Using Bitcoin as Emergency Funds?

[SatoPrincess]

What do you think? If you are going to diversify, what's your strategy?
-100% Savings/Cash
-80.20 Savings/Cash or Bitcoin
-50.50 Savings/Cash or Bitcoin
-Larger part in Bitcoin

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When I hear the term “diversify”, what comes to mind is bitcoin, real estates and real-world businesses. These are the three things I would put my money on. The question of which currency between fiat and bitcoin should be the larger part of your savings, I would say bitcoin simply because of its volatility and high chance of being more profitable in the long term so yes 80:20 seems like a smart money move to me.

[Egii Nna]

With that, inflation is just going out of hand; our local currency Dollars is already at 62pesos, increasing its value exchange through out the years, now im already thinking of putting everything on Bitcoin because it is just the same thing, I would lose money because of inflation, I mean in Bitcoin you would probably lose as well, but at the same time you might get profit long term, Emergency fund was not really something that you are going to use everytime, In my experience It wouldn't really going to get touch for months or year, similar to just saving long term, so maybe it is just better to be put on Bitcoin since it was a long term savings as well.

Let me ask you; if you save keep your emergency funds in bitcoins and it happens that an emergency need came up when the market is at a DIP price, what will you do? Are you going to sell at a lost price just to cover up the emergency need? You see, this is why it is advisable to keep emergency funds in fiats since most of your real life dealings will be in fiats, like when you want to pay health bills.

I know that leaving money in fiat for a long time will make it to lose value as a result of inflation but it will be better to just leave emergency fund where you can easily access it when an emergency need announces itself. It will be so painful to sell your bitcoins to sort an emergency need except in a scenario where the market is skyrocketing but since an emergency need can come out unannounced, keeping emergency fund in fiat will be the right thing to do instead of keeping it in bitcoins.

Exactly leaving your emergency funds in bitcoin or any volatile asset is not ideal because  emergency funds is not supposed to be that much money depending on the emergencies you assume can happen to you and it need to stay in a stable place but if your local currency loses value very fast, you can keep your emergency funds in stable coins.

Another reason why you should not leave your emergency funds in Bitcoin is because emergency funds are not necessarily long term savings as you call them, they can be needed at anytime that is why it is kept for an emergency. Keeping emergency funds in fiat or stable places will also help you achieve investment success in the long term.

[mirakal]

One thing is certain here, you don't have to invest all your money in bitcoin. Learn to diversify, at the same time, reserve also some small funds allocated for any emergency. By having that small funds untouchable, you don't have to worry of any life's emergency.

However, I understand letting your small money sleep in the bank can still be a bad idea, but I guess not all money should go into investment. You can hide your money in your own vault in the house or whatever way that wouldn't be affected by inflation. With that, you don't have to sell untimely. You will just focus on growing your bitcoin portfolio through DCA or every time you have extra money. But I also understand that bitcoin itself can still be an emergency fund, as long as emergencies don't come often.

[coinlary]

Everyone has their own calculations, capabilities, expenses, bills, and so on.

You don't expect someone in debt to have as much invested as someone who isn't in debt. In the same way, you shouldn't expect someone working on a project to have as much invested as someone who has already completed their project(when I say "project," I mean the compulsory ones), same goes for source of income.

So, diversification isn't always a matter of choice sometimes, it's a necessity to some folks.

And about exposing what you'll be using to handle emergency expenses to  Bitcoin volatility, that could turn out to be a bad idea. I will advise not doing it .

[Botnake]

While a good investment can be highly volatile, but emergency funds need to be fixed and stable. You don't want your funds to suddenly lower its value because the market price drops, or even the other way around. And most of all, you don't want it to be eaten by inflation that's why putting it in a bank may not be the best option.

So the best idea is just to save money and keep it, separate your emergency funds as well as your investment funds and use them accordingly. Investing becomes more profitable when there is huge capital, but not all investments are guaranteed profitable that's why you have to set aside emergency funds from emergency funds. Do not mix them or combine them.

[Gozie51]

-80.20 Savings/Cash or Bitcoin
-50.50 Savings/Cash or Bitcoin

I won't go for 50 50 because that will mean having enough fiat that will be hit by inflation and by that, losing value in hodling and purchasing power. So to have 50% cash in bank is giving much out to the system especially where tax is heavily levied on fiat.

