The world we live in is changing rapidly, and many don’t realize what’s happening yet. The new internet (terms like Web 3.0, meta, etc.) is being built, and the opportunity of a lifetime is now. But before you FOMO in, let me explain how I got orange-pilled on Bitcoin and why I strongly urge you to take some time and do your own research. It’s much more than just a new form of money, it’s the future.
There is a lot to dive into, but I’m going to try and explain this like I’m talking to my Mom. 😄 I feel like many simply haven’t gotten into Bitcoin yet because they don’t even know where to begin. Or they don’t understand the technology. Hopefully, my post will help answer some of your questions or hesitations.
Disclaimer: This post is not financial or investment advice.
What is Bitcoin? 🤔
First off, what is Bitcoin? To put it simply, Bitcoin is a digital form of hard money secured by the world’s largest computer network. It’s technically a cryptocurrency, but it’s important not to lump it together with all other crypto projects because Bitcoin is different. I’ll dive into why below.
As of June 2022, there are now over 19,300 cryptocurrencies (according to CoinMarketCap). However, Bitcoin was the very first cryptocurrency. The term “Bitcoin” was first defined in a white paper released in 2008, during the middle of the housing crisis (most likely not a coincidence). It was published by an anonymous person or group with the nickname Satoshi Nakamoto. The software was then launched in 2009.
The smallest unit of Bitcoin is called a Satoshi (Sats), in homage to Satoshi Nakamoto. 1 Satoshi is equal to one hundred millionth of a single Bitcoin (0.00000001 BTC). If you’re buying fractional shares of Bitcoin, you’re actually trading in Sats, until you reach a whole Bitcoin.
Why I love Bitcoin ❤️
Now for the fun part, all the reasons I love Bitcoin.
1. Bitcoin is open-source and peer-to-peer
Bitcoin is open-source, which means all of its code and design are available for everyone to see. That’s the beauty of it. There is no single person, bank, or government that controls Bitcoin. You can see the code for yourself on Github. In fact, some other cryptocurrencies are simply forks of Bitcoin. The software, also known as Bitcoin Core, is maintained by an open-source developer community around the globe.
Bitcoin is a peer-to-peer financial system for the masses. – Bitcoin white paper
The internet as we know it now has developed into a great way to share news, messages, photos, etc. However, the internet didn’t solve a way to send money. Middlemen like PayPal, Stripe, etc., have built on top of the internet to try and solve this problem, but Bitcoin is the first true peer-to-peer way to send money.
2. Bitcoin is secure
Bitcoin is the most secure digital system in the world and has never been hacked. Name a large company today that hasn’t been hacked, you probably can’t. Bitcoin also boasts an uptime of over nine years (source). Is Bitcoin perfect? No, as with any software, there are bugs from time to time. And that’s why it’s important that there is an open-source community of developers.
A few ways that Bitcoin is secure:
- Bitcoin is secured by cryptography. This means it uses a public and private key for the transactions.
- It’s built on blockchain technology and uses a distributed ledger to keep a record of everything. Basically, this means that there is no single copy, the data is stored and replicated everywhere. The ledger itself also uses Proof of Work (PoW). Read more about why Proof of Work is so important.
- The data is irreversible. You can only add transactions to the blockchain, you can’t remove or reverse them.
- Everything is transparent and transactions are recorded on a public ledger. Check it out!
Bitcoin is typically stored in a wallet or on an exchange. And each of these has a unique address. These addresses are shown on the blockchain along with the date, amount, etc. for every transaction. So while you might not know the individual doing the transaction, all of the data is open to the world. This is very different from how a bank works, where all transactions are siloed within their own systems.
And the best part is that the larger the Bitcoin network grows, the more secure it becomes! I forget where I saw this quote, but I love it:
Bitcoin is a revolution based on mathematics, not speculation.
