Why and How to Invest in Bitcoin

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Why Invest in Bitcoin: Understanding Risk and Opportunity

Comprehensive Product and Market Knowledge:

It's paramount not to invest in Bitcoin or other cryptocurrencies without in-depth personal research and a complete understanding of the product and market. We've made efforts to consolidate essential information and provide access to educational material, enabling more informed decision-making. However, this still requires your time and commitment. We strongly advise reading through our extensive resources, including detailed analyses and discussions on Bitcoin, and familiarising yourself with the full UK Risk Disclaimer (Click here to read).

Personal Risk Assessment and Diversification:

Investment in Bitcoin, like any high-risk asset, demands a clear understanding of your financial position and risk tolerance. Common advice such as not investing more than 10% of your money in high-risk investments and diversifying across different asset types should be considered to mitigate dependence on any single investment's performance.

The Reality of Risk:

Remember, investing in Bitcoin is high-risk, and total loss of investment is a possibility. Protection in case of adverse events is limited, and thus a thorough comprehension of Bitcoin is essential before committing capital.

Michael Saylor's Insight on Bitcoin Investment:

Michael Saylor's contributions in elucidating the investment case for Bitcoin are notable. His keynote speeches offer valuable insights into Bitcoin's role in the global economic landscape.

Michael Saylor is a notable figure in the business and Bitcoin world. Here's a full brief on who he is and what he is known for:

Personal Background

Name: Michael J. Saylor
Born: February 4, 1965
Education: He holds a dual degree from the Massachusetts Institute of Technology (MIT) in Aeronautics and Astronautics, and in Science, Technology, and Society.

Professional Career

MicroStrategy: Saylor co-founded MicroStrategy, a company providing business intelligence, mobile software, and cloud-based services, in 1989. Under his leadership, MicroStrategy emerged as a significant player in the business analytics and mobility platform sector.
Role in MicroStrategy: He has served as CEO and Chairman of the Board since the company's inception. His vision and leadership have been instrumental in shaping the company's technological innovations and strategic direction.

Involvement in Bitcoin

Bitcoin Advocacy: Michael Saylor is perhaps most widely known for his advocacy of Bitcoin. He has become one of the most prominent corporate backers of Bitcoin.
MicroStrategy's Bitcoin Investment: Under his direction, MicroStrategy made headlines by investing a significant portion of its treasury in Bitcoin, starting in 2020. This move was seen as a major endorsement of Bitcoin as a legitimate asset class for corporate investment.
Views on Bitcoin: Saylor views Bitcoin as a store of value, akin to digital gold, and has spoken extensively about its potential to act as a hedge against inflation and a devaluing currency.

Here's a summary of his key points:

The Endless Economic War: Saylor highlights the continuous global struggle over wealth distribution, driven predominantly by government policies and technological advancements.
Bitcoin in Global Asset Valuation: Despite being a minor portion of global wealth, Bitcoin's influence is significant. The shift from traditional assets like gold to technology-driven equities is a trend that Bitcoin encapsulates.
The Decline of World Reserve Currencies: With currencies like the US dollar losing value against various assets and consumer goods, Bitcoin emerges as a potential hedge against currency devaluation.
The Phenomenon of Currency Collapses: The rapid devaluation of currencies worldwide against the dollar underscores the volatility of fiat currencies, against which Bitcoin offers a contrasting stability.
Wealth Preservation Strategies: Saylor advocates for converting fiat currencies into scarce, durable, portable, and maintainable assets, with Bitcoin being a prime example
Investment Approach and Market Timing: Critiquing conventional investment strategies, Saylor supports a long-term hold strategy for Bitcoin, avoiding the pitfalls of market timing.
Redefining Money: Questioning traditional notions of money, Saylor points to Bitcoin's capped supply and difficulty adjustment as features that make it superior to gold as a store of value.
A Winning Strategy with Bitcoin: Holding Bitcoin is seen as the most effective strategy compared to traditional assets like stocks, gold, and fiat currencies.
Bitcoin vs. Corporate Equity: Bitcoin outperforms corporate equity as a store of value due to its immunity to factors like management dilution, labour costs, and regulatory changes.
The Bitcoin Standard: Adopting a Bitcoin standard is posited as a sound investment strategy, especially considering Bitcoin's historical performance.
The Future of Bitcoin: Saylor foresees Bitcoin eventually demonetizing other stores of value, leading to its substantial increase in value.
Laser Eyes and Focus on Bitcoin: The call to action is clear – focus on Bitcoin as the key to overcoming economic challenges and achieving long-term financial security.

