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You should never buy BTC with emergency funds. Many people see the market fall and aggressively use the emergency funds they have at that time, which is completely wrong. Emergency funds are created to deal with unexpected financial disasters. If you invest with your emergency fund at that time, if an unexpected financial disaster comes, then you have no choice but to sell your holdings. In some cases, you can invest with emergency funds.
For example, you have the money to buy aggressively, but you may not be able to invest with it due to some problems. For example, you are not able to transact due to some problems or errors in the bank where you have deposited the money. You know that after some time or within 2 or 3 days, your bank account will be fixed or you will be able to transact again. But you have to be confirmed that you will get the money after some time. In that case, you can invest for some time with emergency funds.
You are correct with your example, that you might have some funds that are more liquid and other funds that are less liquid, and perhaps your emergency funds are the most liquid, but some funds might take a week, a month or maybe even longer to receive them into your accounts, and so in those cases, you might use your emergency funds or anything that might be liquid qhile you are processing other funds that you might consider reserve funds rather than emergency funds, and so if you are using emergency funds for non-emergencies then you likely would be replacing those funds as soon as you receive your other reserve funds and surely there might be various classification of funds that you have, and you presume them to be more liquid than they are so when you go to withdraw from them, you find out that you have a few obstacles , and you hopefully have other funds that are more clearly going to be accessible without obstacles.
This is a commendable fund management plan. Having several funds in place with different liquidity levels is a great idea. The emergency funds should be more ready, available and accessible than every other backup funds, while the reserve funds can be a little more less liquid ( but still accessible) than the emergency funds.
It is also very essential to understand the liquidity of each of these backup funds, as this helps one to be able to effectively navigate certain challenges and also make good progress towards achieving your financial goals without feeling overwhelmed. Some of the backup funds could kept for very special purposes, just like major purchases or even for long term investments. When you know and realize the potential withdrawal obstacles of these funds, it helps you plan effectively and also to avoid falling under certain financial stress.
A balanced approach when it comes to funds management involves effectively allocating resources. This could be achieved by maintaining an emergency fund that’s easily accessible, having a very clear plans for your reserve fund and also allocating to longer term investments.