Bitcoin as a savings account, really?

So, you wanna know if converting your savings account into Bitcoin will help secure your financial future? Awesome, you're in the right place! When it comes to saving money, it's important to think outside the box. Investing in digital currencies like Bitcoin is one way to do so, and it could potentially be more lucrative than putting your money into a traditional savings account. But, before you start investing, it's essential to understand the basics of Bitcoin, including the advantages of saving it and the strategies you can use to maximize your profits. In this guide, we'll cover everything you need to know about saving Bitcoin, from setting up a wallet to tax implications and investment strategies.

What is Bitcoin?

World-renowned Bitcoin investor Micheal Saylor is famous for saying it takes around 3000 hours of dedicated learning to fully understand Bitcoin. This is because Bitcoin is a multi-dimensional technological innovation that requires a broad base of specialized knowledge to fully comprehend. The standard definition of what Bitcoin is goes something like this:

Bitcoin is a decentralized digital currency that exists on a public ledger called the blockchain. It's created through a process called mining, where computers solve complex mathematical equations to create new coins. Transactions are recorded and stored on the blockchain, which is a secure and immutable record. Bitcoin is not controlled by any government or central authority, meaning it's immune to inflation and can be used to make payments anywhere in the world.The first Bitcoin was created in 2009, and since then, it has grown to become the world's largest digital currency by market capitalization. As of 2021, the total market capitalization of Bitcoin is over $1 trillion.

This is a good starting point, but Bitcoin is much more than that! In order to fully understand Bitcoin, knowledge from a number of disciplines is required. This includes knowledge from economics, computer science, cryptography, mathematics, and law. Additionally, knowledge from history, art, philosophy, and psychology can provide valuable insights into the potential of this revolutionary technology and its implications for the future of money. Finally, understanding the social and cultural forces that shape our world can also provide further insights into the potential of Bitcoin and its impact on society as a whole.

I will spare you a large chunk of Saylor's 3000 hour requisite, and give a simple answer to what Bitcoin really is:

Bitcoin is a replacement for the US dollar. Its hope. Its freedom for yourself, your family, and humanity. Hopefully, this statement intrigues you enough to get you down the rabbit hole of learning what Bitcoin is really about, and why its so important to our world today. Now, let's get back to business!

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What are the advantages of saving Bitcoin?

The primary benefit of saving Bitcoin instead of dollars is that it allows you to get more bang for your buck over time. The fastest way to prove it is to show you the numbers, so let's do that!

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Say you have a 10-year savings plan. Every month you put $100 into your savings account and watch the balance increase over time. After 120 months (10 years), you have $12,000 saved. But, those $12,000  are not worth the same as they were 10 years before. These bucks have less bang.

For example, let's say you saved this money in the hopes of using it as down payment to buy a car. Well, in 2012 the average cost of a car in the United States was ~$31,000. Today, in 2022, the average cost of a car is ~$48,000. That's an increase of 54% in just 10 years!  When you started saving, $12,000 was a 40% down payment, but by the time you finished saving that number decreased to only 25%. That's called losing purchasing power, also known as getting less bang for your buck. 

Now, lets see what would've happened if you had saved Bitcoin instead of dollars. Below is a list of the average price of Bitcoin and how much you could've saved in Bitcoin terms over the last 10 years:

• 2012 - $8.36 (Saving $100/month in Bitcoin = 143.54 BTC)
• 2013 - $243.00 (Saving $100/month in Bitcoin = 4.93 BTC)
• 2014 - $501.00 (Saving $100/month in Bitcoin = 2.39 BTC)
• 2015 - $275.00 (Saving $100/month in Bitcoin = 4.36 BTC)
• 2016 - $589.00 (Saving $100/month in Bitcoin = 2.03 BTC)
• 2017 - $4,293.00 (Saving $100/month in Bitcoin = 0.28 BTC)
• 2018 - $7,150.00 (Saving $100/month in Bitcoin = 0.1678 BTC)
• 2019 - $7,310.00 (Saving $100/month in Bitcoin = 0.1641 BTC)
• 2020 - $12,315.00 (Saving $100/month in Bitcoin = 0.0974 BTC)
• 2021 - $47,028.00 (Saving $100/month in Bitcoin = 0.0255 BTC)
• 2022 - $27,831.00 (Saving $100/month in Bitcoin = 0.0431 BTC)

