How Much Should I Allocate to Bitcoin?
A common question I often get asked is – how much should I invest in Bitcoin?
Should I buy a fixed dollar valuer (e.g. $10,000 worth)?
Should I keep buying until I own 0.1 of a bitcoin?
How much of my net worth should I allocate towards Bitcoin?
The answer to this isn’t straight forward and has many possible answers. The answer may differ depending on an individual’s financial and investment goals, stage of life, age, financial security and their risk appetite. These are all very valid variables to consider, and all shape an investment choice.
Despite this, I believe everyone should have a minimum of 5% allocation of their net worth in Bitcoin. On the surface this might seem like a bold claim, but the examples below will demonstrate that it is not. For ease of explanation, say an individual has a net worth of $100,000. A 5% allocation would mean $5,000 invested in Bitcoin. The following two scenarios highlight why a 5% allocation of bitcoin is the minimum.
Scenario 1: imagine the price of bitcoin goes to $0 tomorrow. In this scenario the person would lose $5,000 or 5% of their net worth. They would have 95% of their initial net worth remaining. Annoying, yes, as no one likes to lose money, but losing 5% of your net worth isn’t likely to change the trajectory of your financial wellbeing or life for that matter. i.e. life will go on pretty much as it did pre-investment.
Scenario 2: imagine the price of bitcoin multiplies 10x over the course of a period of time, say 3 years. The initial $5,000 is now worth $50,000 and the individual has grown their net worth by 50%. They have turned 5% into 50%. Many people think a 10x price jump from 2024 price is still relatively conservative. If adoption continues at an exponential rate, the price has potential to jump multiples of this. Therefore, the potential upside of bitcoin is far too great to not have exposure to.
So, to answer the question – how much should I allocate to Bitcoin? It is the world best performing financial asset since its inception, and thus I believe it would be unwise to not have exposure to the world’s best performing, most scarce financial asset.