Personally, I would prefer to cut my cost of losing by hodling more btc up to about 70%. Then, 20% for fiat physical invest diversification and remaining 10% is for discretional money for running the day to day in-house expenses.

Therefore, I might use bitcoin for emergency fund if it has to do with health challenges and not to run the daily requirements at home because to benefit from bitcoin investment, it has to be for a long time duration.

Moreover, countries that are yet to tax on Bitcoin, it will be more profitable hodling more btc.

[Ndabagi01]

With that, inflation is just going out of hand; our local currency Dollars is already at 62pesos, increasing its value exchange through out the years, now im already thinking of putting everything on Bitcoin because it is just the same thing, I would lose money because of inflation, I mean in Bitcoin you would probably lose as well, but at the same time you might get profit long term, Emergency fund was not really something that you are going to use everytime, In my experience It wouldn't really going to get touch for months or year, similar to just saving long term, so maybe it is just better to be put on Bitcoin since it was a long term savings as well.

What do you think? If you are going to diversify, what's your strategy?
-100% Savings/Cash
-80.20 Savings/Cash or Bitcoin
-50.50 Savings/Cash or Bitcoin
-Larger part in Bitcoin

Local topic Link

You have raised a very good point here and many people will agree that emergency funds is just for emergency purpose and not for everyday use, leaving it in fiat and there comes inflation striking, then it’ll have your money depreciate and loses its value more. Thinking of Bitcoin as a better choice to save money in is very risky also because of the volatile nature of the currency. You may have invested in bitcoin hoping that when emergency comes, the price would have increased and taking out profit will be easy but it doesn’t always work that way.

Just like the Bitcoin market is very unpredictable, that’s how emergency situations are also unpredictable and they can come at anytime. Some could actually do it 50/50 to be the best approach but one doesn’t also know how much emergency funds can solve a problem when it comes and your saving is all in fiat. This will fully depend on your understanding and long term outlook of the market and economy condition in the country.

[Rengga Jati]

This falls under the category of asset and financial risk management and it applies to more than just crypto. In my view, having a reserve fund is crucial. We really ought to have one so that if an urgent, unexpected situation arises, we can access the money quickly.

It helps to first understand exactly what an "emergency fund" is:

An emergency fund is a cash reserve designed to cover sudden financial expenses so you don’t have to rely on your regular savings account, credit cards, or loans.

emergency fund

The definition itself implies that the funds should ideally be held in cash. Therefore, they really should be kept separate from any investment funds whether long-term or short-term. Since we never know when that emergency fund might be needed, it needs to be readily available as cash.

Even if you were to supplement your funds at some point by selling the Bitcoin you own, that is still distinct from an emergency fund.
On the other hand, funds allocated for Bitcoin investment, whether for the long term or the short term are different. We can distinguish them using specific percentage allocations. The key is to use cold money for these purchases. Naturally, by prudent and proper risk management.

[Odogwu-Blockchain]

According to what you said, you are working in your country where you earning in Fiat. If I were you, I'll have to reduce my expensive lifestyle if there's any, I see that you are on paid signature campaign that receives Bitcoin, that's enough for you to save Bitcoin plus your pay in Fiat. With these two sources, you are good to go as long as you delay any luxurious leaving.

Bitcoin earnings stays in your wallet, Fiat earnings for any emergency that comes in your physical world. Doing this keeps you balance.

[PrivacyG]

The 'Emergency Fund' should not be some thing you should worry about because 'what if it drops in value over the years'.  It should be there to serve in EMERGENCY, where you will probably not care about any thing else other than that you have that money ready to use.

Define what the emergency is though.  If the Internet 'breaks' all of a sudden, if there is a sudden country or global level black out, Bitcoin will be useless for at least a while.  If Fiat inflation goes absolutely insane over night, Bitcoin will probably be heaven on Earth.  The best option would be to create an 'Emergency Fund' that includes multiple Assets protecting you from the worst things.

My personal opinion and how I see things is.  Maybe it is not a bad idea to have the least money invested in the Asset protecting from the worst scenario such as global black out, and the most money for the 'least worst' emergency such as simply an unexpected large hospital bill and such.  Because if you hold 1000 Dollars worth of Bitcoin and 9,000 Dollars worth of Cash and Cash inflates 'to the Moon' unexpectedly rapidly, these 1000 Dollars worth of Bitcoin may become a LOT more in no time.