As you can see, saving $100 worth of Bitcoin every month for 10 years would have netted you 158.02 BTC, which is worth approximately $2.68M at the current price of BTC ($17,000 per coin). Not only is that enough to afford a 40% down payment on that 54% more expensive car, its enough to buy an entire car dealership if you wanted to. The technical term is called: GETTING MORE BANG FOR YOUR BUCK!

Even if you had only been saving Bitcoin for the last 5 years, you'd still have ~0.50 BTC, which could be worth $35,000 if BTC revisits its all time high of $70,000 per coin. My frens, that's almost 300% more money than the $12,000 you would've saved in 10 years! Three hundred percent MORE, in half the time. Think about that...

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Aside from the actual numbers there are several other advantages to saving Bitcoin.

1. Bitcoin is a highly secure and reliable form of currency that is immune to inflation. This makes it an ideal choice for long-term savings.
2. Bitcoin is decentralized, meaning it is not subject to government control or regulation. This gives users more control over their funds and allows them to move money quickly and securely without having to worry about the potential for censorship. 
3. Bitcoin is a global currency. This means that it can be used to make payments anywhere in the world, regardless of geographical or political barriers.
4. Bitcoin is a highly liquid asset, which means its easy to convert into other currencies and back again. This makes it a great investment option, as it can be easily traded or exchanged for fiat currency, i.e. dollars (not that you'd really wanna do that ; -) ).

What are some Bitcoin saving strategies?

Now that you know the benefits of saving Bitcoin, you need to develop a Bitcoin saving strategy. There are several different strategies you can use, depending on your goals and risk tolerance:

• Decide on a long-term or short-term saving plan. If you're saving for retirement or another long-term goal, you may want to invest in Bitcoin for the long haul. If you're looking for short-term profits, you may want to consider trading or day trading.
• Set up a budget and stick to it. Decide how much money you can afford to invest in Bitcoin, and stick to it. This will help you stay disciplined and avoid making impulsive decisions.
• Diversify. Don't put all your eggs in one basket. Instead, spread out your investments across different types of digital currencies, as well as traditional investments such as stocks, bonds, and real estate. If you can exchange your overvalued stocks or real estate for undervalued Bitcoin at the right time, you will end up saving more Bitcoin in the end.

There are different ways to save Bitcoin. You can buy Bitcoin directly from a cryptocurrency exchange, or you can use a broker or trading platform. You can also purchase Bitcoin from a peer-to-peer marketplace or an over-the-counter service. Another option is to mine Bitcoin. This involves using specialized hardware to solve complex mathematical equations and earn new coins. This can be a lucrative way to save Bitcoin, but it does require a significant amount of time and effort. Finally, you can also save Bitcoin by investing in Bitcoin-related companies or products. This includes investing in companies that are researching or developing blockchain technology, investing in cryptocurrency-related businesses, or investing in Bitcoin-based products such as futures contracts or ETFs.

Ultimately, the way you decide to save Bitcoin is completely up to you and will depend on your personal circumstances. Just remember, taking the long-term approach is usually best for most people. This involves buying and holding Bitcoin over a long period of time and waiting for its value to increase. This strategy works best if you're confident about Bitcoin's future potential and are willing to wait out any potential downturns. Alternatively, you can take a short-term approach. This involves buying and selling Bitcoin quickly in order to take advantage of market fluctuations and make a profit. This strategy works best if you have a good understanding of technical analysis and market trends. Ideally, you will want to acquire the skill set  required to use a combination of both these strategies.This not only involves buying and holding for the long term, while also trading in the short term to take advantage of market opportunities, but also involves investing in your financial education! We recently wrote an article about how to analyze cryptocurrencies that should check out after reading this one.

