Why Bitcoin represents over 90% of my investment portfolio

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In July 2020, I decided to convert all my savings to Bitcoin (CRYPTO: BTC). To be fair, most of my money was already invested in bitcoin. What others saw as an irresponsible financial risk I saw as a strategic and well-thought-out lifestyle choice.

My decision is certainly not for everyone, but for me bitcoin is as much a strategy for increasing my wealth as it is a method for achieving financial freedom and optionality. It allows me to navigate the economic turmoil now and for years to come.

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The case of Bitcoin

I have had the courage to fully convert my savings to bitcoin for about 4 years now. Once I decided I wanted to do this massive move, I took it slowly and seriously. I did this by learning as much as I could about bitcoin and slowly incorporated it into my financial outlook and worldview. Rather than feeling comfortable taking more risks, it has been a process of using knowledge to change my perception of the risk itself.

A store of value

Having invested in bitcoin since 2015, I have been through two bear / bull market cycles. This allowed me to see bitcoin go from $ 200 to $ 20,000, down to $ 3,000, and then down to $ 69,000. I have never sold and I do not intend to. My intention is to store my value for a long period of time, not to risk it when trying to time the market. Some will debate whether something with high volatility is a good store of value, but for me that point is moot. My time horizon is wide and the long term trend seems to be up and to the right. I now see strong bitcoin as a store of value narrative unfolding across all levels of society (individual, small business, institution, and government, which I will briefly explain below.).

A hedge against inflation

Canada, my home country, has one of the fastest growing housing markets on the planet. House prices have increased 375% over the past two decades. Combine this with the two economic catastrophes that have taken place in my lifetime (2008, 2020) and my prospects of becoming a Canadian homeowner seem slim. These events reduced my overall confidence and faith in the traditional financial system, only increasing my desire for financial freedom. With inflation at a 40-year high, I found myself in need of an inflation hedge.

My goal is to beat year-over-year inflation by investing in something that is reliably tight in supply. Bitcoin seems to serve this purpose for me due to its monetary policy of exactly 21 million coins. Its supply arises gradually through the mining process. Over 90% of all bitcoin (18.9 million) has already been mined, and the remaining 2.1 million will be mined over the next 120 years.

The design of bitcoin is such that the inflation rate is automatically halved every 4 years, resulting in an eventual inflation rate of zero. Once the inflation rate is halved, it can never be increased again. When the inflation rate finally reaches zero, estimated around the year 2140, the total supply of bitcoin in circulation reaches 21 million. This inflation rate “timeline” was set in stone when bitcoin started in 2009 and cannot be changed. It is because of this conception that I believe that bitcoin is a powerful hedge against inflation in a world where the supply of fiat money continues to grow.

A superior currency

My investment thesis comes to fruition when we forecast the trajectory of bitcoin. An analysis of the 6 properties of money (durability, portability, divisibility, uniformity, limited supply and acceptability) tells me that bitcoin was designed to be optimized according to 5 of these dimensions. The property it lacks is acceptability, which I believe will be addressed within a decade. It boils down to the fact that bitcoin is a better carrier of value in space and time than any other form of money. Gold transports value in time, but not in space. Fiat money can easily be transported in space (digital transactions) but not in time. Bitcoin shifts value both in space and time, which reinforces my perception of bitcoin as superior money.

Why I consider Bitcoin to be low risk

Most of my investment thesis comes down to my time preference. I don’t invest to make quick money over 3 months, 6 months, or even year over year. I chose to hold over 90% of my money in bitcoin because I am investing for myself in 10, 20 and 30 years. My long term horizon allows me to shift my perception of bitcoin risk from high risk in the short term to low risk in the long term.

A word of warning

Of course, my thesis may be wrong. I do not recommend that you take my investment thesis, because it is risky and not for everyone. Despite my perception, many financial professionals have advised that my strategy is extremely risky. It is important for most investors to have a diversified portfolio of different assets and types of assets. Whether I’m wrong or not, I can’t see myself liquidating my bitcoin because it provides me with more than I am

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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