[Jasmyne]

You don't need to invest all the money you have in bitcoin. One piece of common advice for investors is to invest an amount one can afford; this simply means one doesn't need to invest all their money in bitcoin because money will be needed for other basic things.

There is nothing wrong with keeping money in the bank, as long as it won't be there for a long time, because keeping money in the bank without spending it loses value. This is where bitcoin plays a better role for money that is not planned to be spent. Bitcoin investment requires good management of money to be invested, and when an amount that one can't afford is invested, it becomes a failed investment.

I think the thing with most investors is that, they actually act like they can escape emergencies or they will never have emergencies since for the Main time they are currently not having one. There is a reason why it is called ‘emergency’ because it happens unplanned and can happen any time.
Why it is advised to keep emergency funds in the bank rather than bitcoin is because of the high volatility of bitcoin which might likely have a effect on your funds because it short term, hereby resulting in a loss on your emergency funds.

[Sanitough]

If you can allocate a larger amount of bitcoin and save a small amount of fiat, I think that would be much better. As long as you have a stable source of income, you don't have to worry for your emergency funds. Just don't let all your money go into a single investment, know how to diversify and never run out of fiat on hand. Its still different when you have sufficient amount of fiat that you can use any time, and you have investments that continuously grow in time.

However, I have no against using bitcoin as an emergency fund, but I think that will beat your purpose of having bitcoin as a long term or retirement investment. You don't have to complicate your bitcoin investment, have some good amount of fiat on hand always.

[batang_bitcoin]

What do you think? If you are going to diversify, what's your strategy?
-100% Savings/Cash
-80.20 Savings/Cash or Bitcoin
-50.50 Savings/Cash or Bitcoin
-Larger part in Bitcoin

Years ago, my portfolio consists mostly of Bitcoin and that's more than half of my assets. I am going to hold bitcoin continuously but as I grow older, I have to balance things and there's a need to allot for some cash. While I believe for the long term potential of Bitcoin, I start to become more conscious now. And so I allocate some cash as emergency fund and addition to it. Before, I don't mind putting all of it into Bitcoin but then I think I am in a better situation now where I don't have to hurry to DCA and forced to do it. I still do it but not as aggressive I was before. Invested into other assets because I think it's needed but still the biggest part of my holdings goes to Bitcoin but the profits I've made from it are now distributed.

[EL MOHA]

There are times I may have I reduce the bitcoin holdinf, but I increase it back.
Bitcoin is part of my emergency funds.

I usually think this mostly me doing this, but I have noticed that bitcoin isn’t entirely that too volatile for a short period of time and even in a long period of time it most gives me a 50/50 Chance. I am wary of having my emergency funds all in fiat because of the inflation that can easily affect it later. So there are certainly some bitcoin that are kept as emergency funds too and when need arises I can liquidate them without having to touch my main stash.

[Alphakilo]

What do you think? If you are going to diversify, what's your strategy?
-100% Savings/Cash
-80.20 Savings/Cash or Bitcoin
-50.50 Savings/Cash or Bitcoin
-Larger part in Bitcoin

Years ago, my portfolio consists mostly of Bitcoin and that's more than half of my assets. I am going to hold bitcoin continuously but as I grow older, I have to balance things and there's a need to allot for some cash. While I believe for the long term potential of Bitcoin, I start to become more conscious now. And so I allocate some cash as emergency fund and addition to it. Before, I don't mind putting all of it into Bitcoin but then I think I am in a better situation now where I don't have to hurry to DCA and forced to do it. I still do it but not as aggressive I was before. Invested into other assets because I think it's needed but still the biggest part of my holdings goes to Bitcoin but the profits I've made from it are now distributed.

Your ideology is well recognized and I too don't think as Bitcoin investment as a die hard affair even though I still DCA as I please, no matter the season of the market.
The risk to me of using Bitcoin as emergency funds is because it may interfere with my interest in long term holding and or for possible retirement reasons. That's why I prefer to still hold some fiat in savings, hold stablecoins that can be easily liquid when I want to for emergency funds and Bitcoin for long term investment and profit goal.
I prefer a 50-50 savings in fiat and the rest in stablecoins or Bitcoin investment.

[Cityhunter34]

Exactly leaving your emergency funds in bitcoin or any volatile asset is not ideal because  emergency funds is not supposed to be that much money depending on the emergencies you assume can happen to you and it need to stay in a stable place but if your local currency loses value very fast, you can keep your emergency funds in stable coins.