Below you will find both the presentations by Michael Saylor on "The Future of Bitcoin" and "Bitcoin the Smart Asset Class", we strongly advise you to watch them.

Why and How to Dollar-Cost Average (DCA) with Bitcoin

Starting with Confidence:

If you assess the market and believe Bitcoin is currently undervalued or feel that now is an opportune time to invest, beginning your DCA strategy with a larger initial investment can be advantageous. This approach can allow you to potentially capitalise on favourable market conditions and early adoption from the start. Then Dollar-cost averaging (DCA) smooths out your price moving forward.

Dollar Cost Averaging (DCA) is an investment strategy used to reduce the impact of volatility on purchases of financial assets such as Bitcoin. Here's a detailed explanation of how it works:

Basic Concept: The core idea behind DCA is to invest a fixed amount of money at regular intervals, regardless of the asset's price at those times. This could be weekly, monthly, or any other consistent period.
Reducing Impact of Volatility: By spreading out the investment over time, DCA reduces the risk of investing a large amount in a single market entry point. Markets can be unpredictable, and investing a lump sum at a wrong time can lead to significant losses if the market drops soon after.
Average Purchase Price: Over time, DCA helps in averaging the purchase price of the asset. Sometimes you will buy when prices are high, and sometimes when they are low. The average cost per unit of the asset tends to smooth out over time. This can potentially lower the total average cost per share of the investment.
Emotional Benefits: DCA can also help investors avoid emotional decision-making. Since the investment is automated and occurs at regular intervals, it reduces the temptation to try to time the market, which is notoriously difficult even for professional investors.
Long-Term Strategy: It's important to note that DCA is typically considered a long-term investment strategy. It's most effective when continued over longer periods, allowing the market's ups and downs to play out.
Suitability: DCA is particularly suitable for investors who are risk-averse and those who are looking to invest in volatile markets. It's a way to build up an investment gradually without the stress and risk of trying to find the "perfect" time to buy.
Limitations: However, it's worth mentioning that DCA doesn't guarantee a profit and doesn't protect against a loss in declining markets. Also, if the market is on a steady rise, lump-sum investing might outperform DCA since you would have gained from the continuous rise from the beginning.

In this worked example of Dollar-Cost Averaging (DCA) with a total investment of $6,000 over six months, the investment breakdown is as follows:

In this scenario, you invested $1,000 each month. The number of shares purchased each month varies based on the stock price at that time. Over the 6-month period, you would have accumulated a total of approximately 610.35 shares.

The DCA strategy has allowed you to buy more shares when the price was lower and fewer shares when the price was higher, averaging the cost over time. This is a classic demonstration of how DCA can help mitigate the risks of market volatility, making it a suitable strategy for long-term investments in fluctuating markets like stocks or Bitcoin.

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Embracing a Long-Term Investment Approach in Bitcoin:
The Wisdom of Holding

In the rapidly fluctuating world of cryptocurrency, a prevailing piece of advice echoes amongst seasoned investors: “Do Not Trade, Hold.” This philosophy underscores a long-term investment strategy, particularly in Bitcoin, diverging from the high-stakes, often speculative nature of active trading.

Understanding the HODL Strategy

The term 'HODL' originated from a misspelling of 'hold' in an online forum and has since become a mantra in the crypto community, symbolising a steadfast approach to cryptocurrency investment. It's a strategy that advises against selling Bitcoin in response to market volatility, advocating instead for holding onto the investment over a longer period.

Benefits of Long-Term Holding in Bitcoin

Mitigates Volatility Risks: Bitcoin is renowned for its price volatility. A long-term holding strategy avoids the pitfalls of trying to time the market, which can be fraught with risks and uncertainties.
Potential for Appreciation: Historically, despite its fluctuations, Bitcoin has shown a significant upward trend in value over extended periods. Holding allows investors to potentially benefit from this long-term appreciation.
Simplicity and Reduced Stress: Unlike active trading, which requires constant market monitoring and quick decision-making, holding is a relatively stress-free approach. It simplifies the investment process, making it more accessible to a broader range of investors.
Avoiding Transaction Costs and Taxes: Frequent trading can incur substantial transaction fees and potential tax liabilities. Holding reduces the frequency of these expenses.