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How do I keep my Bitcoin savings safe?

Once you've decided on a strategy to save Bitcoin, the next step is to set up a Bitcoin wallet. A Bitcoin wallet is a secure digital storage system that allows you to store, send, and receive Bitcoin. There are several types of wallets available, including desktop wallets, mobile wallets, and web wallets. Each type of wallet has its own advantages and disadvantages, so it's important to research and choose the one that best fits your needs. We recently wrote an article about the best Bitcoin wallets in 2023, go check it out! Once you've chosen a wallet, the next step is to set up an account. This involves providing personal information such as your name, address, and email. It's important to make sure your information is accurate and secure, as this will be used to verify your identity and protect your funds.

Once you have a wallet set up, the next step is to store and secure your Bitcoin. It's important to keep your wallet secure and backed up, as this will help protect your funds from theft or loss. It's also important to use strong passwords, two-factor authentication, and other security measures to protect your wallet. Additionally, it's a good idea to keep your wallet off of public computers and only use it on trusted devices. Finally, it's important to keep your Bitcoin offline. This means storing it in a paper wallet or hardware wallet, which is a USB device that stores your private keys. This ensures that your funds are safe, even if your computer is hacked or stolen.

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When it comes to saving Bitcoin, it's important to take security and safety seriously. As with any form of investing, there are potential risks involved. It's important to research and understand the potential risks before you begin investing. First, it's important to use a secure and reputable wallet. Make sure you select a wallet that is backed by a trusted company and has strong security features. You must also keep your wallet backed up and secure. It's important to keep your Bitcoin safe from hackers, so always use strong passwords, two-factor authentication, and other security measures to protect your wallet. It's also important to be aware of phishing scams, as these are a common way for hackers to gain access to your funds. Lastly, it's important to use a trusted cryptocurrency exchange. Make sure you select an exchange that is compliant with the law and has strong security features. Make sure you research the exchange's fees and withdrawal limits before you begin buying or trading on it.

Are my Bitcoin savings subject to tax?

When it comes to taxes, it's important to understand the implications of saving Bitcoin. In general, Bitcoin and other digital currencies are treated as capital assets for tax purposes, which means that any gains or losses are subject to capital gains tax.

It's also important to understand the tax implications of trading or exchanging Bitcoin. The IRS considers any profits or losses from trading or exchanging Bitcoin to be taxable income. Furthermore, any profits or losses from trading or exchanging Bitcoin must be reported on your tax return.

Finally, it's important to keep detailed records of all your Bitcoin transactions. This includes the date of the transaction, the amount of Bitcoin involved, and the address of the wallet used. This information should be kept in case you need to provide it to the IRS.

However, now that you know more about what Bitcoin is and its long-term price performance, you should consider NEVER selling your Bitcoin, EVER! This is called HODL'ing. If you hodl BTC instead of selling for dollars (yuck!) you will never be required to pay a tax on your Bitcoin profits. You can just use Bitcoin to pay for the things you want instead. That's the whole point of saving Bitcoin!

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You're right, I need to save Bitcoin!

Saving Bitcoin can be a great way to invest and grow your money. However, it's important to understand the basics of Bitcoin, including the advantages of saving it and the strategies you can use to maximize your profits. Additionally, it's important to set up a secure Bitcoin wallet, store and secure your Bitcoin, and understand the tax implications. Finally, it's important to research different investment strategies, keep your Bitcoin safe from hackers, and use a trusted cryptocurrency exchange. By following these tips and strategies, you can save Bitcoin and maximize your profits.

By following these tips, you can be well on your way to successfully saving Bitcoin. With the right knowledge and strategies, you can maximize your profits and ensure your funds are secure. So, what are you waiting for? Get out there and start stacking sats today!

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