Poor people might have ONLY a very narrow path of opportunities to get out of poverty, and if they spend several years building up something like a bitcoin portfolio, and then they end up screwing up their investment because of their own slopiness they might not be able to recover again... so there could be some poor persons who had spent one or two cycles building up his bitcoin holdings and he does not have much if any of an emergency fund, but then an emergency comes and his whole bitcoin is wiped out because his bitcoin was serving as his emergency fund. .and maybe if the BTC price is down at the same time as the emergency, he might never be able to recover from what he ended up losing. Sometimes also just a bit of cash can get someone over the rough periods and to prevent a bad situation from becoming even worse because the onhand cash was able to cover the expenses until the person got back on course and started earning an income and/or maybe resolved some expenses.
Bitcoin is a savings that is kept for the future. If a person creates Bitcoin as an emergency fund, then he is making a big mistake. Because investments are made for a long term period such as 5 to 10 years. And we create an emergency fund to protect our portfolio. But there are some people who use Bitcoin as an emergency fund. If you are a person who does this, then he can find himself in many bad situations. For example
*If the price of Bitcoin decreases and then that person needs money, then he will have to sell it at a loss
*If he sells at a loss, then he will be behind in terms of money and then that person will have to take a loan.
*He will break down mentally a lot.
*He may blame Bitcoin, such as Bitcoin is fake etc.
Bitcoin is very risky, but not for everyone. Because I think Bitcoin is very low risk for people who can have proper knowledge about Bitcoin and hold their holdings for the long term. Bitcoin is very risky for people who invest in the short term or use Bitcoin as an emergency fund.
Before anything else, let’s clear this up… your savings, emergency funds, and Bitcoin investment are three completely different things. They are not the same and should not be treated like they are…
Your desire to claim that savings is different from emergency funds is a bit strange. Of course there is an investment category, yet the investment category can also be like a savings that is expected to grown over longer periods of time.
It is probably better to consider savings within categories of money that we already discuss, which it seems that savings is a form of back up funds. .and there are three forms of back up funds that can all overlap in some kinds of ways. Emergency funds, reserves and float.
Savings likely fit within either emergency funds or reserves. Emergency funds are the last line of defense that a person has before having to tap into his bitcoin, so if he has spent all his other funds, and he is tapping into his emergency funds, he is in a position that is not good, especially if the emergency funds are depleting and the next thing would be tapping into his bitcoin once the emergency funds are depleted. I personally think that a person who is in bitcoin accumulation stage would likely have to stop accumulating bitcoin once he gets down to the point of only having emergency funds, yet at the same time, guys can figure out how they treat these different categories and we could be having a semantics debate that only is arguing about the meaning of the words rather than the practical application in terms of how a guy is going to be using these various kinds of funds.
If you tell me that your savings is serving some kind of a purpose, then what is that purpose? so then it might tell us what category of back up funds it fits into.
If your savings is earning yield and you are holding it for the long term, then it might be considered as a form of investment rather than as a form of back up funds.
From my own perspective float is not something that we necessarily save up over time, yet each month if we are accounting for our expenses from our income, so that after we account for all of our expenses, then whatever amount is left over would be discretionary income; however, if we are unclear about how much our expenses are going to be, then we might hold some extra funds in float until we determine how much the expenses are going to be. Once the expenses accounting is figured out, then whatever extra amount that we had been holding in float would end up becoming discretionary income.
Bitcoin is not your emergency fund.
If you have no back up funds, then it seems that bitcoin would end up becoming your emergency fund, since it would be the next thing to tap into. Of course, the best way to hold emergency funds is cash, but if you don't have any cash left (because you depleted all of it), then the next thing would be to tap into your investments, and if the only thing you have is bitcoin then bitcoin is next. If you have other investments, then sure maybe you could choose to tap into the other investments first, yet there could be questions in regards to which one to tap into based on how liquid it is (how easy and quick it is to convert it into cash). If something is more or less equally liquid, like it might take a day or two to convert into cash, then we also might look at how volatile it is, or if one is up or down in price at the time that we need to choose which one to cash out of... So when running out of money, there would be a combination of liquidity and price that might influence our choice of which one to go to first.
I understand that you are making a recommendation that bitcoin not serve as the emergency funds, which of course, is not a controversial assertion.
Bitcoin is not your traditional savings either. Put in mind It is an investment asset where you build and grow long term, using strategies like DCA over years, not weeks or months. If you’re trying to save money you might need soon, or for safety, go put it in a bank or somewhere stable. Bitcoin is not the place for that.
Fair enough regarding bitcoin. Yet you still seem to be talking about savings as if it were backup funds of one sort or another .. either reserves or emergency funds. By the way, reserves are very similar to emergency funds, but they just have more options on how they might be used. which seems to be what you are suggesting savings to be since you had been saying that savings is different from emergency funds.
Now, using Bitcoin as emergency backup? That is just not smart. Emergencies don’t wait for price rebounds. Haha… BTC can take time to move, convert to cash, and sometimes the fees or even the network can delay you… What if the price crashes when you urgently need money? You will then be forced to sell at a loss. Which will now lead to you panicking, probably regretting everything, and maybe even blaming Bitcoin when the truth is, it was just poor planning.
Fair enough. yes.. we need to have some back up funds so we don't end up tapping into our bitcoin at a time that is not completely of our own choosing, and if we got into bitcoin and we had told ourselves that we were planning to invest into bitcoin for 4-10 years or longer, then in order to attempt to honor our own desired preferences, then we have to have back up fund systems in place to make sure that we do not break our own intentions.
now if we have not figured out our own timeline in regards to investing into bitcoin, then we might be merely trying to figure out if bitcoin is in profits or not so that we might sell some of it to satisfy our needs and/or our wants, so yeah, we have to figure out if we are striving to have an actual investment into bitcoin rather than a trade, then if we are investing, our timeline would need to be 4-10 years or longer, otherwise we are trading, and if our investment timeline is 4-10 years or longer, then we likely have to make sure that our back up funds are sufficient to cover the variation in our income and/or our expenses, and the more variability that we expect, then the more likely we have to hold larger amounts of back up funds to cover such variability.
Now if we have back up funds that we consider to have higher priority than bitcoin, such as maintaining our savings, then those are choices that we make if we already consider that there are some categories of funds, such as savings and/or other investments that have higher priority over bitcoin. We should try to know our priorities in advance, but sometimes if we are put into a position of having to sell one thing or another, we might find that we have to either reconsider our priorities or even to consider a matter that we had not previously considered... which would be another justification to make sure that we have sufficient back up funds so we do not necessarily have to figure out what would be the next thing to sell when we run out of things to sell to cover our expenses.