So, at long last, here it is:
How to accumulate more bitcoin, by spending what you already have
I will break down the principles and methods in accordance with 2 profiles:
1. HODL'ers and/or (wouldbe) users
2. ALT coin traders
Now, if you are simply an investor / regular user of bitcoin, only this first article/section is relevant to you.
Don't get smart and begin trading ALT coins because of this article, if you are not doing so already.
Either way, this post assumes, that your overall goal is to accumulate as much bitcoin as possible.
So stick to your overall strategy, in order to reach that goal!
If you consider yourself an investor and/or user, or active trader, don't shift lanes!
There are methods of 'profit optimizing' for both, so don't let anything below change your overall strategy!
And remember; long-term investors get better returns than traders, in the long term, in more than 90%+ of all case-studies I know of. So if in doubt - HODL for profits. ;)
1. Investors / HODL'ers and users
I define investors, or "HODL'ers", as the people who believe in bitcoin as an appreciating store of value, and simply invest regularly, and maybe even spend it regurlarly like myself - and if not, maybe you should be, as discussed in my previous post.
- The same rule applies for "profit-optimizing" holdings of BTC, as for when investing in crypto in general - never invest more, than you are willing to loose in a flash.
- And since this method relies on the volatility, you need to keep a FIAT "reserve" ready to inject - or spend, during bullish periods, where it makes more sense accumulating BTC rather than spending it.
- In my experience, you don't need much - app. half a months worth of spending money, assuming you have a steady income, and you receive income on a regular basis. However, you should always try to build as large a FIAT cache as possible, to deploy in bearish markets and in case of 'flash-crashes'.
Let's say you have $10.000 you want to put into BTC. Don't think "I have $10.000 to spend, let me buy all the BTC now"!
For example; leave $5000 set aside, for spending during bullish markets and buying dips - and buy in with the remaining $5000 at first.
What you will need, to profit-optimize your bitcoin spending, is:
1. an efficient way of cashing out quickly, or even better - spending directly.
A payment card (I use TenX personally) is the optimal solution in my experience, but I believe Coinbase has a card solution also - Wirex is another upcoming card spending option, along with many other possible existing and future card service providers.
2. an efficient way of (re)acquiring new BTC - a pre-loaded FIAT account on a low-fee exchange is my best advice here - personally I use a combination of BitStamp, CoinBase, a online buy/sell service local to my country - and localbitcoins.com for OTC buys.
3. a good spot-price ticker for keeping an eye on the BTC live price - personally I use "Bitcoin Ticker Widget" for Android
Once you have these in- and out-flow setups in place, it all becomes a question of "gamifying your habits" of spending and buying. I will be using round numbers here, to simplify the reading of the
In a bullish cycle, where the price is rising, the following method can be applied:
1. Leverage buying power
Let's say you invest in BTC on a monthly or weekly basis, with your expendable income, simply to add to your 'savings'.
Instead of just HODL'ing the investments - spend them where and when you can - assuming the price is on an upward going trajectory.
Let's say you start at 0 BTC and buy $1.000 worth of bitcoin, at a price of $10.000 on a given day, while the price is moving up - you will now have 0.1 BTC in your holdings from that investment.
Now - you leverage the fact, that the bitcoin price is so volatile, and look for spikes in price when making your purchases, and pay with bitcoin, if possible (this is where the crypto cards are REALLY handy, since they make all your purchases payable with crypto).
Example: I have been wanting to buy a new hardware wallet for a while.
In this example, the price of the hardware wallet is $100, and it is not a time-critical purchase.
If I get it this week or in three weeks, does not matter to me.
As mentioned, we bought 0.1 BTC for $1.000, when 1 BTC was valued at $10.000 earlier in this example.
Let's imagine that 2 weeks have passed since that purchase, and the price of 1 BTC is now valued at $11.000, and the value of your 0.1 BTC is now $1.100.
At this point, I would pay for the purchase with bitcoin - using 0.01 BTC ($100) and have 0.9 BTC left - still worth the the original $1.000, that we invested.
Now I apply self-control and patience - and wait until the price of BTC goes back down to below $11.000 - which it WILL at some point, historically speaking.
So at the time of purchase, I will put aside $100 in FIAT/cash - ready to deploy back into BTC, once the price is back down around - for examples sake - $10.000. The 'automated' method of recooping the spent BTC, would be to set up an auto-buy on your exchange of choice, if that is possible for you.