3. Bitcoin is scarce
One of my favorite aspects of Bitcoin is that there are only 21 million. Why is this important? Because it means it’s deflationary. It’s the opposite of the US dollar (Fiat), which is inflationary and continues to lose purchasing power every day. Bitcoin on the other hand becomes more valuable as the scarcity increases. It’s also referred to by many as NgU technology, or Numbers Go Up.
According to Decrypt, it’s estimated that upwards of 3.7 million Bitcoin have been lost forever. This is due to people losing their private keys, people dying without passing on the information of how to access their Bitcoin, etc. That means there is even less Bitcoin available today!
It’s hard for many to grasp this concept, as standard currency (money) has never worked this way. All of us have grown up in an inflationary world. Take, for example, a block of cheese. I remember when one cost around $5.00. Now I have to pay upwards of $8.00. These small cost increases might pass you right by if you don’t pay attention. After all, you still need that cheese, right? 🧀 But as of January 2022, the U.S. rate of inflation hit a 40-year high.
And remember, the U.S. isn’t the only country on the planet. I feel that sometimes people forget that. Some countries are suffering horribly right now from double-digit or even triple-digit inflation. For them, the plight of inflation is an everyday nightmare.
If you want a crash course on inflation and Bitcoin, check out this great video from InvestAnswers.
What happens when all the Bitcoin runs out?
This is the first question my Mom asked when I was trying to explain how Bitcoin worked. What happens when all the Bitcoin is mined and purchased? Well, first off, current estimates for mining of the final Bitcoin put that date somewhere in February 2140 (source). So anyone reading this post will most likely be dead.
But the answer is that Bitcoin is infinitely divisible. Due to its open-source nature, it can easily be soft-forked. It’s built into the code already. And this isn’t like printing more money, which would result in inflation. The problem with inflation is the distributive effect. When you just increase the divisibility of Bitcoin, it’s similar to a stock split. You had one share of stock, now everyone has 10. Nobody was diluted.
To understand this more, I recommend watching the interview with Robert Breedlove on the philosophy of Bitcoin and how it could change the world as we know it.
Another thing is that once Bitcoin is accepted everywhere, it’s more likely to be used to purchase things, especially big assets. Say, for example, you want to buy a house and the seller accepts Bitcoin. Bitcoin wealth will eventually flow more from person to person, instead of just holding it. Right now this isn’t happening, because we haven’t reached mass adoption yet.
Curious to see how many people currently own Bitcoin? Due to its public ledger, you can. Check out the Bitcoin Rich List. According to the Global Wealth Report, the total number of millionaires in the US alone is 20.27 million. That means not every millionaire can own a whole Bitcoin. So if you own between 1-10 Bitcoin already, you’re in the top 1.6%. That’s how scarce the asset is. And why Bitcoin is going to cause a transfer of wealth for those who participate.
4. Bitcoin is volatile
Many don’t want to invest in Bitcoin yet due to its high volatility. And that’s completely understandable. You really do have to detach your emotions when investing in an asset like this. However, volatility is when real money is made. And that’s why I love its volatility. Once Bitcoin is available in every bank, every supermarket, etc. I guarantee you the volatility will decrease, and so will the life-changing gains.
The best thing you can do right now is to keep buying Bitcoin on a schedule and Dollar Cost Average (DCA) into the market. Ignore the ups and downs and don’t keep checking the price of Bitcoin every few minutes. If the price goes down $2,000 in a day, that’s no big deal. When in doubt, zoom out.
If you have more time, you can, of course, try to buy the dips more aggressively. But trust me, it doesn’t always work out like that (especially if you’re a beginner). You’ll find yourself trying to buy the dip, then the next, then the next, and then you’re out of cash.
After you’ve been in the market for a while, you can get a better handle of eyeing the support levels and bottoms. But this is why for anyone just starting, DCA’ing into Bitcoin is the easiest, less stressful, and most successful method. Bitcoin should be a long-term investment.
