How Much Bitcoin Should You Own?
What to Consider When Buying Bitcoin
Bitcoin is the world’s largest cryptocurrency.
Bitcoin is becoming a mainstream investment for both the biggest names in investing AND newer retail investors.
Veteran Investors
Veteran investors like Paul Tudor Jones, Bill Miller, Stan Druckenmiller, and Ray Dalio are now invested in bitcoin. Jones has roughly 2% of his assets in bitcoin. Other asset managers like Grayscale are making waves in investing with bitcoin and crypto products like GBTC.
Paul Tudor Jones
Jones has called bitcoin the ‘great speculation’ and it appears that he and other major wall street players don’t want to miss out on the potential upside that bitcoin and cryptocurrencies present.
Veteran investor Paul Tudor Jones has invested close to 2% of his assets in bitcoin. As of mid-2020, Jones said the amount “seems like the right number right now.”
Bill Miller
In early 2022, Miller outdid Jones and others, announcing that he has roughly 50% of his portfolio in bitcoin. The other 50% — in Amazon. Miller is a legendary investor. The 50% figure surprised even the most bullish bitcoin investors on wall street. It’s a huge move from one of the biggest names in investing and it’s difficult to think how he could be more bullish without putting 100% of his portfolio into bitcoin.
Miller stated that his portfolio is close to 50% bitcoin and 50% Amazon. He first bought BTC in 2014 and his conviction and buying increased in early 2021.
Winklevoss Twins Call For a $500,000 Bitcoin
Cameron and Tyler Winklevoss see bitcoin as a hedge against inflation and have been accumulating bitcoin for years. The Winklevii are becoming poster boys for a certain style of next-generation cryptocurrency investors.
At one point, they were estimated to own roughly 1% of all bitcoin in circulation. That was in bitcoin’s early years but they remain major players in bitcoin and the cryptocurrency markets today.
They founded a cryptocurrency exchanged called Gemini in 2014. Gemini later became the first exchange to launch bitcoin futures contracts and is seeing rapid growth alongside other top exchanges.
Similar to the Winklevii, we’ve also seen other big names in bitcoin like Wences Casares and Anthony Pompliano call their shot on bitcoin hitting price tags like $100,000 or even $1 million.
Despite any ongoing market volatility around bitcoin and cryptocurrency, notable investors are in it for the long term and they remain bullish.
Bitcoin on the Balance Sheet
Recent years saw major publicly traded companies such as Tesla, MicroStrategy, and Square (now Block) placing large bets on bitcoin.
In late 2021, Twitter and Square CEO Jack Dorsey stepped away from Twitter to focus solely on Square. Soon after his departure from Twitter, Square changed its name to Block. The financial services and digital payments company remains highly focused on bitcoin development.
Several crypto and bitcoin mining companies such as Marathon Digital, Core Scientific, and Hut 8 Mining, among others, have also gone public and hold bitcoin on their balance sheets.
Coinbase
In April of 2021, Coinbase went public, providing yet another alternative for bitcoin and broader cryptocurrency exposure to investors. At the time of its direct listing, the price of bitcoin hit a then all-time high.
Coinbase going public was a boon to the price of bitcoin, but it also marked a massive moment in the history of bitcoin. The listing signified that bitcoin, cryptocurrency exchanges, and digital payments were here to stay.
So, how much bitcoin should you own?
0.28 Bitcoin Makes You the 1%
Blockworks Group analyst Jake Levison says that owning just 0.28 bitcoin means “you’re statistically guaranteed to be in the richest 1% of the world in BTC terms.” It’s also a reminder that you don’t have to buy one whole bitcoin to start investing in it.
0.28 is or isn’t a lot of bitcoin, depending on your current financial state and the current price of bitcoin.
0.28 bitcoin is, however, arguably an attainable amount for the average investor, especially if you buy bitcoin over time implementing a dollar cost averaging strategy. Your intention may not be to enter the statistical bitcoin 1% or higher. That’s okay. You can get involved at a much lower level.
