key recognition is that a healthy approach to diversification now must also mean hedging against the risk of the eventual failure of paper currency printed by Central Banks.
And that’s where Bitcoin investing comes in. Bitcoin is savings technology. The most effective way to hedge against the risk of currency failure is to own some Bitcoin. The most effective way to start to own Bitcoin is to make a one-time decision to set up a Bitcoin savings plan that will squirrel away a little bit of your income into Bitcoin savings on a regular, consistent basis, just like you do with your 401k.
Set up your Bitcoin savings plan like a 401k
To start investing in Bitcoin as you do with your 401k, you simply need to set up a savings plan and let it run, making regular contributions. So where can you set up this kind of Bitcoin buying plan (often referred to as auto-DCA, or “automatic dollar-cost-averaging”)?
If you’re outside the United States, our article “Bitcoin Investment Sites for 2020: Top 6 Trusted Sites” will get you started picking the option that’s right for you. If you’re in the US, Swan Bitcoin is an increasingly popular choice, as it is easy, dedicated to Bitcoin education and has the lowest fees for automatic recurring purchases of Bitcoin.
Getting a Bitcoin investing plan started with Swan takes just a few minutes. You specify the dollar amount and frequency for your purchases. Swan will pull USD from your bank account and automatically convert it into Bitcoin. It’s as simple as that — click here to get your Bitcoin savings plan set up.