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 being a potential solution to the financial problems of the existing fiat economic system to reaching the unbanked and diversified portfolios. However, a large portion of the general public sees Bitcoin as a gateway to financial freedom amid rising fiat inflation and geopolitical uncertainty.

Traditional banking systems have time and again served as a tool for centralized governments to dictate financial access, especially in times of emergency. Most recently, the war between Ukraine and Russia served as a case study for how cryptocurrencies helped the displaced and the unbanked access funds for basic necessities.

As intended by its creator Satoshi Nakamoto, Bitcoin seeks to bring power back to the people. No amount of regulations, sanctions or bans can stop people from using Bitcoin as money. Beyond that, a calculated investment in Bitcoin has the potential to bring people closer to the dream of financial freedom. But how can people achieve it?

Hodl

The enormous volatility of cryptocurrencies combined with the restlessness of an investor is a recipe for an instant loss. Many fail to understand that Bitcoin – unlike other cryptocurrencies – is a long-term investment. Therefore, Bitcoin veterans recommend holding the asset during bull markets and buying dips during bear markets.

According to data from UpMyInterest, over a few years, Bitcoin holders witnessed an average annual return of 93.8%, which in its best year rose to 302.8%.

As simple as it sounds, hodling (crypto lingo for holding assets) has proven difficult for investors. Some factors that trigger sudden Bitcoin sell-offs include the spread of FUD (fear, uncertainty and doubt) and price movements.

While profiting from Bitcoin’s volatility makes short-term sense, zooming out on the price chart reveals a long-term greater incentive to hold. Moreover, investors who own Bitcoin will always have the ability to spend these expenses across geographic boundaries without losing value.

Average dollar cost

Considering Bitcoin as a viable long-term investment option, many investors tend to implement the Dollar Cost Averaging (DCA) strategy. This involves setting aside a predetermined dollar amount from a regular income to be reinvested in Bitcoin every day, week or month.

While El Salvador was initially criticized for adopting Bitcoin as legal tender amid crippling inflation, the country was able to repurpose the resulting unrealized gains to fund social projects, such as building hospitals and schools.

When the Bitcoin bull ran out by 2022, Salvadoran President Nayib Bukele followed a strategy similar to DCA, where the country would buy 1 BTC every day.

When Bukele announced his plan to buy Bitcoin, it was priced at roughly $16,600, as shown by data from Cointelegraph Markets Pro and TradingView.

Since then, BTC’s price has risen by 40.46%, bringing much-needed relief to Salvadorans. Investors looking for financial freedom must follow a similar strategy as they react to market changes and public sentiment.

Self storage

When it comes to the long-term holding of Bitcoin, the key is not to trust any other third-party entity with the assets’ private keys. Investors who store Bitcoin on crypto exchanges unknowingly give away full control over their assets.

Ever since the FTX scam came to light, the case for self-storage has grown stronger. Investors who suffered losses due to alleged misappropriation of funds realized the importance of self-storage. Maintaining ownership of the private key – via self-managed wallets – becomes essential for those seeking financial freedom in its truest sense.

The FTX fallout also forced crypto exchanges to prove the existence and security of users’ funds to avoid a low liquidity situation.

Although crypto self-storage hardware options require an upfront investment, it is up to the users to choose an ideal method to store the private keys, even if it means writing the private keys on a piece of paper.

The three practices mentioned above – hodl, DCA and self-storage – constitute the main pillars of financial freedom. However, users are not restricted from trying other strategies that suit their needs.

Achieving financial freedom with Bitcoin is possible. Given the nascent nature of the crypto ecosystem, investors are advised to focus on the long-term benefits of Bitcoin while reaping short-term gains in the process.