In the past, Bitcoin has always revolved around its halving events, which take place every four years. Basically, the rewards of mining Bitcoin are cut in half. This ensures that the Bitcoin in circulation does not increase exponentially. The result of this is usually an increase in Bitcoin price.
The halving events do impact the market, and you might hear the term “bull” or “bear” markets. A “bull market” means the price has gone up for a period of time. A “bear market” means the price has gone down for a period of time. In the past bull markets have been followed by sometimes a bear market that lasts years. That’s right, years.
However, many don’t think bear markets lasting years at a time will happen anymore due to the increasing demand and adoption of Bitcoin around the globe. Whenever there are dips, more and more institutions and people are snatching it up immediately. The most likely thing that will happen is we’ll have shorter bull and bear markets that last a few months.
This happened between May and August 2021 (what some might consider a mini bear market) In April 2021, Bitcoin reached an all-time high of over $63,000. It then dropped rapidly all the way down to $29,000. This was followed by months of Bitcoin trading sideways. And this is really when you should be accumulating the most. I was buying all that I could afford during this period.
As Baron Rothschild said, “When there’s blood in the streets, you buy.” Or as Warren Buffet says, “Be fearful when others are greedy, and greedy when others are fearful.”
Speaking of that, check out the Fear and Greed Index. This can be a great little tool to help you time your buys.
Because of Bitcoin’s scarcity, the term “HODLING” came about on the internet. It’s a mispelling of “I am hodling” that caught on from a drunk guy in a forum post (source). Basically, it means you’re holding for future profit. Due to Bitcoin’s volatility, it has become somewhat of a MEME status for many.
But again, you should really be embracing Bitcoin’s volatility. That is where the money is made.
5. Bitcoin is an excellent store of value
While Bitcoin can, and already is in some places, be used as a day-to-day currency, I prefer to think of it as an excellent store of value and inflation hedge.
For example, if you buy a brand new car with Bitcoin today, and the price of Bitcoin goes up 5x, are you happy with that transaction? Probably not. You will probably hate that car every time you use it. Whereas, if you used fiat, you don’t care, because that money would have lost value.
6. Power consumption (it’s not as bad as you think)
There’s a lot of press online regarding the pros and cons of Bitcoin’s power consumption. It’s no surprise that Bitcoin uses a lot of energy. It’s the largest computer network in the world. However, many Bitcoin miners are now using renewable energy. In fact, miners want cheap green energy.
Bitcoin mining electricity mix increased to 58.5% sustainable in Q4 2021. – Bitcoin Mining Council
I encourage everyone to watch “This Machine Greens” from Swan Bitcoin. It’s a documentary that explores Bitcoin’s complex and nuanced relationship with energy. Obviously, they are biased, but you’ll probably learn some things you didn’t know.
For example, there is a lot of “waste” energy produced today. You can’t transport energy long distances, and therefore a lot of energy in the world simply goes to waste. Bitcoin miners are now capturing energy from natural gas flaring, instead of it polluting the atmosphere. Amazing! Bitcoin is helping clean the environment by capitalizing on wasted energy.
As Square has published, Bitcoin is key to an abundant, clean energy future. Check out their whitepaper. I also recommend checking out this article on how large-scale Bitcoin mining is driving clean energy innovation.
Check out these 10 epic Bitcoin mining photos!
7. Bitcoin is doing good around the world
Every day there are new inspirational stories of how people around the world are using Bitcoin.
On September 7, El Salvador was the first country to adopt Bitcoin as legal tender (alongside the US dollar). It gave $30 of Bitcoin to every citizen who download the free Chivo app on their phone. A couple of months later, that amount doubled. For the first time, El Salvadorians experienced deflationary currency. Also, check out Bitcoin Beach. It’s an entire community in El Salvador that challenged the fact that Bitcoin could never be used for daily transactions.
To take that even further El Salvador is now mining Bitcoin using the energy from volcanoes! We truly live in exciting times.
