You must have a source of income if you must succeed in your holdings.
Not just having a source of income, you should have provision for emergencies. Hence there is a need to have emergency funds in case of loss of job, health issues or other unforeseen occurrences. You should always invest only what you can live without, that is why the DCA strategy will always be the best investment option. It facilitates investing at your pace and places less financial burden on the investor.
Life can be so unpredictable that if we don't prepare well enough for the future against any type of emergencies that may arise we might end up going back to square one like we never had a plan or a job in the first place.
There are circumstances that may hit a man that his single job that is his source of income can't handle it compared to when he's with multiple streams of income. Still fresh in my head the covid-19 pandemic that made a lot of companies to layoff some of their workers , I had a family member that was affected and that was how he fell back to his little savings (if it were bitcoin we would call it hodling). Assuming he had other sources of income flow a layoff from his company wouldn't have had such adverse effects on him that he fell back immediately to his savings. So I agree, having multiple streams is much better than just a single source of income in today's world.
However, some persons that sell their bitcoin hodling in some cases may not be as a result having no steady income source or a single income source that later went bad but could be that they faced life challenges and circumstances that not even their multiple income source was capable to settle it all so they had no option but to sell their bitcoin hodling even in a loss or average price to settle their problems. Life is entirely unpredictable!
Part of the justification for an emergency fund is if the income streams dry up. some guys like to go with the idea of merely having cashflow is going to save you, but it is not going to save you if you are not managing your cushion very well, and yeah sometimes multiple cashflow streams could dry up at the same time, and temporarily, there might not be any other options and sometimes the lack of other options could last 6- months or a year or longer and Covid likely lends some credibility to those kinds of outlier scenarios that end up really catching people off guard if they don't have something like an adequate emergency fund.
Sometimes emergency funds could be designed for 6 months but if shit really hits the fan, there could be ways to cut expenses in such ways that the emergency fund might be able to last for 9-12 months... and yeah, there are a variety of kinds of emergencies, and likely the ones who are most likely getting into emergency situations are those people who are living on the edge in terms of how they manage their cash cushion and how well they might monitor their cashflow and expenses into the future to see when there are various short-falls and to minimize the time in which there might be short-falls in cash and in order to lessen the odds for emergencies actually getting to such a level that their bitcoin stash would need to be dipped into at a time that is not of their own choosing.
For the few years I have been into cryptocurrency, I have discovered that you can't hold till the right time if your don't have a source of income. Just imagine that you have a pressing basic needs like feeding or rent, then you don't have money to finance it, you will be forced to sell your Bitcoin at a loss if you don't have a source of income outside your holdings.
People who don't have a source of income don't invest in the first place, unless is that rare case of an unemployed person winning the lottery or inheriting wealth.
Your theory isn't very good because the bitcoin holder could've bought in 2016 and have enough money now to be able to live without any other income. I have enough bitcoin that if I started to sell it today to cover all my basic needs, it would last me for decades.
These are good points darkangel11.
Earlier someone mentioned getting into bitcoin with their passive income, but that hardly makes sense because people frequently get into investing, whether into bitcoin or otherwise, in order to attempt to create a passive income.
I do agree with the idea that an income is needed in order to grow an investment, unless you can figure out some kind of way that you are both able to pay for your monthly expenses and also to grow your investment, which surely is not an easy thing to accomplish for anyone trying to trade and make money off of their trades - since many times in order to both have growth in the investment and also to be able to pay for your expenses, then you need to be working with a certain amount of capital.
In regards to the injection of some kind of a lump sum amount into bitcoin and then being able to live off of it in perpetuity, there would be some need to figure out what might be a sustainable rate of withdraw, and in traditional investments, there has been a suggestion of 4% as being safe, and so in that regard, there is a bit of a presumption that on average the investment is going to gain in value at least 4% on average in order to make a 4% withdrawal rate sustainable in perpetuity... but if the investment is not gaining in value at least 4%, then there will be eating into the principle.
I personally believe that currently a 6-10% withdrawal rate is sustainable for bitcoin, so long as the valuation is made from the 200-week moving average rather than spot price and also so long as there are reduction of the withdrawal rate when the BTC price is close to the 200-week moving average or below the 200-week moving average, and so I present those ideas in
my sustainable withdrawal thread and
bitmover created a tool to reflect such ideas.
In my thread I use the idea of starting with 21 BTC in September 2022, and so after about 16 months, the balance of that hypothetical is just below 20.5 BTC, but the withdrawal rate that was being used was 4%, so the withdrawal rate was set more conservatively as a means to conserve and potentially grow the value of the holdings, and maybe a some point the rate might be moved up to a higher percentage because at a certain point if the fund keeps growing the income keeps growing but the fund does not deplete, and maybe at some point there would be a goal to keep the fund more flat rather than growing.
I think that a bitcoin can start with any amount of BTC, and if the amount of income off of the BTC is enough to sustain his monthly expenses, then he would not necessarily need any further cashflow from other sources once the BTC amount has reached a high enough amount... .. so a person has to figure out what is his monthly expenses, and maybe also ask himself if he is o.k. maintaining the same rate that he had been accustomed or does he want to increase or decrease his monthly expenses, and so then the fund amount would need to be at a large enough value to sustain his income objectives.
It will be a crazy thing to do when you invest not just in Bitcoin but every orher business without having a source of income, how do you plan to sustain the growth of the business when you keep pulling out money from the investment to take care of family needs or your basic needs? I think lack of proper orientation is the reason why most people believe that they can actually start of any kind of Bitcoin investment with all what they have without minding what the omen will be in the future. These saying has been over emphasis here on the forum, Bitcoin is not a quick money giving scheme, before you Hold, trade etc insure you have your back , have source of income, don't leave your present job to focus on Bitcoin investments only and invest with the amount you can afford to lose even though you don't intend to lose.
