Investing In Bitcoin for Early Retirement - Listen To What This Millionaire Couple Has to Say

 Hey guys it's sadia and maha from our rich journey on today's video we are talking about investing in bitcoin now ever since we started our youtube channel we've always received questions here or there about investing in bitcoin but recently with bitcoin at all time highs up over 300 in 2020 the questions have been

  Coming in furiously and so we must take this opportunity to talk about investing in bitcoin because there is a lot of excitement about investing in this cryptocurrency and we must give our opinion when it comes to investing in bitcoin for financial independence and retiring early so in this video we're going to talk

About what bitcoin is how it's valued how people buy it the pros and cons of bitcoin and we're also going to give our thoughts on investing in bitcoin for financial independence and retiring early so if you are new to our channel our channel is all about making money saving money and investing money on the road to financial independence and retiring early we were pursuing financial independence For eight years we reached it we quit our government jobs and we retired early so if you're interested in any of those topics make sure you subscribe to our channel so let's start off by talking about what bitcoin is so it is a digital currency which is also a cryptocurrency and it was created in january of 2009 and it is the largest cryptocurrency by Market cap it's used to make online purchases to buy and sell things but people also invest in it so when it comes to bitcoin everything is done digitally there is no physical coin that you're holding so when you buy and sell things with bitcoin you do it through a digital wallet that has a private and a public key that you use to buy and sell things And every single bitcoin transaction that is made is recorded digitally and then a massive amount of computer memory and data is used to verify the validity of each bitcoin transaction so massive amounts of computing power are necessary in order for bitcoin to function because this power is used to create more bitcoin now this process is called Bitcoin mining where these massive amounts of computers solve these very complex computational puzzles and when they solve these a new block in the blockchain process is created and when this happens new bitcoin is created now we could spend hours talking about the bitcoin mining process how it's issued how bitcoin is secured but this is not that video what we Wanted you to understand is that this is a currency that is very complex in how it is developed something else we want you to recognize is that bitcoin is not backed by any bank or any government organization and thus it is not a legal tender so now let's talk about how people can get their hands on some bitcoin because there are really three different ways that you can get a hold of bitcoin The first way is to be a bitcoin miner now bitcoin miners are the people that solve these bitcoin algorithms in order to create more bitcoin on the blockchain these miners are paid in bitcoin they are given a fraction of the bitcoin that they create now we don't want to confuse you because when we say that people are bitcoin miners what we really mean Is that people own what is typically referred to as bitcoin farms where there are huge huge warehouses with so many different computers and computer cables and wires that are figuring out these different algorithms to create more bitcoin and when they do that they get paid in bitcoin as well so it's not these individual people working on their desktop or a Laptop trying to solve these algorithms so if you are an individual that wants to mine for bitcoin it is very very difficult and the next way that you can get your hands on some bitcoin is to receive it as payment for a product and service that you produce people can pay you in bitcoin and the third most common way that People can get a hold of bitcoin is through buying it on a platform that sells bitcoin so robinhood is a new platform that sells bitcoin etoro is another one but there's also platforms like coinbase square cash binance coinbase pro all of these are platforms that sell bitcoin now these platforms are also platforms That people trade bitcoin bitcoin is popular because it is a big investment for a lot of people now people are buying and selling bitcoin as an investment and we're going to talk about the investment aspects of bitcoin later on in this video but these are some of the places that you can get a hold of bitcoin so let's talk about how bitcoin gets its value Because it's not like the typical dollar or euro or yen that's backed by the government so how does it shoot up and drop down so quickly and so sporadically well it all has to do with supply and demand so basically bitcoin has no intrinsic value like i said it's all about supply and demand and it's created this way because Bitcoin has a limited number in circulation and ultimately bitcoin is only going to have 21 million bitcoins produced and then it ends so as it's being produced it changes the supply and demand supply can go up and demand goes low or if there's lower supply and demand goes up then it shoots the price of the cryptocurrency up so it all depends on how much is in Supply and how much is being demanded by investors now supply and demand is a huge part of what gives bitcoin its value but another part contingent on that value is people's trust in bitcoin people have to trust that bitcoin will be successful so investors are investing in it because they believe that the price of bitcoin will go up or people Are trading with bitcoin because they believe that bitcoin may ultimately surpass the dollar the euro the end whatever form of money that is used people trust that bitcoin will ultimately be used in the same way so let's talk about the pros and cons of bitcoin and the first pro is that there are large swings in the value of bitcoin and this is a pro to a lot of People that like to get those short term wins i mean in 2020 bitcoin was up over 300 so there were people that were able to buy bitcoin low and sell it high and reap that type of profit the next pro is that it is relatively easy to buy and sell bitcoin because bitcoin has moved into the mainstream you can buy it now on major platforms And you can trade it daily in the past it was very hard to move bitcoin like that so the final pro with bitcoin is that there is a finite supply of it like we said before bitcoin has this source code that allows it to create exactly 21 million units of bitcoin after that there will be no more bitcoin that is created so it's cutting off the supply now the idea behind that is if the Demand continues to grow and the supply does not grow then the concept is that the price of bitcoin can continue to go up so this however leads to the cons which goes back to that supply and demand dichotomy what's happening with bitcoin is that it's very popular right now and it's very unique but in the future bitcoin could be replaced with something Completely new a newer and better technology and if that happens the demand can go to this new different type of cryptocurrency if that happens then bitcoin's popularity will crash and there will be no more interest in it meaning that the price of bitcoin will bottom out so this is a major con because when you're investing in bitcoin The value is based off of a speculative demand on the other hand if you are investing in a company for instance and you're buying their stock you are basing that decision on their financials this is not the case when it