Then you have the Navajo Nation, the largest Native American reservation. It’s also one of the most impoverished communities in the US after suffering decades of financial abuse from the Federal government. They are now reclaiming sovereignty by mining Bitcoin. Check it out!
Then you have the Bitcoin Water Trust. You can donate any amount of BTC to the fund. They are holding it until 2025 and then will begin putting it to work. All donated coins will be used to fund clean water projects.
There are countless examples like the ones above of how Bitcoin is changing people’s lives.
Also, the idea that Bitcoin is only used for money laundering is false. In a report from Chainalysis, they found that 5% of the global gross domestic product is laundered every year in fiat currency. That is huge! Only 0.05% of all crypto transactions involve money laundering. So yes, as with any form of money or asset, you will have those that use it for illegal purposes. But the big problem is money laundering with the US dollar.
8. Sending Bitcoin is practically instantaneous
Using a free app like Strike on the Lightning Network, you can send Bitcoin practically instantaneously for almost no fees anywhere in the world. Name a bank that can do that. It’s literally changing the game in terms of remittances for third-world countries. Gone are the days of having to travel to Western Union.
For example, I use Wise to pay EU and UK VAT payments for our business. Typically the fee is around $10. Imagine just getting rid of all of these types of fees forever!
What’s even cooler, is you can use Strike to send USD (fiat) or even convert it to another currency. This means you’re sending fiat using the Bitcoin blockchain. Check it out in action. It’s pretty mind-blowing.
In fact, the Bitcoin network is settling an average of $95K for every $1 in fees (source). That is incredible!
And the Lightning Network is just getting started.
9. Bitcoin has made me reprioritize my health
Health is wealth! What good is holding Bitcoin if you’re not around to use/benefit from it? Ever since I started investing in Bitcoin, I’ve taken an even harder look at my health. Just recently I managed to ditch my sugary soda habit altogether (I now drink a lot of Spindrift).
In fact, I use a free app called HabitShare to keep myself in check with my brother, who has his own goals. I have a workout goal and an eat-healthy goal. Having an accountability partner keeps me on track.
How to buy and store Bitcoin
One thing I love about Bitcoin is that, unlike the stock market, it operates 24/7. You can buy or sell it at any time of the day, even on the weekend.
Below are a few ways I recommend to safely buy and store Bitcoin. I’ll dive into this a lot deeper in another post.
Stacking Sats with Gemini credit card
One of the easiest and risk-free ways to get Bitcoin is to get the Gemini credit card. There’s no annual fee, and you get 3% back in Bitcoin on purchases at restaurants and fast food places. 2% back at grocery stores.
My second recommendation would be the Fold card. This is technically a debit card, but you can get free Sats back on every purchase you make.
Just ask yourself. Would you really miss the cashback that you’re probably getting with your current credit or debit card? Probably not. Therefore, by getting your rewards back in Bitcoin, this is an easy way to stack Sats.
Purchase with Strike, Cash App, or Swan Bitcoin
If you don’t want to figure out exchanges, you can easily buy Bitcoin with Strike or Cash App for very low fees. In fact, Cash App just integrated the Lightning Network!
Both Strike and Cash App allow you to withdraw your Bitcoin to a wallet at a later time.
Another amazing service that is super easy for first-time buyers is Swan Bitcoin. It has super low buy fees and no withdrawal fees. The UI and workflow from signup to stacking Sats is one of the best I’ve ever seen.
If you don’t want to sign up anywhere, the last resort would be using Robinhood or PayPal. You can buy Bitcoin on both of these platforms, and they do support withdrawals now to your own wallet. Just note that these have higher fees and or spreads.
Purchase on exchange
If you want to purchase Bitcoin directly on an exchange, I recommend using Kraken, Coinbase, or Gemini. These seem to be the most reputable. They are all US companies and highly regulated, which can be a good thing.