Once BTC is back at this level, I buy back 0.1 BTC at a price of $100, getting me back to a total of 0.1 BTC, with a value of $1.000. At this point it may have seemed like a pointless exercise, since I have just spent $100 of BTC, just to spend $100 on BTC again, without actually gaining anything (yet).
But as the price of BTC goes back up to $11.000 (which it - again - historically speaking, WILL do). My 0.1 BTC would now be worth $1.100 and I would effectively have bought a hardware wallet worth $100, without it costing me anything, since my goal was to accumulate BTC anyway.
NOTE: You cannot always be sure that the price will go up 10%, and back down 10% precisely. So wait for a good time, and take what you can get. In the above example, spending your BTC at a price of $10.600 and buying it back in at $10.100, will still result in a discount on your purchase, once the BTC price recovers.
All this requires is patience and steady hands - as well as healthy rational. DON'T GET GREEDY.
Netting a 20-40% discount on something you buy, and securing that discount, is better than waiting too long, and nullifying the point, because you don't get to buy BTC back at a lower price.
It will take some adjustment of your mindset, to fight the FOMO and eventually greed, that this method will lead to, so this should definitely be done with caution, and don't see it as a way of making money. Look at it, as a way of securing bitcoin at the lowest price possible, which spending it can help you with.
PS. I actually did EXACTLY this during these last few days, and basically bought a new hardware wallet, at 40-50% discount, since I was accumulating newly bought BTC over the last few anyway, and needed another hardware wallet.
In a bearish cycle, where the price is dropping, the inverse method can be applied:
In a bearish market, it is obviously much easier, to just take the above model and flip it on its head.
The actual savings, will not be as high as in the example above - in fact, they will be significantly lower - since you are reversing the process and "saving money" on what it is you purchase, and not the re-purchasing of BTC - but it will be a small discount none the less. :)
In a market where you see prices going down very steadily, your mentality should be: "spend, spend, spend!"
Of course it should also be to buy the BTC back, at a lower price, (and perhaps adding to your total holdings by buying a bit more) - remember the basics; BUY THE DIPS!
Let's take the example from above, with buying a hardware wallet, but imagine that we reverse to a bearish market, where the price is continuously falling for a longer period.
We buy 0.1 BTC, for $1000, at a BTC price of $10.000, assuming it will go up in price.
Instead, a bearish trend sets in, and BTC starts dropping in price.
We immediately spend the $100, using 0.01 BTC and simply ride the price down, before buying the 0.01 BTC back at whatever cheaper price we can. Say the price drops to $8.000 per bitcoin. We can now buy the 0.01 BTC for a price of $80, having instantly saved $20 on buying the hardware wallet.
Now, instead of having to wait for the price of BTC to go back up - as in the example above - this is an INSTANT saving, that you can "lock" in your mind as "money saved = money earned".
And this is where the FIAT holdings we spoke about earlier is important to have on "standby".
Even though, as a long-term investor, it may have seemed alluring to buy as much BTC as possible, and just HODL, when we had those $10.000 - we end up better of (having more BTC) in the long run, by keeping some FIAT in reserve, for cases such as this, and actually spending our investment, and add to it's value in many ways, while also helping ourselves accumulate as much as possible.
This method will of course also work for people like me, who both invest in BTC, and also trade in ALT coins.
But the next post will be purely for ALT coin traders, who can minimize their losses, in a similar way to what we have gone through here.
Brevity is the soul of wit - and longevity the soul of the contemplative!
#0.0 - Who am I, and how did I get here? [intro]
#0.1 - Who am I, and how did I get here? [pt. II]
#1.0 - How the DeepWeb made me a HODL'er
#1.1 - The power of addiction...
#2.0 - If something seems too good to be true...
#2.1 - Is Bitcoin the exception to the rule..?
#3.0 - The revolution that never came... [Pt. I]
#3.1 - The revolution that never came... Or did it? [Pt. II]
#4.0 - Is Bitcoin doing its job?
#4.1 - Is Bitcoin working... and are you putting it to work?
#5.0 - Why you should spend Bitcoin NOW, no matter what the price is...
#5.1 - The reasons for spending your bitcoin, constantly
#5.2 - Getting the most out of buying bitcoin by spending them - HODL'er edition