Another reason why you should not leave your emergency funds in Bitcoin is because emergency funds are not necessarily long term savings as you call them, they can be needed at anytime that is why it is kept for an emergency. Keeping emergency funds in fiat or stable places will also help you achieve investment success in the long term.

Emergency funds are very important at all times, because you don't know when they will be needed. So we shouldn't think about anything else other than finding a stablecoin and keeping it there. Bitcoin is highly volatile, so it will definitely not make sense to leave it in Bitcoin. There's no way you can sell it without losing, because an emergency will never wait for you to get the target price you want. That's absolutely the simple truth about it, because anything can happen at any time, so we should always try as much as possible to keep it ready.

[TastyChillySauce00]

With that, inflation is just going out of hand; our local currency Dollars is already at 62pesos, increasing its value exchange through out the years

What about holding dollar in your bank account as a safety net for emergency funds and investing the rest to bitcoin, wouldn't it be plausible that you exchange your local currency to dollar if the local currency keep going down against dollar?

That way you got both safety net that you can use at emergency time and then your bitcoin holding won't be touched. I do think that people who lives in a country with a weak currency don't talk about it a lot but most of them actually are holding USD and always exchanged their local currency whenever they get the chance, which could also be the reason why the country's currency keep weakening.

The best course of action would be to also exchange your money to USD and put everything else in appreciating asset like bitcoin.

[SeriouslyGiveaway]

What about holding dollar in your bank account as a safety net for emergency funds and investing the rest to bitcoin, wouldn't it be plausible that you exchange your local currency to dollar if the local currency keep going down against dollar?

The US dollar is a strongest fiat currency as it holds purchasing power so well. There is inflation of the US dollar and its purchasing power has actually decreased over time but compares to other fiat currencies, so far the US dollar is the best. Hence it is intelligent to exchange other fiat currencies to the US dollar in order to hold your emergency fund value better over time.

The purchasing power of the US. dollar over time.

That way you got both safety net that you can use at emergency time and then your bitcoin holding won't be touched. I do think that people who lives in a country with a weak currency don't talk about it a lot but most of them actually are holding USD and always exchanged their local currency whenever they get the chance, which could also be the reason why the country's currency keep weakening.

Governments in such nations can try to tighten regulations and more strictly enforce regulations on citizens because they don't want existence of free market or dark market exchanges of their national fiat currency and the US. dollar but if citizens actually have need, they will figure out ways to do that. It's true with the exchange methods for the US. Dollar and Bitcoin.

[SPIDERMAN008]

None of the options you have given seem to me to be a universal strategy. Depending on a person's lifestyle, income, financial situation and current assets, it can be determined whether to invest in Bitcoin or what percentage of it will be kept as savings.

A person with a strong income, who has a good amount of cash in the bank as savings, in addition to which he has already invested in some assets, such as land, apartment or small business , and he is regularly getting much more income than his expenses, he can invest in Bitcoin from that money according to his preference.

Now, for a person who does not have a strong income, who does not have much cash savings and does not have any assets, it would not be right to keep any fund in Bitcoin as savings. If he needs money at an emergency moment, he may be forced to sell Bitcoin at the wrong time. This can cause him losses.

A Bitcoin investor creates an emergency fund to keep his Bitcoin holding strong. If the investor's backup fund becomes equal to 3 to 6 months of expenses, then there is no need to increase his backup fund. Then he can invest in Bitcoin with discretionary income.

[Female King]

You don't need to invest all the money you have in bitcoin. One piece of common advice for investors is to invest an amount one can afford; this simply means one doesn't need to invest all their money in bitcoin because money will be needed for other basic things.

There is nothing wrong with keeping money in the bank, as long as it won't be there for a long time, because keeping money in the bank without spending it loses value. This is where bitcoin plays a better role for money that is not planned to be spent. Bitcoin investment requires good management of money to be invested, and when an amount that one can't afford is invested, it becomes a failed investment.

In some country where inflation is high keeping much of your money in fiat will give it less value because the value of your money in fiat will continue to deprecate as inflation gets high. In such case like 20-10 % of your fiat can be in the bank while there rest should be invested into bitcoin which appreciate in value over time and also other investment and businesses.

I also agreed with your sentiment that one don't need to invest all there in money in bitcoin which is correct because bitcoin is a long time investment and will take years for your investment to mature, some percent of your income can go on bitcoin investment that's some part of you know you won't be needing for a long or the money you can afford to loss.