How to store your Bitcoin
There are multiple places you can store your Bitcoin. You can leave it in exchange, you can use a hardware or software wallet, or go with a multisig setup.
The problem with leaving Bitcoin on exchanges is that you don’t technically own it yet. You have an IOU. That’s where the term “not your keys, not your Bitcoin” originated from. The exchange could get hacked or go out of business. Therefore, I recommend starting with one of the following options:
- Software wallet like Muun (completely free, just need your phone).
- Hardware wallet from Trezor (under $100).
Once you have accumulated a larger amount of Bitcoin and are more comfortable with transferring it back and forth, it’s better to upgrade to a multisig setup for the long term. I recommend a service like Unchained Capital. This is a dummy-proof way to self-custody your Bitcoin.
What about other crypto?
With over 19,300 cryptocurrencies you might think it’s impossible to choose. But to the honest, most of the projects out there have no chance of succeeding. 99% of them will be gone in a year. If you want a safe asset, Bitcoin is the answer.
Check out the Bitcoin First report from Fidelity on why you need to consider Bitcoin separately from other digital assets.
You’re still early
I know what you’re thinking. You’re too late to the party, right? Wrong. Crypto will hit 1 billion users in the next few years. And if you compare where we are at today, it’s still in the early internet days.
I bought my first fractional amount of Bitcoin in 2017 at a spot price of $3,987.26. But I ended up selling all of it less than six months later. Unfortunately, I hadn’t learned patience yet or done enough research to understand what I was actually holding. I didn’t start seriously investing again in Bitcoin until 2020. So if you think you’re too late, trust me, you’re not! But the sooner you dive into the world of Bitcoin, the better.
Fun fact, Bitcoin has been declared dead over 440 times.
Bitcoin people to follow
There are a ton of great resources out there to follow. However, there are just as many or even more scammers. Here are some trustworthy and reputable people/channels that I recommend following in the Bitcoin space:
Twitter peeps
YouTube channels
Summary
There is so much more I could talk about when it comes to Bitcoin. In some future posts, I will cover things like how to do taxes, keeping track of your average buy price (profit/loss), utilizing stablecoins, securing your Bitcoin in a cold wallet, etc.
I would never tell anyone to just go buy Bitcoin. This isn’t financial advice. However, I do encourage everyone to do the research for themselves. Look at what’s happening and where things are headed. Bitcoin had the best annual performance of all major asset classes in 2021 – for a third straight year (source).
Once you go down the Bitcoin rabbit hole (hence the term “orange-pilled” from The Matrix), it’s not something you can escape. It really does change the way you think about money, investing, the future, etc. In fact, I would argue that Bitcoin forces you to save more money because you think about everything in Bitcoin terms.
As some say, the best time to start buying Bitcoin was yesterday. The next best time is today. And you don’t have to go all in. In fact, I always recommend you slowly DCA into Bitcoin. Trying to time the tops and bottoms is just asking for trouble. Patience and time in the space, is the name of the game, as with any investment.
From a risk management perspective, the only wrong allocation is 0%.
Have any thoughts? I would love to hear them below.
And just a word of warning. You should never invest more than you can afford to lose. This goes for the stock market, Bitcoin, etc. If you can’t sleep well at night, that means you’ve invested too much.
Make sure to also check out my post on how to get free Bitcoin.
Excellent article, Brian. As a tech person, what do you think about the possibility of quantum computing putting the bitcoin wallet’s security in jeopardy?
Hey Daniel,
Great question! Quantum computing will eventually be a problem for every system. But I’m not worried, as Bitcoin can be upgraded to become quantum resistant. They just released the Taproot update recently. So this is an example of Bitcoin receiving a massive update. As quantum computing evolves, so will the defense against it.
I have way more trust in the developers working on Bitcoin than I do with my bank that can’t even support 2FA properly (still doing SMS).
But again, everything will be in jeopardy once quantum computing is a problem. So we will have way bigger issues to deal with.