In this article, we’re going to discuss how many bitcoins you should have in 2020. It’s a good question — you’ve heard about why you should buy bitcoin and how to buy bitcoin, but nobody really tells you how much you should have. It’s not an easy question to answer, especially with all the conflicting information online. Bitcoin forums are filled with both bitcoin millionaires and faucet chasers, so it’s difficult to figure out what the “right” amount of bitcoin is. Keep in mind that this depends on multiple factors, and we’re going to discuss all of these factors in this article.
By the end of this article, you’ll know how much bitcoin you should have in 2020, and which factors should dictate your cryptocurrency holdings.
Before you begin, you need to understand your risk profile as an investor. How much risk are you willing to take on? What factors restrict you from taking on higher risks? You may have heard of Mark Cuban, who is a celebrity business owner. He has a net worth of over four billion US dollars. He told Vanity Fair in an interview that he recommends people to put 10% of their net worth into bitcoin. Coming from a multi-billionaire, this may seem like good advice, but really, there is no single rule of thumb that can apply to everyone.
Start off with your age. If you’re young — say, in your teens, or mid-20s — you can afford to have a large amount of your wealth in cryptocurrencies. Bitcoin is volatile and risky, but it has a lot of upside potential. If your bet pays off, you can become extremely wealthy. When you’re young, you can afford to take much riskier investment bets, so a good percentage for your bitcoin holdings is anywhere between 25% and 80%. Of course, the opposite applies as well. If you’re in your 50s, 60s, or even 70s, you’re going to want to stay further away from bitcoin. Mark Cuban’s 10% rule is more applicable to you, since at an older age, you really can’t afford to lose a large chunk of your retirement fund.
Another key factor in determining your investment profile is your market risk tolerance. How well can you handle risk, as a person? Bitcoin has seen some insane gains, sometimes going up over 100% in a single day — but at the same time, downswings are frequent. Bitcoin is extremely volatile, and for the average investor, this can be quite scary. Most people have their money in index funds, which aren’t that volatile. Bitcoin, by comparison, is a way more scary investment. So, think about your personal risk tolerance when determining how many bitcoins to own. If you are open to high risk investments, and if you can tolerate volatile market swings, then buy more bitcoins! You are a strong investor, and you can tolerate the risks involved. You won’t panic sell, or get extremely scared every time there’s a huge bitcoin price swing. In fact, for you, it’s way more fun, just like a rollercoaster. But, if you have a lower risk preference, then reduce your bitcoin exposure. For people like that, having risky investments isn’t a good idea, since they’d probably panic sell at the wrong time anyway.
Quality Of Life
There is another major personal factor to consider, which is your current quality of life. If you’re slaving away at a minimum wage job and you find yourself living paycheck to paycheck, buy less bitcoin. You need money for food, rent, and more important things, so don’t worry about how much you have in cryptocurrencies. If you’re living a more comfortable life, with a decent salary and a reliable living situation, you can afford to put much more in bitcoin, since losing your funds won’t have a significant impact on your life, but if bitcoin explodes as expected, you will become a multimillionaire. Of course, if you are already financially comfortable or retired, it’s a great idea to plow a ton of your wealth into bitcoin. It’s an asymmetrical bet — it could be the difference between living in a nice apartment and flying private jets to new islands every day!
A super important external factor exists which has nothing to do with personal preferences — bitcoin supply. As you know, the supply of bitcoin is cryptographically limited — there can only be a set number of bitcoins in existence. Every day, bitcoins are lost, people forget passwords, or they die. The effective supply of bitcoin decreases every single day, which results in its value proposition being pushed up over time. There are only 732,000 bitcoin addresses that have more than 1 BTC — not to mention that one person can have unlimited addresses. That means that well under 0.00976% of the people on the planet have a significant amount of bitcoin. This is an insanely small number. If you own a single bitcoin, you are instantly in the top 0.01% of the population in terms of bitcoin ownership. Since only 21 million bitcoins can ever exist, if we divided all possible bitcoins amongst the entire world population, each person would only get 0.0028 BTC. Think carefully about how limited the bitcoin supply is. You will understand that owning even a small piece of bitcoin puts you ahead of billions of people, and if the cryptocurrency ecosystem blows up, that $100 that you invest today could be a future yacht, or even a house. Now, if you buy a whole bitcoin today, you’ll be in the 21 million club. Imagine where that will put you in the future. The potential is absolutely limitless.
Start with a target of 0.0028 BTC, which everyone absolutely has to have. Then, based on the risk profile information given earlier on in the article, allocate a certain percentage of your monthly paycheck to bitcoin. This should ideally range from 10% to 80% depending on where you fall on the risk profile spectrum. Save up 1 BTC, then 21 BTC, and wait for the next crypto boom. It will be spectacular.