It is true that sometimes it is better to invest into bitcoin a little bit less aggressively rather than making the mistake of not having enough money to cover your various expenses, and surely sometimes there are surprise expenses that might have had been difficult to detect in advance, yet if we are failing/refusing to make adequate preparations, we likely end up contributing to our own emergencies, since we likely need to have some cushion in our budget, especially if we are trying to be more aggressive in our bitcoin investing, we are likely ONLY in a solid place to be aggressive with our bitcoin in terms of our having already created some budget cushion that not only accounts for emergencies but also accounts for mistakes that we might make.. .and to test our own boundaries and even to figure out how far we might be able to push ourselves without over doing it, we likely need to practice and pay attention and even attempt to be honest with ourselves in regards to some of the risks that we might sometimes be taking when we push aggressively, which might well be signs that we are actually overdoing it, even if the situation does not end up imploding upon us.
Right, Before investing in Bitcoin, you should take the time to understand and plan your investment by keeping at least a one-year breakup fund.
That is crazy to 1) potentially wait to invest into bitcoin based on the creation of a large back up funds, 2) there is no reason to have back up funds in advance since you can build your bitcoin investment and back up funds at the same time (of course, many folks naturally will already have some back up funds in their normal practices), 3) generally you can be disadvantaged if you keep too much value in cash since the more cash that you hold, the more it might be devaluing faster than you can build it up.. 4) Holding cash is a bad way to build wealth or even to overly prepare with your back up funds may well be self-defeating never causing you to invest in bitcoin and/or contributing to your bitcoin investment rather than being overallocated to cash, 5) many of us will recommend 3 months of your expenses in cash - like emergency funds, and sure you might have some extra cash of 1-2 months beyond that for various reasons that you are holding the cash, but if you are starting to get into larger amounts of value, you might not need to have the value so liquid, and you might consider ways to earn returns on your larger quantities of funds.. These are judgement calls that may well differ from area to area and differing kinds of currencies lose their value less rapidly than others.
You're absolutely right about the dynamics of investing in Bitcoin vs holding fiat (cash). I always tell people how wrong it is to wait first until you've finished building your emergency fund before starting your Bitcoin accumulation, this is definitely not the most effective strategy. It makes more sense when you're building both your backup funds and your Bitcoin portfolio simultaneously, especially considering the fact that a lot of people already have some level backup funds as part of their financial practices.
For certain reasons, it can be dangerous to hold too much value in cash, especially for a long period of time. Inflation is one of those reason. Fiat or cash like we know isn't immune to inflation, which automatically makes it a very bad option when considering wealth building, and overallocating to cash might also potentially hinder your ability to invest in assets like Bitcoin which actually has potential for long term growth.
The idea of having at least 3 months of expenses in cash for the purpose of emergency makes more sense and a reasonable guideline. I also don't have anything against having some extra cash for various purposes, but the thing is that no matter how much your value grows in cash, you'll never earn any returns, thus making it more reasonable to consider earning returns on those funds by investing in assets with long term potential like Bitcoin rather than letting them lie around in completely liquid form.
Your perspective about the nuances of cash management and the potential demerits if holding way too much cash is also well noted. When we talk about the impact of value retention, it may potentially vary from region to region, and individual judgement calls are very important if one must determine the right balance for one's financial approach.