Author: Jessy Gilger
Source: https://www.unchained.com/blog/six-stages-bitcoin-adoption
Although the role of BTC in value storage and exchange medium is increasingly recognized, accepting it also requires a step-by-step approach. These steps include understanding BTC, addressing potential risks, saving for the future, incorporating it into an investment portfolio, viewing long-term holding as an opportunity, and ultimately maintaining a lifelong relationship with it.
These steps are not predetermined; in fact, you may not smoothly progress from start to finish. These steps also do not comprehensively cover all situations; there are other ways to understand BTC. However, whether you are a newcomer to the BTC world or an experienced veteran, reflecting on these steps can help you better balance your personal goals and BTC position.
Understanding
"When you first buy BTC, your understanding of it is necessarily limited... More understanding will gradually occur in the days to come."
—— Parker Lewis
If you do not experience BTC, you cannot understand BTC. If you are curious, the best approach is to dive in, which is usually the first step for everyone to accept it.
There is no financial threshold for buying BTC. You might start with an amount that would make you happy if found on the street and sad if lost. For me personally, $20 was enough. The most important thing is to start from zero and take this step. The worst-case scenario is simply losing this small amount of money.
Play around and feel the fun. Listen to podcasts, watch videos. Follow people on social media who take this asset seriously. As your understanding and experience grow, you may gain more confidence and buy more.
Insurance
"BTC is insurance."
—— Greg Foss
After understanding BTC, many people next consider it as insurance or a "hedge" against the existing financial system. At this stage, some may believe that if the US dollar-dominated system collapses, BTC would be the top competitor to replace it.
People who invest 1% to 5% of their net worth in BTC may have entered this insurance stage. If investing 1%, even if BTC vanishes, it's equivalent to losing one cent out of a dollar. This won't cause a devastating impact on your financial situation, but if its purchasing power increases 100-fold, it protects all other assets in your portfolio.
When hedging the existing system, it's important to remember to keep your BTC outside the system. If you keep BTC on an exchange or with a counterparty, you'll lose them if the other party goes bankrupt. If you view BTC as insurance, you should manage it with cold storage and private keys. Otherwise, it becomes someone else's insurance.
Savings
"BTC is savings."
—— Pierre Rochard
At this stage, you may begin to realize that BTC is more than just insurance. BTC helps people protect their purchasing power from inflation. From this point, you may see that BTC is currency, and therefore a savings technology for your medium to long-term goals.
To use BTC for savings, the key is to have a good grasp of your "free cash flow": your income minus your expected expenses equals your free cash flow. When your income and expenses are properly planned, you can invest part or all of your free cash flow in BTC using a periodic investment method.
Periodic investment is a method that helps you gradually invest funds over a period of time. You need to purchase a certain amount of BTC according to a predetermined plan, regardless of its price. The most popular way to implement this method is through an automatic purchase plan, which sets your purchase plan and amount.
Allocation
"BTC is electronic property."
—— Michael Saylor
People in this stage attempt to invest in BTC more proactively. They intrinsically believe BTC will occupy a significant proportion of their investments (such as 20% of net worth), and generally buy or sell based on their investment strategy. This may involve a one-time purchase or rebalancing their investment portfolio to maintain their desired proportion.
In other words, BTC "savers" might save from their free cash flow, while BTC "allocators" may also invest in other assets in their existing portfolio.
Whether through the passage of time or your subjective decision, BTC has the opportunity to become an important part of your net worth. By this time, you will naturally consider selling some BTC because it has become more mature. This could be due to changes in your financial goals, risk appetite, investment cycle, or simply to realize profits and reduce your risk exposure to a particular asset.
For individuals, it's crucial to carefully consider your reasons for buying and selling BTC and assess its potential impact on your overall investment portfolio. Equally important is to remember that your approach to investing in BTC or other assets is a personal decision based on your financial goals, risk tolerance, education, and investment cycle. These issues should be consulted with a financial advisor.
Commitment
"BTC is time."
—— Gigi
The longer the time, the more apparent BTC's essence becomes. By concentrating time and energy into a completely scarce currency, people in this stage focus on developing and growing their long-term wealth. However, picking up long-term goals requires discipline, commitment, and willingness to withstand short-term market fluctuations.
People are often motivated to focus on immediate rewards and results, which can lead to premature selling of investments due to unexpected gains or losses. We are not naturally inclined to think in decade-long scales. This is where products like individual retirement accounts are useful, as they encourage individuals to be loyal to long-term goals.
Investing in BTC with a long-term time horizon carries specific risks. Nothing guarantees that this asset will perform as desired in the coming decades. However, if BTC performs as hoped and expected by people in this stage, it could significantly impact personal lives and long-term net worth.
Patience
"BTC is hope."
—— Robert Breedlove
The Bit people in this stage are true believers in the revolutionary force of Bit. They believe that Bit is not just a financial asset, but a way to bring positive change to the world. They are passionate about Bit's potential to expand human freedom and create intergenerational wealth, and they are willing to accept significant risks in pursuit of this goal.
Despite obstacles and challenges along the way, these Bit people will remain committed to their vision. They will become stronger in bear markets and will not be defeated by short-term setbacks. They focus on the long term, concentrating on creating sustainable wealth and a better future for themselves and those around them.
Some Bit people even completely abandon fiat currency in their financial lives. They fully believe in the principles of Bit and consider it the best way to achieve their goals. Overall, these individuals are driven by a powerful sense of purpose, believing in Bit's potential to make the world a better place.
Summary
Understanding the potential stages of your interaction with Bit can help you align your personal goals with what Bit might offer you. Whether you are simply learning about Bit, hedging potential risks, saving for the future, adjusting your asset portfolio, committed to using it as a primary medium of exchange, or enduring market fluctuations, gaining a solid understanding of these perspectives will help you make wise decisions and better understand your own "why".
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