Climbing The Ladder Of Financial Freedom With Bitcoin

We’re going to climb a ladder together today. It’s perhaps one of the more important ladders you will ever climb: the ladder of financial sovereignty. Until last year when I began to learn about Bitcoin, I didn’t know that such a ladder even existed and I’m guessing you didn’t either. 

What this ladder symbolizes is one of the more important human freedoms available to us in the 21st century.

This ladder is needed most in war-torn regions of the world like Syria or Afghanistan. [Hat tip to Alex Gladstein for his amazing articles that highlight the financial repression found in some of these regions.] 

This ladder is needed in regions of the world where the nation’s currency is rapidly losing value and where financial repression is out of control. This ladder is needed by those who don’t trust their government to act in their best interest.

 This ladder is for people who don’t trust central bankers to act in their best interest. This ladder is for people willing to accept 100% responsibility for their finances. For these reasons, this usually ends up being a relatively small number of people expressed as a percentage of the population. All have this ladder available to them, but few will choose to climb it all the way to the top.

Before we begin climbing this ladder I’d like to share my thoughts on why it is important to climb this ladder. The reason it’s important to climb this ladder today is because of the rampant theft by stealth that is happening in every currency on the planet. 

If there is a government-mandated currency anywhere in the world that is holding its value across time, I’m unaware of it. Our most vulnerable, the poor and the elderly, are being hurt the most by central banks and governments everywhere. 

That ought to sicken all of us. That probably sounds harsh to some, but if you do your homework you’ll learn this is true.

For the first time in the history of money, there is a way for the average person to save their wealth in a form that can’t be devalued while it remains in your possession. You can set up your own “decentral bank.” You can save your wealth in a form that can’t be confiscated. 

You can save your wealth in a form that has no middlemen or rent-seekers. You can save your wealth in a form that gives you a level of property rights that were heretofore impossible to conceive let alone achieve.

Now that we’ve gotten those issues out of the way, here are the steps we must take to achieve financial freedom. You aren’t required to take these steps in sequence, but in most cases that is the best way forward.

Gain awareness of Bitcoin. This awareness can be based on your brother-in-law telling you to buy it or reading an article about it. 

To really understand Bitcoin requires you to go far beyond awareness. Learning about Bitcoin isn’t easy, but it’s worth the effort. For the wise few who make it a subject of study they will be rewarded. 

As New York Digital Investment Group (NYDIG) CEO Ross Stevens says, “Learning Bitcoin is like learning a foreign language.” You can buy bitcoin in very small increments in a matter of minutes. 

That doesn’t mean you speak the language of Bitcoin yet, or that you think in Bitcoin; that will take hundreds or thousands of hours. It’s a large commitment with an equally large payoff.

Purchase bitcoin on a centralized exchange. It is not required that you buy bitcoin on a centralized exchange but the simple reality is most people will start there. If you’re savvy enough to buy bitcoin without using a centralized exchange, congratulations! You can skip this step. 

There are some who trade silver or gold for bitcoin directly with no middleman or central exchange taking their cut. There are many central exchanges for buying bitcoin such as Swan Bitcoin, BlockFi, Coinbase, Kraken, Binance and many others. 

All have varying levels of user-friendliness and I’m not going to suggest one over the other. The key to remember with all of them is you don’t own bitcoin yet; you have an IOU for bitcoin from the exchange.

If their systems go down or get hacked you are exposed to the loss of bitcoin or you may be prevented from being able to spend or move your bitcoin off their platform. Most are user-friendly and a large percentage of people are likely to never move past this step on the ladder to financial freedom. Too bad. As longtime members of the Bitcoin community will tell you, “Not your keys, not your coins.”

Note: There are also derivatives of bitcoin that you can buy likeGrayscale Bitcoin Trust (GBTC), Osprey Bitcoin Trust (OBTC), ProShares Bitcoin Strategy ETF (BITO, a futures ETF) but these are really not the same since you can’t ever take possession of your private keys. 

There are four Canadian Bitcoin ETFs that are directly tied to the spot price of bitcoin as well if you live in Canada or have the ability to buy these Canadian ETFs in your country. The stock symbols for these are BTCC, EBIT, BTCX and BTCQ. There are also publicly-traded bitcoin mining companies like Hut8 Mining, Riot Blockchain, Marathon Digital Holdings and several others.

Derivatives might make sense if you have an IRA or some other retirement account that doesn’t allow you to purchase bitcoin directly. I’m sure that these will become popular with sovereign wealth funds and retirement funds who are prohibited from owning bitcoin directly for a myriad of reasons. 

If you buy these derivatives, you will not have the option to take possession of the private keys. Many bitcoin purists will scream, holler and warn you away from these derivatives, but for those of you who are not tech savvy this may be as far as you go up the ladder. 

Hopefully, you will become well-informed enough to take the next step on the road to financial sovereignty. I’m not recommending any of these options just trying to give you some idea of the best-known choices for this step on the ladder.

One final option for those who want to hold their private keys in an individual retirement account (IRA) is a company called IRA Financial. 

The reason I put it at step two and not the next step is because although you may hold the private keys in collaborative custody, you are often restricted by how soon you can access your bitcoin. 

Holding bitcoin in an IRA doesn’t give you the same freedom as steps three or four because the company will probably hold your private keys in collaborative custody, meaning that you will be charged a penalty by the Internal Revenue Service for early withdrawals that happen before you are age 59, and IRS rules also require you to start withdrawing your bitcoin no later than age 70 1/2. 

That IRS rule will trigger forced liquidation of your bitcoin when you may not want to.

Post a Comment

Previous Post Next Post