Time and time again, traditional banking systems have acted as a tool for central governments to dictate access to financial services, particularly during emergencies. More recently, the Ukraine-Russian war has been a case study in how cryptocurrency can help the displaced and unbanked access funds for basic necessities.
As intended by creator Satoshi Nakamoto, Bitcoin seeks to give power back to the people. No amount of regulations, penalties, or bans can stop people from using Bitcoin as money. Moreover, a calculated investment in Bitcoin has the potential to bring people closer to realizing their dream of financial freedom. But how can people achieve this?
Huddle
The massive volatility of cryptocurrencies coupled with investor anxiety is a recipe for instant loss. Many fail to understand that Bitcoin – unlike other cryptocurrencies – is a long-term investment. Hence, Bitcoin veterans recommend holding the asset during bull markets and buying the dips during bear markets.
According to UpMyInterest data, aside from a few years, bitcoin holders have seen an average annual return of 93.8%, which in the best performing year increased to 302.8%.
Historical summary of annual bitcoin returns. Source: UpMyInterest
As simple as it sounds, hodling (the crypto language for holding assets) has proven difficult for investors. Some of the factors that lead to a sudden sell-off in Bitcoin include widespread FUD (Fear, Uncertainty, and Doubt) and price movements.
While it makes sense in the short term to profit from Bitcoin’s volatility, minimizing the price chart reveals a greater incentive in the long term to hold on. Moreover, investors who hold Bitcoin will always have the option to use this spending across geographic boundaries without losing value.
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Average dollar cost
Considering Bitcoin as a viable long-term investment option, many investors tend to implement a dollar cost average (DCA) strategy. This involves setting aside a predetermined dollar amount of regular income to be reinvested in Bitcoin each day, week or month.
While El Salvador was initially criticized for adopting bitcoin as legal tender amid crippling inflation, the country could repurpose the resulting unrealized gains to fund social projects, such as building hospitals and schools.
With the Bitcoin bull running out by 2022, El Salvadoran President Nayib Bukele has pursued a strategy similar to the DCA, whereby the country will buy 1 BTC each day.
When Bukele announced his plan to buy Bitcoin, the price was near $16,600, as evidenced by data from Cointelegraph Markets Pro and TradingView.
Bitcoin price action since Nayib Bukele announced his plans to buy 1 BTC every day. Source: TradingView
Since then, the price of BTC has increased by 40.46%, providing much-needed relief to Salvadorans. Investors seeking financial freedom should follow a similar strategy while responding to market changes and public sentiment.
self-incubation
When it comes to keeping your bitcoins for the long term, the key is not to trust any third party entity with the private keys to the assets. Investors who store bitcoin on cryptocurrency exchanges inadvertently give up full control of their assets.
Since the FTX scam was exposed, the case for self-booking has grown stronger. Investors who incurred losses due to alleged misappropriation of funds understood the importance of self-booking. Retaining ownership of the private key – through self-booking wallets – becomes critical to those seeking financial freedom in its truest sense.
The FTX fallout also forced cryptocurrency exchanges to prove the presence and safety of users’ funds in order to avoid a low liquidity situation.
Although hardware alternatives to self-saving cryptocurrencies require an upfront investment, it is up to users to choose an optimal method for storing private keys, even if that means writing the private keys down on a piece of paper.
The three practices listed above – hodl, DCA and self-custody – form the cornerstones of financial freedom. However, users are not limited to trying other strategies that suit their needs.
It is possible to achieve financial freedom with Bitcoin. Given the strength of the cryptocurrency ecosystem, investors are advised to focus on the long-term benefits of Bitcoin while reaping short-term gains in the process.
