Tag Archives: financial freedom

1% Allocation to Bitcoin – An Asymmetric Bet

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Bitcoin represents an asymmetric bet. It is one of the few assets that has the potential to 50x.

I think it’s smart to invest 1% of your net worth into bitcoin. If you have $100k in investable assets in your 401k or bank account, you could consider buying $1,000 worth of Bitcoin. With Bitcoin costing $29,749.64 for 1 bitcoin as I’m writing this $1,000 would get you 0.03302561. If bitcoin was to hit $100k that’d be worth $3,302. If Bitcoin goes to $1 million/coin you’d have $33,025.

Once you accumulate a higher net worth you can actually bet a larger amount to bitcoin, say 2%-5%. The reason is you have the safety of your core position of assets in case your asymmetric bet goes poorly. If your core position is $500k and you invest $5k or even $10k, in the chance your asymmetric bet goes to $0 you still have $490k in your core position, which is still a strong position to be in. 

Nassim Nicholas Taleb shares the concept of asymmetric bets. Safe/low risk positions in your investments act as an anchor while as well as big/high risk investments give you the opportunity to “hit it big”. Bitcoin would fall into this big payoff/high risk category. 


But as noted, if you have a very safe base of index funds as your safe/low risk position, it might make sense to take some risk, but only with what you are willing to lose! Most people think they are willing to take more risk than they actually are. Once a position drops 50% people often sell. You need to consider what you will do if your asymmetric bet drops 50% BEFORE it happens. If your answer is “sell” the asymmetric bet probably wasn’t something you should have done in the first place!. If the answer is buy, and you are sure you will do that, perhaps you should consider the asymmetric bet. Personally this is the position I was in all of 2022. I was buying bitcoin all the way from $60k down to $15k. It is now at $29k and I am just a little in the green, but at the start of 2023 I was 50% in the negative on my bitcoin holdings!

The majority of my personal portfolio is invested in safe index funds. But I do have 2 potential asymmetric bets with a smaller portion of my portfolio, Tesla and Bitcoin. 

If you’d like to learn more about bitcoin you can read plenty of my posts. 

Nobody Wants to Buy Bitcoin… Yet

Bitcoin Vs. Cryptocurrencies

What Problem Does Bitcoin Solve?

KPMG – The Bitcoin Narrative is Changing

Bitcoin Vs. Cryptocurrencies

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Bitcoin – Yes as much as you are willing to go to $0. Expect it to fall at least 50%-80% after you buy it. 

All other Cryptocurrencies and NFT’s – Proceed with EXTREME caution (likely scams). Honestly, probably just don’t buy it. 

For an in depth article about Bitcoin vs. All other Crypto I recommend reading the Fidelity Bitcoin First paper. 

Since I’ve started to post about Bitcoin a little, I wanted to make my stance very clear. Bitcoin, while it has potential to cause disruption to payments and fiat currencies, it is still a speculative asset. I personally have a higher than average income and net worth and as such I am willing to risk a small amount of money on speculative assets that I think have a high return potential. Even as such, I am only betting a very small amount of my assets on Bitcoin specifically. For most finances, savings, investing, I still recommend an asset allocation across index funds as advocated by these people.

The Crazy Man in the Pink Wig

JL Collins

Mr. Money Mustache

If you need more recommendations about what books to read about financial independence and investing for low fees please ask. 

Back to Bitcoin and Cryptocurrencies.

As I said, bitcoin is quite speculative, but most other cryptocurrencies are even more so. Most crypto currencies are thinly disguised, unregulated securities. In this case a security is something like a stock, where it’s like owning a part of a company. Read more here. 

Most cryptocurrencies are controlled by a small number of initial developers. Those developers also award themselves some of their cryptocurrency before they allow others to buy them, giving themselves an advantage to “get the crypto while it’s cheap/free”.

Bitcoin is different. Bitcoin is decentralized. No one got a bunch of bitcoin at the start. It is being mined everyday. No one controls Bitcoin. No one person can change Bitcoin. That is what makes Bitcoin very different from 99% of the other cryptocurrencies out there.

Another technology that is getting a lot of press is NFT’s. NFT = Non-Fungible Tokens. 

“NFTs are individual tokens with valuable information stored in them. Because they hold a value primarily set by the market and demand, they can be bought and sold just like other physical types of art. NFTs’ unique data makes it easy to verify and validate their ownership and the transfer of tokens between owners.” – SimpliLearn

Most NFT’s are either a picture of a GIF. Usually you are literally able to take a screenshot to make a copy or just right click to save. While there may be some minor value in these in general I would just advise beginners to stay far far away from NFT’s. 

In conclusion, do a bunch of research yourself before getting into cryptocurrencies.

Only buy as much as you are willing to lose/have to go to $0. 

This is the same advice as any investment.