Why choose bitcoin Why its a good idea to get some bitcoin for the future
Why Bitcoin?
Bitcoin was designed with one primary purpose: to serve as a form of “digital gold.” What I mean by this is that Bitcoin was created to be a store of value that isn’t controlled by any government, central bank, or company. There are only 21 million bitcoins that will ever exist, which creates a kind of scarcity similar to precious metals. Because of this fixed supply, Bitcoin can act as a hedge against inflation in a way that traditional currencies cannot.
Inflation and the Cost of Living
As we all know, the cost of living in South Africa has been increasing rapidly. The official inflation rate, which you may have seen reported as the Consumer Price Index (CPI), is often used to measure how much costs are rising year to year. But CPI doesn’t always tell the full story. CPI might show an inflation rate of, say, 5-6%, but when you look at the real cost of your groceries, fuel, electricity, and other essentials, you’ve probably felt that these prices are rising much faster. CPI doesn’t always capture these increases fully, and that’s because it’s an average of many categories—some of which might not apply to what you’re actually spending on.
For many people here, inflation isn’t just a percentage—it’s the impact you feel at the end of each month when your money doesn’t stretch as far as it used to. And that brings us to the core issue: finding ways to protect our hard-earned money from losing value over time.
Performance Over Time
Now, let’s talk about how Bitcoin has actually performed over the years. While it can be volatile in the short term, Bitcoin has consistently outperformed traditional assets over longer timeframes. Let’s look at the data:
- In the last year, while many traditional markets have struggled, Bitcoin has risen significantly, outpacing many other assets.
- Over the past five years, Bitcoin’s performance has exceeded most traditional investments, including the stock market, real estate, and gold.
- In the past decade, Bitcoin has been one of the best-performing assets worldwide, creating substantial returns for those who held onto it.
This doesn’t mean Bitcoin is without risk. It has its ups and downs, and it’s essential to understand that it’s still relatively new in the grand scheme of finance. But its track record shows that it can offer protection from the effects of inflation and currency devaluation over the long term.
The Approach: Starting Small
When we talk about Bitcoin, we’re not saying to put all your savings into it. Instead, it’s about considering whether it makes sense to allocate a small portion of your portfolio to an asset that isn’t directly affected by local economic issues or currency depreciation. This approach is called “hedging.” By putting just a small part of what you have into Bitcoin, you create a potential shield against inflation and future economic uncertainty.
One of the safest and most practical ways for someone to buy Bitcoin over time is called Rand Cost Averaging (RCA), a local version of what’s known as Dollar Cost Averaging (DCA) in other countries.
What is Rand Cost Averaging?
Rand Cost Averaging (RCA) is a straightforward, low-stress way to buy Bitcoin. It involves setting aside a fixed amount of money each month, or at regular intervals, to invest in Bitcoin, regardless of its current price. Instead of trying to time the market and buy at the “right” moment, RCA allows people to average out the cost of Bitcoin over time. This strategy helps someone build a position in Bitcoin in a way that minimizes the impact of short-term price swings.
Rand Cost Averaging is a cautious, disciplined way to approach buying Bitcoin over the long term. It’s designed to reduce risk, minimize the stress of market timing, and help someone build a position gradually and affordably. For anyone interested in Bitcoin but concerned about price fluctuations or the right time to buy, Rand Cost Averaging is a strategy worth considering.
For example, an investor might choose to put aside R500 or R1000 each month to buy Bitcoin. Some months, the price will be higher; other months, it might be lower. Over time, these regular purchases will average out, allowing them to build a position at a “smoothed” price.
Why Rand Cost Averaging Makes Sense
Reduces Risk: Instead of making one large purchase, RCA spreads out the investment over time. This reduces the risk of buying at a high price and then seeing a drop afterward. By buying regularly, the investor is less exposed to the volatility that can come with big, one-time purchases.
Less Impact on the Budget: Setting aside a small, fixed amount each month is often easier to manage than trying to make a large purchase all at once. RCA allows someone to gradually build a Bitcoin position without straining their monthly budget, making it easier to invest consistently without disrupting day-to-day finances.
Eliminates the Stress of Timing: Predicting when Bitcoin’s price will go up or down is challenging—even for experts. RCA removes the pressure of trying to “time the market,” which can often lead to stress or emotional decisions. By following a set schedule, investors can avoid the worry of whether it’s the “right time” to buy.
Takes Advantage of Market Volatility: Bitcoin can be quite volatile. While this might seem risky, RCA actually benefits from these fluctuations. When the price of Bitcoin is lower, the fixed amount buys more Bitcoin. When the price is higher, it buys less. Over time, this helps the investor capture an average price that smooths out the highs and lows.
An Example of Rand Cost Averaging in Action
Consider an investor who decides to start buying R1000 worth of Bitcoin each month. Some months, the price per Bitcoin is high, so their R1000 buys a smaller amount. Other months, the price is lower, allowing them to buy more. Over a year, they’ll have accumulated Bitcoin at an average cost that reflects both the highs and lows of the market. This average is typically more favorable and less risky than making one large purchase.
How to Get Started
Getting started with Rand Cost Averaging is simple. Most cryptocurrency platforms and exchanges offer automatic purchase plans, so there’s no need to manually buy each month. Investors just decide on an amount that fits their budget, set it on a recurring schedule, and let it run. Read more on how to buy bitcoin here.