These are all good points.
The power of compounding comes from keeping the overwhelming majority of the value in the investment (in this case in bitcoin), so an income can help you to build your bitcoin enough in order that it can get into a large enough value to be self-sustaining, but you will never get to the point in which the value is self-sustaining if you withdraw from it more than it is appreciating in value. Maybe with bitcoin it could take one or two cycles before your bitcoin holdings have been built to a large enough size in which you would be able to start to draw from it... and so prior to that, you have to be careful regarding how much (if any) you draw from it.
You can also lower your cost of living.
You can move to a cheaper place, buy a small house outright, etc.
The closer your cost of living is to zero, the easier it is for you to get some kind of income that covers it.
OP is right however. With no source of income there is no way you can live without selling Bitcoin unless you have millions in the Bank.
That is common sense however, is it not. Does any body actually believe they can simply use all their life savings to buy Bitcoin and all of a sudden put their feet up on a table and retire? Life is much harder than that. There are people who get luckier and win a lottery. Or purchase Bitcoin right before a Bull run. But they are the rarest of the rare and the luckiest of the lucky.
You can not just buy Bitcoin and step back, you need to be involved and keep working on it to reach the point of you living a good life. And even then, if Bitcoin is all you own how in the world are you supposed to live? By shouting you own Bitcoin? You need to sell some of it to cover your costs of existence!
Personally, I think that you could just buy bitcoin and live off of it, but you have to already have enough that would sustain you. So for example, if you need $3,333 per month, then you would need
33 bitcoin which would put you at $1 million in valuation based on the 200-week moving average and $1.4 million in valuation based on the spot price.
However, if you believe that you can get by for less, such as based on $1,667 per month then you would ONLY need half of the above stated amount, so about 16.5 BTC.
The quantity of bitcoin that you need will likely decrease in the future in order to maintain the same given standard of living, and of course there are various ways that you can calculate cost of living, and/or your withdrawal rate and/or maybe if you are trying to continue to grow your BTC holdings while you are trying to live off of them. In
my entry-level fuck you status chart, I try to project out in a relatively conservative kind of way how many BTC that you would need in the future based on a kind of graduated increase in the 200-week moving average that is likely going to continue to become a smaller and smaller upward slope, and of course the 200-week moving average is not always guaranteed to be positive, either, even though so far in BTC's history it has remained positive, with its worst performance between June 2022 and November 2023 with ONLY around an average of 20% increase per year, and yes it could bet worse than that, yet part of the reason that I still consider the 6% to 10% to be within the parameters of sustainable withdrawal is because the 200-week moving average has still not gone down to those levels, yet.
Of course if you do not have enough capital to get the amount of BTC that you need, then you have to get up to the amount that you need, so either you sell things or you get some kind of an income in some kind of way, and surely while you are building your stash it seems that having an income is the best way to do it, but once you built it, then the stash becomes the income, as long as you withdraw it in a sustainable way, as I present these ideas
in my sustainable withdrawal thread.
If I had 50k dollars and it was my last money for the rest of my life, I could still make a smart long term investment. I can say that the main issue is not whether the investment is made with additional income or not, but the amount of the investment.
For example,
$50k invested into bitcoin and if we go by the 200-week moving average for an evaluation, then that is going to be about 1.65 BTC. Of course, current spot price does get you a bit more value, but we should be using the bottom prices to figure out the value of our stash if we are going to figure out if the withdrawal rate/amount is enough to live off, and with a withdrawal rate of 4% that is only going to get you about $167 per month of income.
That amount might not be enough for anyone to really live off off, but it could be a good supplement of income, and you could choose to withdraw at a higher rate... or you could choose to dip into the principle, but I would not recommend dipping into the principle unless you are getting close to death or some other emergency that would take you out of the investment.
You are not really worse off by accumulating bitcoin as long as you are able to manage your withdrawals, and surely if the withdrawal amount is not enough to sustain you then you either need another income source, or you need to build up your BTC holdings so that your withdrawal amount will be higher.
Absolutely, I'm with you on this. Investing in Bitcoin is more of a side hustle rather than a full-time commitment, unless, of course, you're professionally managing a crypto investment fund. For most of us, it's about wisely using our savings to tap into the crypto market.
It's crucial to remember the old adage, "Don't put all your eggs in one basket." Diversification is key in any investment strategy, and it holds especially true for volatile markets like cryptocurrency. While Bitcoin offers great potential, it's important to balance it with other investments to mitigate risk and ensure a more stable financial portfolio. This way, we can explore the exciting world of crypto without jeopardizing our entire financial security.
Fuck crypto. We are talking about bitcoin here. There is no need to diversify into crap.
Another thing is that if you are brand new to investing, then there may well be no need to diversify into anything except bitcoin and cash, and perhaps once your bitcoin stash starts to get to half a year or a year worth of income/expenses, then maybe at that time there might be some needs to diversify beyond bitcoin, but that is also not necessarily into shitcoins... so the traditional assets to diversify into would be equities, property, bonds, commodities and cash/cash-like products (not necessarily shitcoins).. anyone buying any shitcoins would be best served to limit any purchase of shitcoins to less than 10% of their bitcoin size and not to cheat by reinvesting into shitcoins after losing the 10%.. the 10% is similar to gambling or trading which take a lot more skills that investing into bitcoin.. which you would be more likely to lose your money if you involve yourself in shitcoins, trading or gambling.
