🧱 How to Buy Bitcoin
FIRE BTC Issue #10 - My approach and what I tell my friends
🚨 BITCOIN HAS REACHED $100,000 🚨
Before we get started, we should take a moment to recognize this historic moment.
Crossing $100k is a key marker of the start of a new era. It’s a number that cannot be ignored. Bitcoin is mainstream. We are at the beginning stage of the vertical part of its S-curve adoption path.
Acceleration ahead.
Ok, let’s get into it…
Since the bitcoin bull run kicked into a higher gear a few weeks ago, a lot of people have reached out to me, having decided to finally make an allocation.
In some cases, the person was making their very first bitcoin purchase. In other cases, they had previously bought a small amount, and the run-up in price created FOMO for moving a chunk of money in.
Whether you’ve owned bitcoin for a while or are buying it for the first time, it’s common to feel anxiety in the face of its inevitable volatility.
This is especially true for “noobs”.
The seasoned veterans among us are numb to the euphoria of the booms and the panic of the busts. We are still susceptible to these feelings, of course, but they tend to be muted by conviction forged from experience and understanding.
For the bitcoin newcomer, that very first purchase is often the hardest. People are stricken with fear that they are too late or that they are throwing “Real Money” away on something they don’t understand.
This week’s issue explains how I buy bitcoin and the thoughts I share with friends, family, and others who are looking to start their bitcoin journey.
🌱 Getting off zero
I’ve noticed a lot of people who don’t yet own any bitcoin think of it in binary terms, as if you’re either on zero or all-in.
Of course there is a spectrum. Everyone is different, and a comfortable bitcoin allocation is different for everyone. However, the proper allocation is definitely greater than zero.
This has become much more widely recognized in the last year. Even the US government may be creating a Strategic Bitcoin Reserve. I touched on that a few weeks ago:
The zero-to-one moment of buying bitcoin for the first time is scary to some. Even an initial purchase of $100 is a good start.
Breaking through the psychological barrier of getting off zero is the first goal. Once you’ve done that, you’re likely to watch bitcoin more intently and learn more about it.
Understanding is the foundation of building conviction that allows for a serious allocation.
🛣️ DCA paves the way
A dollar-cost averaging approach is foundational to any FIRE plan, and bitcoin should not be treated differently.
Once you’ve acquired your first bitcoin and decided it’s should be a part of your savings portfolio, it’s time to set up an automated DCA. If you’re already pursuing FIRE, you likely already have this in place, with those dollars being funneled into the stock market (VTI or similar). In this case, a simple approach is to divert a portion of that allocation away from stocks and toward bitcoin. Over time and as your conviction grows, you can adjust the relative allocations as needed.
If you’re interested in how various bitcoin vs stock allocation mixes performed over the last 8 years, make sure you check out FIRE BTC issue 4 below.
The beautiful thing about DCA is that it takes emotion out of the picture. Remember, as FIRE practitioners, we are building a savings portfolio, little by little, over a period of years. The key to success is consistent accumulation regardless of what the market is doing in the short term.
An automated DCA makes this consistency easy, which means you’ll likely end up with more assets sooner than if you build cash balances and try to time the market. Humans are emotional creatures, and it’s very difficult to buy bitcoin (or stocks for that matter) when there is “blood in the streets”.
So instead we address the timing question and relieve emotional stress by automating the process of accumulation. We’ll buy all the tops, all the bottoms, and everywhere in between, because FIRE is not built on speculation and taking chances to hit it big. There is a formula that works, and all you have to do is implement it.
DCA serves as the foundation of any FIRE strategy.
If you’re ready to buy your first bitcoin and implement a DCA, check out River (referral link). This is where I send friends and family and where I have my DCA set up.
💰 What if I have a big chunk to invest?
Many times I’m asked how to allocate a large sum of money to bitcoin, like $50k, $100k, or more. These questions come from people who are early in their bitcoin journey, as well as from people who already have a material allocation.
This is a very difficult scenario for most of us, myself included. You’ve made the decision to allocate in size, but the fear of getting the timing wrong can be overwhelming. Everyone dreads the thought of buying the top and suffering immediate losses.
I find this framing to be helpful: It’s almost guaranteed to happen. Just be prepared that as soon as you make that large purchase, the price will immediately drop by 30%. You can’t get away from it; this is the price we pay.
On the other hand, not making that purchase will result in an immediate increase in the price by 30%, and you’ll be forced to wrestle with the coulda, woulda, shoulda of your failure to act.
With that perspective in mind, a good way to mitigate this scenario from an emotional standpoint is to take a blended approach.
Purchase half of the intended amount immediately. Don’t think about it, and don’t look at the price. Just hit the buy button. For the other half, establish a DCA plan for a specified period of time, say 8 weeks.
This approach enables you to take action immediately without feeling like you bought the top with no ability to take advantage of lower prices in the short term. At the same time, if you get lucky and the price rises immediately, you’re already halfway allocated and can benefit from it.
🟢 Be like Mike
The chart below shows the price of bitcoin with a green dot on each date where MicroStrategy has purchased bitcoin.
What do you notice?
Michael Saylor also buys the highs, the lows, and everywhere in between. It’s a consistent DCA strategy focused on accumulating the asset over the course of time.
I do the same.
With an automated DCA in place, you set an intentional floor on your savings rate with the opportunity to sporadically add to your portfolio when excess cash becomes available.
A true, winning FIRE strategy.
That’s it for this week. Thanks for reading!
💡 Enjoyed this content? Share FIRE BTC with someone who’d love to learn about financial independence and bitcoin!
Until next week,
Trey ✌️
P.S. I joined my friend, Darin Hunter, for an introductory conversation about why bitcoin is valuable and how it fits into the FIRE framework. You can check out the full conversation below.