FIRE stands for Financially Independence Retire Early. FIRE is a movement that is advocating for people to retire early without sacrificing their spending. This means that you can retire early and manage to survive without a salary. You can opt to FatFIRE or LeanFIRE. FatFIRE is where you retire early, and you have savings that can afford a luxurious lifestyle. LeanFIRE is where you retire early, but your savings can only afford you a simple lifestyle. One of the ways you can FIRE is by investing in Bitcoin.
Investors considering to FIRE with Bitcoin need to understand the risk reward profile that comes with the volatility of the crypto asset class. It is also worth noting that not all cryptos are suitable for retirement. Bitcoin is the only cryptocurrency you can consider for retirement. Many bitcoin investors don’t even see it as speculation, but rather as a safeguard for their financial future.
Can Bitcoin Help Me Retire?
The short answer is yes, and the long answer is, it depends. Just like any other cryptocurrency, Bitcoin is volatile; meaning that its value can rise or fall depending on several factors. Many people cannot stomach this and tend to buy their bitcoin when the price is high, and sell when it’s low. Or they buy other cryptos because “those seem cheaper”. Like this, they lose their money and drop out saying “it’s all a scam”, while others remain calm and keep buying bitcoin without looking at daily prices. They practice DCA’ing bitcoin for many years on end, or just go all-in.
The thing to keep in mind is that the way Bitcoin has been designed simply means it keeps on increasing in value (as long as bitcoin’s adoption also grows). What’s essential to understand is that the number of bitcoin created decreases every 4 years by half (called the bitcoin halving), while the amount of total bitcoin that will ever be created is capped at 21 million. This means its scarcity will only increase more. Buying enough bitcoin or sats (as portions of bitcoin are called) will allow you at some day in your life to live of it. Therefore, it is recommended to save bitcoin regularly.
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Bitcoin price swings
Bitcoin was created in January 2009 by Satoshi Nakamoto. In October 2009, the value of one Bitcoin was $0.0009. In 2021, Bitcoin prices reached over $60.000. However, in 2022, Bitcoin prices declined by 64%. But not to worry, this is basically a natural course of the price of Bitcoin, and people say it’s a good time to buy bitcoin while it’s cheap. Because some time after the halving, like half a year later, the price goes up steeply, while some time after that, the price will drop significantly – until the next halving. Bitcoin has witnessed at least five of these market upheavals in its very short history.
As such, some people have been questioning the value of Bitcoin as a long-term investment. However, when you look at the long term, there is only gain to be seen. The following are Bitcoin returns by year:
| Year | Return |
|---|---|
| 2009 | N/A |
| 2010 | 30,203%* |
| 2011 | 1,467% |
| 2012 | 187% |
| 2013 | 5,870% |
| 2014 | -61% |
| 2015 | 35% |
| 2016 | 124% |
| 2017 | 1,338% |
| 2018 | -73% |
| 2019 | 94% |
| 2020 | 302% |
| 2021 | 60% |
| 2022 | -64% |
| 2023 YTD (mid-June) | 57% |
How to Use Bitcoin for Retirement
While some people, think the best way to FIRE with Bitcoin is to diversify your portfolio, you can also invest only in Bitcoin. Instead of investing in Bitcoin alone, you can find other assets with a potential to grow. You need to consider how much of your portfolio will be allocated to each crypto asset. That will depend on how much of risk-averse you are.
If you are considering retiring early, Bitcoin can help you achieve your goal, as long as you are aware of the risks involved. You need to be ready in case Bitcoin doesn’t give you the returns you expected. So, you have to be aware that Bitcoin should be a part of your retirement mix over the long term. As such, you have to keep your hopes and expectations in check to avoid frustrations.
Why Bitcoin is the Only Cryptocurrency You Need?
Bitcoin is the only cryptocurrency you need. Almost all other cryptocurrencies can safely be considered as scams. The following are the reasons why Bitcoin is dominant and superior to the other cryptocurrencies:
- Very scarce. There will only be 21 million Bitcoin in circulation. By 2035, about 99% of Bitcoin will exist will be mined. As such, the fixed supply of Bitcoin cannot be changed unless through consensus among network node operators. The limited supply of Bitcoin follows the same economic principles of fiat currency, making Bitcoin a superior cryptocurrency.
- Decentralized. Bitcoin is the only decentralized cryptocurrency, since there is no one who operates the Bitcoin protocol. As such, its ecosystem is resistant to any risk; politically and socially. It means that governments and powerful entities cannot manipulate an individual or group to regulate or alter the key components of the base protocol. It is not like Ethereum, which has the influence of Vitalik Buterin and the Ethereum Foundation.
- Proven network effects. Bitcoin has established itself as a legitimate store of value. It has grown to surpass $1 trillion in market capitalization in 12 years. There is no other cryptocurrency that has come any close to Bitcoin’s mass adoption.
Will Bitcoin Help Me Retire Early?
If the value of Bitcoin continues to soar with time, Bitcoin can help you retire early. If you’re serious about this, you can allocate at least 10% of your retirement portfolio to Bitcoin and diversify in other assets. Other ways you can diversify your retirement portfolio is through stocks and retirement savings plan as they may give you tax benefits as well as other benefits, maybe.
The thing to keep in mind is that between 2011 and 2021, Bitcoin has outperformed a wide array of assets like stocks, bonds, commodities, and real estate in terms of returns. For those 10 years, Bitcoin had delivered average returns of 230% per year. While Bitcoin is volatile, the price movements will earn you returns in the end if things go well. Comparing Bitcoin with other assets like bonds, real estate and stocks between October 2010 and October 2020, Bitcoin has experienced higher annual returns. Consider the following table:
| Asset | 2010 Oct | 2020 Oct |
|---|---|---|
| Bonds | $100 | $106.85 |
| Real estate | $100 | $144.98 |
| Stocks | $100 | $270.98 |
| Bitcoin | $100 | $17,201,250 |
How to FIRE with Satoshis?
Yes. You can FIRE with Bitcoin and diversify your retirement portfolio. While Bitcoin has experienced tremendous price increases in the past 10 years, there is no guarantee that the trend will continue that way. As such, it makes sense to diversify your portfolio with other assets such as bonds, real estate and stocks. Such assets can help you during retirement in case the prices of Bitcoin went low in the future.
Retire early with bitcoin FAQs
Is retiring early a bad idea?
Retiring early can be a good idea if you're financially prepared. Ensure you have enough savings, consider healthcare costs, and plan for a potentially longer retirement. Minimize debts, explore benefit options, and review your investments. Maintain an emergency fund and stay engaged in activities.
Can you retire on bitcoin?
The short answer is yes, and the long answer is, it depends. Bitcoin is a volatile asset, meaning that its price can fluctuate wildly. If you are considering retiring on Bitcoin, it is important to do your research and understand the risks involved. You can allocate at least 10% of your retirement portfolio to Bitcoin and diversify in other assets, such as stocks and bonds, to reduce your risk.