Some Advisors Say 1% of Your Net Worth
Some financial advisors have come out and recommended those interested in bitcoin put in no more than 1% of their total net worth.
This is a similar approach to what Paul Tudor Jones is doing. It’s a recognition that investing in bitcoin, like with other investments, is risky. But, it also acknowledges that bitcoin is something to pay attention to.
How Much Is 1% Of Your Net Worth?
That depends on your financial situation and it also depends on bitcoin’s price at any given time. One percent today might look different tomorrow.
Because the price can be volatile, the percent of your net worth that bitcoin makes up will vary over time. This also means that assigning a hardline percentage of your portfolio to bitcoin isn’t always possible. Rebalancing your portfolio based on changes in price and percentage value of your portfolio is something to consider.
Bitcoin saw significant bull runs in 2013, 2017, and 2020–2021. The jumps in price, and corresponding pullbacks, show how volatile it can be both up and downwards. This potential volatility is important to understand.
Shooting for roughly 1% of your investment portfolio could be one strategy. But if you’re looking for a percentage, consider also looking at the other buckets in your portfolio before deciding what makes the most sense. Bitcoin can have a place in a broader investment strategy.
Comfort Level Is Key
Investing in bitcoin doesn’t have to be so different from investing in anything else. How do you treat your other financial investments? It could make sense to apply a similar approach to crypto.
Although none of this is financial advice, it’s more or less common sense investing to ensure you’re comfortable with the amount of money you’re putting into bitcoin. That goes for any type of investment but it’s good to remind yourself when entering a new asset class.
Don’t Invest What You Can’t Afford To Lose
Know your comfort level.
Bitcoin, like all investments, comes with a high degree of risk, especially as it relates to your strategy. There’s a lot to consider when investing.
When it comes to investing in bitcoin, have a good understanding of your comfort level and risk appetite. Treat bitcoin like you would your other investments, while also understanding that the cryptocurrency space is newer than most other asset classes. Investment risks could be higher, but the upsides could be greater.
Dollar Cost Averaging Can Help
Dollar cost averaging can get you into bitcoin slowly, over time. Putting all of your chips in on any investment at one time brings with it a high level of pressure and a fixed cost for that investment.
You can buy a set amount of bitcoin daily, weekly, monthly, or at any other time interval you decide.
You don’t have to buy a full bitcoin. You can own as little as one satoshi or one hundred millionth of a single bitcoin (0.00000001 BTC).
Dollar cost averaging is one strategy to consider. There are other strategies, most of which end up with you simply HODLing bitcoin for the long term, but dollar cost averaging is an easy to implement strategy that puts a fixed amount of money into an investment over time in order to account for swings in price. In short, you “average” into your position. You remove the pressure the comes with a one-time investment.
You can even set out to earn bitcoin rather than purchase it. It might be harder to find consistent ways of doing so, but you can certainly find people willing to pay you in bitcoin for goods or services.
Conclusion
There are only ever going to be 21 million bitcoins in existence. Do you own any bitcoin now? Do you plan to own any in the future?
If you’re thinking about buying bitcoin, consider your comfort level, investment strategy, and follow what’s happening in the cryptocurrency space.
None of this is financial advice. Know what you’re getting into and find a way to get more involved in bitcoin and crypto that works for you.
There’s a reason that investors such as Paul Tudor Jones, Bill Miller, and the Winklevoss Twins are invested in bitcoin and crypto. Bitcoin is a hedge against inflation. It’s digital gold. And, perhaps even more simply, bitcoin is groundbreaking technology that can change the world.
Bitcoin Isn’t Going Anywhere
Bitcoin is here to stay. If it’s caught your eye, continue to learn more about it and consider getting more involved in the cryptocurrency community.
Thanks for reading! I am not an investment or financial advisor. This is not financial advice. All opinions expressed are mine alone. If you want more content like this, sign up for my weekly email.