comes to investing in bitcoin you are basing the value of your investment on what everyone else is willing to pay for this speculative Thing but this speculative thing could be replaced by another technology like christina said another coin could come along that is more efficient that is more popular that people believe more in so you have to be very careful when it comes to investing cryptocurrency because there is nothing holding up that value except other people's perception of that Cryptocurrency the next con is that bitcoin is very volatile now we talked about this as a pro if you are one of the lucky ones that can buy low and sell high but it also works in the opposite direction investing in bitcoin it's very hard to time the market in fact we think it's impossible and in and timing the bitcoin market oh my goodness You must be right twice you must be right when you buy and you must be right when you sell but this volatility can leave you in a bad position to sell at significant losses so let's go over bitcoin's pricing to give you an idea of what we're talking about in october of 2017 bitcoin was selling at five thousand dollars and then the following month it went up to Ten thousand dollars the following month after that it almost doubled to twenty thousand dollars which is great for people who got in at five thousand dollars but in 2018 from january to february alone the price crashed by 65 and by november of 2018 the price had crashed down to 3 500 from the highs of 20 000 just one year prior so look at what Happened in 2019 bitcoin sold for as much as 10 000 in 2019 but then dropped back down to 7 000 by the end of the year now in 2020 prices surged again with bitcoin starting off at 7 200 at the beginning of the year and to date it's now selling for over 33 000 but imagine what will happen if there's a crash if people are paying for bitcoin At more than 33 000 and it crashes down to what it was selling at the beginning of 2020 which is 7 000 that's a significant and huge loss for investors you see these types of swings bring us to the next con when it comes to investing in bitcoin there is no price history when you invest in the stock market you can see the historical returns of the stock market And use that as a gauge to where the stock market may be going what we see with bitcoin is we see these tremendous rises and these tremendous falls and it's hard to gauge where bitcoin will really end up will it end up at thirty three thousand dollars a coin or will it end up back at three thousand dollars a coin there is no real historical perspective to understand where it may Be going another con with bitcoin is the security risk and online hacking now a lot of proponents of bitcoin say how secure it is how secure the source code is because of the algorithms and the bitcoin mining but that is not the problem with the security related to bitcoin it's really about the online wallets that people use in order to trade bitcoin and buy And sell things with bitcoin those are very susceptible to online hacking one of the bigger hacks that occurred was with a japanese bitcoin exchange where hackers stole hundreds of millions of dollars in bitcoin from digital wallets being stored on what was supposed to be secure servers and that's just one example but the real issue is that when those hacks happen There is no regulation or government organization in place that helps those people get their money back when you invest in cryptocurrency you are taking on a lot of risk when it comes to having the crypto being stolen from you and you never being able to get it back because there is no one there to support you so those are the pros and cons that we See with investing in bitcoin but now what we really want to talk about is bitcoin investing as it relates to financial independence and retiring early now ahmad and i were on our fire journey for eight years we were investing consistently through those eight years and at no point did we invest in cryptocurrencies or specifically bitcoin and people ask us now would we invest in Bitcoin and the answer is still no the number one reason why we never invested in bitcoin and why we never will is because of the risk involved in it now we mentioned that there have been some huge rewards for people investing in bitcoin and we think that's great for those people but because of the potential risks the huge losses that also come with investing in bitcoin We are not willing to assume that level of risk with our investment portfolios so the reason why we're not willing to assume that level of risk is because we base our fire principles off of the four percent rule which means our investment portfolio has to generate on average a yearly return rate of four percent adjusting for inflation now if we can make that four percent adjusting for Inflation year after year after year we will be able to maintain early retirement and beyond if we start searching for goals where we're getting a return of 300 percent at a risk of also losing all of our money that is very detrimental because the way that we have been investing right now has allowed us to keep up with that four percent withdrawal rate and actually since we've Been retired our portfolio has had huge returns much higher than that necessary four percent so we retired a year and a half ago in 2019 and we primarily invest in a total stock market index fund which is vtsax in 2019 vtsax returned 30 in 2020 just last year it returned 20 so we are really happy with the returns that we've gotten in the past Year and a half since we've been in early retirement now historically the stock market returns an average of nine to ten percent every single year and those are the types of averages and returns that we need to have in order for us to stay in retirement so we are satisfied with the results that we have we are satisfied with the historical return of the market and because we are satisfied with that We do not need to go out and chase even higher returns because in doing so our portfolio could result in significant losses so those are our thoughts about using bitcoin in pursuance of fire we never did it and we are not investing in bitcoin now or in the future but we have some thoughts for you to consider if you are planning on investing in bitcoin and the first thing is to always consider investing with a plan So if bitcoin is going to be part of your investment portfolio you need to have a plan associated with it generally the rule of thumb is if you are investing in a speculative type of investments like bitcoin the rule of thumb is that it should be less than 10 allocated to your portfolio and if you choose that allocation or whatever allocation you choose you have to understand Whether or not you're going to go into this investment with bitcoin as a short-term investment or a long-term investment what will you buy it at what do you plan on selling it at and once you sell it what do you plan on doing with the profits assuming that there are profits now assuming that there are losses you also have to take that into account if there are losses what do you plan to Do how will you plan on building your portfolio after that so basically how will you use bitcoin profits to support your journey towards fire now these are just our thoughts everyone should develop their own individual plan when it comes to investing in bitcoin investing in the stock market pursuing fire but this is what has worked for us And so if you guys have liked this video if you feel like we've given you value on your journey please give this video a thumbs up subscribe to our channel and join the journey you