Over the past fourteen years, investors have been drawn to bitcoin (BTC) for many reasons, from a potential solution to the economic problems of the current monetary system, to access to non-bank or portfolio diversification. However, many in the general public see bitcoin as a gateway to financial freedom, amid rising inflation and geopolitical uncertainty.
Traditional banking systems have, time and time again, served as a tool for centralized governments to dictate access to finance, especially in times of emergency. More recently, the war between Ukraine and Russia served as a case study of how cryptocurrencies helped displaced and unbanked people access funds for basic needs.
As its creator Satoshi Nakamoto wished, bitcoin seeks to give power back to the people. No regulations, sanctions or bans can prevent people from using bitcoin as a currency. Also, bitcoin computing investment can bring people one step closer to their dream of financial freedom. But how to achieve it?
Keep your bitcoins
The massive volatility of cryptocurrencies coupled with investor turmoil is a recipe for instant loss. Many don’t realize that unlike other cryptocurrencies, bitcoin is a long-term investment. Therefore, bitcoin veterans recommend holding the asset during bull markets and buying the dips during bear markets.
Excluding the last few years, Bitcoin holders saw an average annual return of 93.8%, which rose to 302.8% in the best performing year, according to data from UpMyInterest.
As simple as it sounds, hodling (crypto jargon for asset holding) has been difficult for investors. Some of the factors driving Bitcoin’s sharp selloff include the spread of FUD (fear, uncertainty and doubt) and price movements.
While it makes sense in the short term to profit from bitcoin’s volatility, zooming out on the price chart shows that holding bitcoin is more attractive in the long term. Furthermore, investors who own bitcoins will always have the ability to use those costs across geographic boundaries without losing value.
Programmatic investment (dollar cost averaging)
Seeing bitcoin as a viable long-term investment option, many investors tend to implement a DCA (dollar cost averaging) strategy. This involves setting aside a predetermined amount from regular income and reinvesting it in bitcoins every day, week or month.
Although El Salvador was initially criticized for adopting bitcoin as legal tender amid crippling inflation, the country could redistribute the resulting unrealized gains to fund social projects, such as building hospitals and schools.
With the bitcoin price rally coming to an end in 2022, Salvadoran President Nayib Bukele has followed a similar strategy to the DCA, under which the country buys 1 BTC per day.
We are buying one #Bitcoin every day starting tomorrow.
— Nayib Bukele (@nayibbukele) November 17, 2022
We are buying one #Bitcoin per day starting tomorrow.- Nayib Bukele (@nayibbukele) November 17, 2022
When Nayib Bukele announced his plan to buy bitcoin, the price of bitcoin was around $16,600, as shown by data from Cointelegraph Markets Pro and TradingView.
Since then, the price of BTC has risen by 40.46%, bringing much-needed relief to Salvadorans. Investors seeking financial freedom must follow a similar strategy as they respond to changes in the market and public sentiment.
When it comes to holding bitcoins long-term, the key is not to entrust the private keys of the assets to another third-party entity. Investors who store bitcoin on cryptocurrency exchanges are unknowingly giving up full control of their assets.
Since the FTX fraud came to light, the case for personal ownership has grown stronger. Investors who suffered losses due to the alleged embezzlement realized the importance of self-ownership. Retaining ownership of the private key – through a non-custodial wallet – is essential for those seeking financial freedom in the strictest sense.
We will be sending out an email every week strongly advising our people not to keep savings on any exchange, including @worm This is the way! Always keep your savings to yourself! pic.twitter.com/DI95Gaa5Y6
— Ray Youssef (@raypaxful) December 11, 2022
We will send out an email every week strongly advising our employees not to keep their savings on any exchange, including @paxful. This is the way to go! Always keep your self-service savings! pic.twitter.com/DI95Gaa5Y6- Ray Youssef (@raypaxful) December 11, 2022
The fallout of FTX also forced crypto exchanges to prove that user funds exist and were safe to avoid a low liquidity situation.
Binance Releases Proof of Reserve System | Binance Support https://t.co/pdA2OdvAKG
— CZ Binance (@cz_binance) November 25, 2022
Binance Releases Proof of Reserve System | Binance Support https://t.co/pdA2OdvAKG- CZ Binance (@cz_binance) November 25, 2022
While other hardware options for independent cryptocurrency holdings require an initial investment, it is up to users to choose an ideal method to store the private keys, even if it means writing the private keys on a piece of paper.
The three practices mentioned above – Stewardship, DCA, and Self-Ownership – are the main pillars of financial freedom. However, users are not limited to trying other strategies that meet their needs.
Financial freedom can be achieved with bitcoin. Given the youth of the crypto ecosystem, investors are advised to focus on the long-term benefits of bitcoin while realizing short-term gains.