Let me ask you a question, why are you into Bitcoin and Crypto? Some would say that it is the future and they believe in the freedom that digital assets bring. However, if we distill all the answers, the product would be because we want to earn. Most of us would like to escape the rat race and just retire in comfort. But with the shrinking value of money, this aspiration seems to be too difficult to achieve. So we turn to BTC and all the altcoins in the hopes that we could 100x our money.
Of course, digital assets have their share of detractors. We have Jim Cramer, a TV personality and former hedge fund manager, who has no love for Bitcoin. He urges investors to get out of the crypto space, while they still can.
We also have Peter Schiff, a stockbroker and renowned financial expert. He refuses to acknowledge that Bitcoin is digital gold and still prefers holding “real” assets. But are they correct?
How Much Do You Need to Retire?
The answer to this question is more questions. Where are you planning to retire? What kind of lifestyle do you want? What is the projected inflation for the next 20 years? The questions are endless. Retiring in New York City will be more expensive than living in a developing country. Traveling around the world will entail bigger funds than living quietly on a farm.
According to a survey, most Americans believe that they need $1.8 million to retire. The average worker’s career would last around 45 years. So one would need to save $40,000 every year to hit this target. And we are not even factoring in inflation.
A recent study tried to find out how much is needed to comfortably live in the Top 15 cities in the US. Number 15 is the St. Louis metro area and you would need $57.446 per year. At the top spot is the San Francisco metro area and you need to spend $84,026 a year to live there. These amounts are post-tax
If we add the $40,000 you need for retirement and the minimum amount you need to comfortably live in the top 15 cities, then that would amount to more than $97,000. Again, this is post-tax. The sad part is, the average US salary is $76,370.
The Promise of Bitcoin
It is said that the greater the risk, the bigger the rewards. This is an apt adage for the risky but rewarding nature of crypto. While it is true that many investors have lost billions in the digital asset industry, many have also made generational wealth with it. Crypto disasters, like FTX, have given the industry a bad reputation, but a lot still believe that Bitcoin is an instrument against financial uncertainties.
Several politicians in different countries have pointed to Bitcoin as the solution to financial woes. In the US, several presidential candidates, like Robert Kennedy Jr., have promised to make holding BTC a right. He believes that the top cryptocurrency is an escape route when disaster strikes.
In Argentina, top presidential candidate, Javier Milei, thinks that central banks are scamming people and Bitcoin is a natural reaction to the deception. This is thought-provoking, especially if we consider that Milei has two masters in economics.
Of course, let us now forget about El Salvador’s president, Nayib Bukele. Bukele is one of Bitcoin’s biggest ambassadors. He spearheaded BTC adoption in the country to reduce reliance on the US dollar and make digital transactions more accessible to underbanked citizens.
What Do Top Investors and Fund Managers Say About Bitcoin?
Larry Fink, CEO of the financial giant BlackRock, was once against Bitcoin. He went as far as saying that it is an “index of money laundering”. However, he changed his tune recently. Not only did BlackRock file for a spot Bitcoin ETF, but Fink also called BTC digitized gold and an “international asset”. This is big considering that the firm has about $9 trillion under management.
Cathie Woods, CEO of Ark Invest, is projecting a million-dollar Bitcoin in the next decade. According to Ark’s projection, BTC will reach $258,500 in a bearish scenario, and $1.48 million in a bullish scenario by 2030.
Mike Novogratz, a hedge fund manager and CEO of Galaxy Digital Assets, claims that ten percent of his worth is in the space. This is big since veteran investors and fund managers don’t invest in something that they haven’t studied closely.
Let us look at the history of Bitcoin
Satoshi Nakamoto is the recognized creator of Bitcoin. But nobody knows who he is. It is not even known if that is his real name or if the name represents a group. We just know that Satoshi created BTC to revolutionize the monetary system, which has shown its flaws in the 2008 financial crisis. It was created as an antithesis to the Central bank’s money printing. It is programmed to have a limited supply of 21 million. Its scarcity makes it deflationary compared to fiat.
History tells us that the first BTC block was created in January 2009. After a few days, Satoshi made the first transaction by sending some BTC to Hal Finney.
In Oct 2009, a Finnish software developer by the name of Martti Malmi sent 5,050 BTC for $5.02. The transaction was made using PayPal. That is about a dollar for 1000 Bitcoin.
Fast forward to 2022, Bitcoin reached a value of more than $69,000. A far cry from its 2009 value.
At the time of writing the number one crypto asset is trading at around $26,000. It is less than its 2022 peak, but still thousands of times higher than in 2009.
Comparing Bitcoin with Other Assets
Bitcoin has a short history compared with other assets, but let us look at the data.
First, let us look at the Standard and Poor’s 500 or S&P 500 (SPX), which is the index for the top 500 public companies in the US. It is considered to be the barometer of the economy’s health.
The charts show an almost 600% increase from 2009 to its peak in 2022. This is a good return on investments.
Gold is probably one of the oldest if not the oldest store of value. The chart below will show its price action from 2009 to its peak in 2023. It shows an increase of 150%.
Investing in the S&P 500 and gold is not a bad idea. Since 2009, both have steadily increased in value, but those returns are nothing when compared with Bitcoin. In 2009, a dollar can get you a thousand BTC. Today, $ 1000 can only buy you 0.038 of a Bitcoin. Also, consider that the price is cheap since we are in a bear market.
A Quick Summary
- We need to remember that present wages and cost of living make it hard for the average worker to save up for retirement.
- From its inception, Bitcoin’s return on investment surpassed traditional assets like S&P 500 stocks and gold.
- Several fund managers and investors are bullish on BTC’s future.
- Inflation devaluates money, but Bitcoin’s scarcity makes it a deflationary asset.
- Politicians around the world are realizing the flaws of the current monetary system and see Bitcoin as a good model.
What is the Verdict?
The points laid out above show us why Bitcoin is being taunted as a good store of value and should therefore be a good addition to any portfolio. However, we have to look at this rationally. A lot of investors are not looking at the bigger picture. They see Bitcoin and the crypto market as a quick money-making opportunity, which is no different from a casino. Who can blame them? They need money now and they need a lot of it. But just like in casinos, you’ll probably lose all of your money if you play it this way.
Just like any asset, nothing goes up in a straight line. Not even gold can claim this. Bitcoin is not exempted from the bear and bull cycle. Its volatile nature makes it susceptible to huge pullbacks. So selling everything and investing in Bitcoin will either make you super rich or broke, depending on when you bought and sold. Also, a sane financial adviser will tell you not to put your eggs in one basket.
So can you retire with just Bitcoin? If you bought low and sold high, then yes. But this is easier said than done. It takes a lot of work to be good at it.
You know the drill – Do your homework and always manage your risk. Your future self will thank you for it.
The information provided is for informational purposes only and is not intended as financial advice
