Is it possible to achieve financial freedom with Bitcoin?

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Over the last 14 years, investors got attracted to Bitcoin (BTC) for many reasons— from fixing a flawed fiat economy and reaching the unbanked to diversifying portfolios. However, a large portion of the general public sees Bitcoin as a gateway to financial freedom amid growing fiat inflation and geopolitical uncertainties.

Traditional banking systems have, time and again, served as a tool for centralized governments to dictate financial access, especially during dire situations. Most recently, the Ukraine-Russian war served as a case study for how cryptocurrencies helped the displaced and the unbanked access funds for basic necessities.

As intended by the creator Satoshi Nakamoto, Bitcoin aims to bring power back to the people. This means that no amount of regulations, sanctions or bans can stop one from using Bitcoin as money. Beyond that, a calculated investment in Bitcoin has the potential to bring one closer to attaining their dream of financial freedom. But how does one do that?

Hodl

The massive volatility of cryptocurrencies coupled with the restlessness of an investor is a recipe for an instant loss. What many fail to understand is that Bitcoin — unlike cryptocurrencies — is a long-term investment. Hence, Bitcoin veterans recommend holding the asset during bull markets and buying the dips during bear markets.

Setting aside a few off years, Bitcoin holders witnessed a mean annual return of 93.8%, which at its best-performing year, spiked to 302.8%, reveals data from UpMyInterest.

Historical summary of Bitcoin annual returns. Source: UpMyInterest

As simple as it sounds, hodling (a crypto lingo for holding assets) has proved to be a difficult feat for investors. Some of the factors that trigger abrupt Bitcoin selling include an ongoing FUD (fear, uncertainty and doubt) and price movements.

While it makes sense in the short-term to earn profits off Bitcoin’s volatility, zooming out the price chart reveals there’s a long-term greater incentive in holding. Moreover, investors owning Bitcoin will always have the option to utilize this spending across geographical boundaries without losing value.

Dollar-Cost Averaging (DCA)

Considering Bitcoin as a viable long-term investment option, many investors tend to implement the dollar-cost averaging (DCA) strategy. This involves setting aside a predetermined dollar amount from a regular income to be reinvested in Bitcoin every month.

While El Salvador was initially criticized for adopting Bitcoin as a legal tender amid crippling inflation, the country could repurpose the resultant unrealized gains to fund social projects such as building hospitals and schools, among others.

With the Bitcoin bull run running out by 2022, El Salvador President Nayib Bukele followed a strategy similar to DCA, wherein the country would purchase 1 BTC every day.

Back when Bukele announced his plan for a Bitcoin prescription, Bitcoin was priced roughly at $16,600, shows data from Cointelegraph Markets Pro and TradingView.

Bitcoin price movement ever since Nayib Bukele announced plans to purchase 1 BTC every day. Source: TradingView

Since then, the Bitcoin price has surged 40.46%, providing much-needed relief to Salvadoreans. Investors looking for financial freedom must delve into a similar strategy while being reactive to market changes and overall public sentiment.

Self-custody

When it comes to the long-term holding of Bitcoin, the key is not to trust any other third-party entity with the private keys of the assets. Investors who store Bitcoin on crypto exchanges unknowingly give away complete control of their assets.

Ever since the FTX fraud came to light, the case of self-custody grew stronger. Investors that suffered losses owing to the alleged misappropriation of funds realized the importance of self-custody. Maintaining ownership of the private key — via wallets (hardware/software/physical) — becomes paramount for those that seek financial freedom in its truest sense.

The FTX fallout also forced crypto exchanges to prove the existence and safety of users’ funds in order to avoid a low liquidity situation.

Although hardware alternatives for crypto self-custody require an upfront investment, it is up to the users to choose an ideal method of storing the private keys — even if it means writing down the private keys on a piece of paper.

The three practices mentioned above — hodl, DCA and self-custody — form the main pillars of financial freedom. However, users are not limited from trying out any other strategies that can suit their unique needs.

Finally, to answer the question — yes, achieving financial freedom with Bitcoin is possible. Given the nascency of the crypto ecosystem, investors are advised to focus on the long-term benefits of Bitcoin while reaping short-term gains in the process.