Whether you’re a first-time bitcoin buyer or have bought bitcoin in the past, you’ve probably wondered how many bitcoins you should own (or aim to own one day). The answer to this question depends heavily on your personal financial situation, your purpose for owning bitcoin, and your risk tolerance. This article will walk you through the main things you should consider when deciding how much bitcoin you should own.
Currency vs. Investment
When deciding how much bitcoin you should own, it helps to have a clear idea of what you intend to do with it. Bitcoin can be purchased for use as an everyday currency, or it can be bought and held as an investment or as part of your savings strategy.
If you buy bitcoins to use as a currency, it is important to be aware of bitcoin’s limitations in this regard. First, the value of bitcoin is highly volatile, meaning that if you buy bitcoin one day, it can dramatically increase or decrease the value in the short term. For example, you might buy a certain amount of bitcoin one day with the intent of buying a specific item the next day, only to find that you no longer have enough bitcoins to buy that item because the value of bitcoin has decreased. Secondly, only a handful of sellers accept bitcoin as a payment option, so before buying bitcoin with the intent of using it as a currency, you need to double-check that the sellers you are buying from accept bitcoin. See our article on where you can spend bitcoin for more details.
Due to its high volatility and current limitations as a daily currency, it is often recommended to buy bitcoin as part of a long-term investment or savings plan. There are many strategies for buying bitcoin as an investment, which are covered in our article “What is the best basic strategy for investing in bitcoin”.
The amount of bitcoins you should own will vary depending on how you intend to use it. If you’re using bitcoin as your currency for day-to-day transactions, chances are you can safely buy small amounts of bitcoin on an ongoing basis if needed. But you could instead consider buying bitcoin as a long-term investment or for long-term savings. As you hold bitcoin for a longer period, the chances of its value decreasing due to market fluctuations will be reduced. If you choose to go the investment route, think carefully about what percentage of your savings should be allocated to bitcoin.
Portfolio diversification
It can be tempting to invest a significant portion of your savings in bitcoin if you’re looking for great returns or if you’re a strong proponent of bitcoin’s purpose. But keep in mind that bitcoin is considered a high-risk asset. The high-risk nature of bitcoin stems from its significant price volatility, as well as the possibility of financial losses from scams (see “How to avoid crypto scams”), fraud, or loss of hardware wallets or seed phrases. For this reason, if you are buying bitcoin as an investment, we recommend that you make sure you diversify your portfolio by including low-risk options (i.e. non-cryptocurrency investments) as well. This will help you reduce the risk associated with investing in bitcoin, while maintaining the possibility of a high reward.
