Is it possible to achieve financial freedom with Bitcoin?

Over the past 14 years, investors have been attracted to Bitcoin (BTC) for many reasons – from fixing the flawed fiat economy and reaching the unbanked to diversifying their portfolios. However, a large segment of the general public sees Bitcoin as a gateway to financial freedom amid fiat inflation and geopolitical uncertainty.

The traditional banking system has, many times, become a tool for centralized governments to dictate financial access, especially during difficult times. More recently, the Ukraine-Russia war became a case study in how cryptocurrencies help displaced people and fund unbanked access to basic needs.

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

Hodl

The enormous volatility of cryptocurrencies coupled with investor anxiety is a recipe for quick losses. What many don’t realize is that Bitcoin – unlike cryptocurrencies – is a long-term investment. Therefore, Bitcoin veterans recommend holding the asset during bull markets and buying dips during bear markets.

Setting aside a few years, Bitcoin owners witnessed an average annual return of 93.8%, which in the best year, rose to 302.8%, according to data from UpMyInterest.

Historical chart of Bitcoin to Bitcoin over the past year. Source: UpMyInterest

As simple as it is, hodling (crypto lingo for holding assets) has proven to be a difficult feat for investors. Some of the factors that lead to sudden Bitcoin sales include FUD (fear, uncertainty and doubt) and price movements.

While it makes sense in the short-term to profit from the volatility of Bitcoin, zooming out the price chart reveals that there is a greater long-term incentive in holding. In addition, investors who own Bitcoin will always have the option to use this spending within geographical boundaries without losing value.

Dollar Cost Averaging (DCA)

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

While El Salvador was initially criticized for using Bitcoin as legal tender in the midst of crippling inflation, the country was able to use the unrealized proceeds to finance social projects such as hospital and school buildings, among others.

With the Bitcoin bull running out in 2022, El Salvador President Nayib Bukele is following the same strategy as DCA, where the country will buy 1 BTC per day.

Back when Bukele announced his plans for a Bitcoin recipe, Bitcoin was priced at about $16,600, according to data from Cointelegraph Markets Pro and TradingView.

Bitcoin price movement since Nayib Bukele announced plans to buy 1 BTC per day. Source: TradingView

Since then, the price of Bitcoin has increased by 40.46%, providing much-needed relief to Salvadoreans. Investors seeking financial freedom should study the same strategies while being reactive to changes in the market and overall public sentiment.

Self-control

When it comes to holding Bitcoin long-term, the key is not to trust other third-party entities with the asset’s private key. Investors who store Bitcoins in crypto exchanges unknowingly give themselves complete control of their assets.

Ever since the FTX scam was announced, the case for self-restraint has gotten stronger. Investors who have suffered losses due to alleged misappropriation of funds understand the importance of custody. Maintaining ownership of private keys – through wallets (hardware/software/physical) – is paramount for those who truly seek financial freedom.

The fall of FTX also forced crypto exchanges to prove the existence and security of user funds to avoid low liquidity situations.

Although hardware alternatives to crypto custody require upfront investment, users must choose an appropriate method to store their private keys – even if that means writing down their private keys on a piece of paper.

The three practices mentioned above – hodl, DCA and custody – form the main pillars of financial freedom. However, users are not limited to trying other strategies that suit their unique needs.

Finally, to answer the question – yes, achieving financial freedom with Bitcoin is possible. Due to the nature of the crypto ecosystem, investors are encouraged to focus on the long-term benefits of Bitcoin while making short-term gains in the process.