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Bitcoin is down 40% from its all time highs.
And that is exactly why now is the perfect time to learn about Bitcoin.
You've heard Bitcoin mentioned before. Your coworkers talk about it. It shows up on social media, and even on mainstream news. Maybe you’ve even bought some.
But usually, you only hear people talking about Bitcoin after it has already doubled or tripled in price. And if you’re buying when hype is at its peak, you might be setting yourself up for disaster.
Today's article is a crash course on Bitcoin, so that you're prepared for the next bull market. We'll cover:
Strap in, because this is a big one. Let's dive in.
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Now, back to the article.
What Bitcoin Actually Is (And Isn't)
In short, Bitcoin is digital money with a limited supply.
Although many people get into Bitcoin to make quick money, it is not a get-rich-quick scheme.
Although many people get into Bitcoin because of the technology, it is not a technology company.
And although many Bitcoiners go all-in on Bitcoin, it (probably) should not be a replacement for your entire portfolio.
The 21 million Bitcoin supply limit isn't just a marketing slogan crafted to drum up interest. It is a very intentional design decision that Satoshi Nakamoto programmed into Bitcoin from Day 1, all the way back in 2008.
By nature of it’s fixed supply, Bitcoin became money that can't be printed by governments.
New Bitcoin is created at a steady rate by specialized computers called "miners". Every four years, the rate of new Bitcoin creation gets cut in half through an event called the halving. Around 2140, no new Bitcoin will ever be created. This is what enforces the 21,000,000 hard supply cap.
There will never be more than 21 million Bitcoin. Ever.
Compare that to dollars, where the Federal Reserve can create billions (even trillions) of dollars with a few keystrokes. They not only "can" create billions of dollars… they have. And they will continue to do so. As many have said before me, nothing stops this train.
Also, an important distinction:
Bitcoin is not “crypto”. This distinction upsets a lot of people (usually, crypto people).
Bitcoin has no CEO, no marketing team, no venture capital investors that bought in before the public. It's a decentralized monetary network that runs itself. You can’t “shut off” Bitcoin.
Everything else in “crypto”: Ethereum, Solana, the thousands of "altcoins" and "memecoins"... they are technology projects with founders, venture capital investors, employees, foundations, and use cases they are trying to capture.
When people say they invest in "crypto", they're usually talking about speculation on which blockchain platform will win for a specific use case.
Smart contracts, tokenized real estate, real world assets, prediction markets, NFTs... the list of “use cases” goes on. Arguably, none of them have achieved true product-market fit.
When people say they invest in "Bitcoin, not crypto", they're talking about whether digital money with a fixed supply makes sense as a store of value. Bitcoin’s use case is money. That's it. Sound money that the government can't print out of thin air.
I am in the latter camp. If you're in the former camp, that's totally fine. But don't get the two confused.
Why People Buy Bitcoin
The mainstream financial advice you've heard is usually focused on diversified index funds.
In fact, the Investing Module in the Wealth Potion Academy teaches you about Index ETF investing before we get into gold, Bitcoin, and other riskier assets. And it is true that index funds are a solid foundation for an investment portfolio.
But index funds rely on the economy continuing to grow, the U.S. dollar staying stable, and no major recession in the near future.
But what happens when it doesn't?
Here are 3 reasons why this question matters, and why many investors buy Bitcoin:
The Inflation Hedge Case
Since 2020, the M2 money supply increased by about 40%. M2 is one of our best measures for the amount of money in circulation.
That means 40% more dollars chasing the same goods and services. Housing prices, grocery bills, and everything else followed. Bitcoin holders watched their purchasing power increase while cash savers watched theirs erode.
Over longer time periods, assets with fixed supplies tend to outpace assets with expanding supplies. Basic economic logic.
The Debasement Protection Case
Every government in history has eventually debased its currency when faced with unpayable debts.
The Romans clipped coins. The Weimar Republic printed marks. Nixon took the dollar off gold in 1971. The pattern repeats because the incentives never change: it's easier to print money than raise taxes or cut spending.
Bitcoin protects you from the money printer by removing that option entirely. No one can create more Bitcoin to pay off government debt or fund spending programs. If you think currency debasement is a long-term certainty, then owning some Bitcoin makes sense.
The Portfolio Insurance Case
Even if Bitcoin has a 50% chance of going to zero, it also has some chance of going to $500k or $1 million as more institutions and countries adopt it. Those aren't symmetric bets.
A small allocation (1-5% of your portfolio) gives you exposure to massive upside while limiting your downside to whatever you put in.
This is no longer a fringe opinion either: BlackRock, Morgan Stanley, and even Bitcoin skeptic Ray Dalio recommends a non-zero Bitcoin allocation.
How to Buy Bitcoin: The Practical Steps
Step 1: Choose your exchange. For beginners, stick to the major regulated exchanges: Coinbase, Kraken, or Cash App. Hardcore Bitcoiners might recommend against this, but they are market leaders for a reason. Coinbase is the most user-friendly but charges slightly higher fees. Kraken has lower fees but a steeper learning curve. Cash App is the simplest for small amounts, but isn't available in Canada (Shakepay is a great Canadian alternative). There isn't really a wrong answer here.
Step 2: Set up your account. You'll need to verify your identity with a driver's license and bank account, just like opening a brokerage account. This takes 24-48 hours for most exchanges.
Step 3: Start small. Don't buy $10,000 of Bitcoin on your first day. Start with $100-500 to get comfortable with the process. You can always add more later.
Step 4: Use dollar cost averaging. Instead of buying a lump sum, set up weekly or monthly purchases. This smooths out Bitcoin's notorious volatility. If Bitcoin is $50k today and $40k next month, your average cost is $45k instead of $50k.
Most exchanges offer automatic recurring purchases. This is an extremely powerful feature. Yet again, another topic we will cover in depth in the Investing Module of the Wealth Potion Academy.
Step 5: Decide on custody. For amounts under $10,000, leaving your Bitcoin on the exchange is probably fine. For larger amounts, consider a hardware wallet like Ledger or Trezor and learning about self-custody. The saying "not your keys, not your Bitcoin" exists because exchanges can be hacked or go bankrupt (see FTX). Once again, this is where the reputation of the exchange matters.
How Much Bitcoin Should You Own?
The honest answer: it depends on your risk tolerance and what you think happens to the dollar over the next 10-20 years.
Conservative allocation: 1-3%. This gives you some upside exposure without meaningful downside risk to your overall wealth. If Bitcoin goes to zero, you lose 1-3% of your portfolio. If it goes to $500k, that 1-3% becomes 10-30% of your wealth.
Moderate allocation: 5-10%. This is for people who think Bitcoin has a reasonable chance of becoming a global reserve asset alongside or instead of gold. You're betting that digital scarcity beats physical scarcity over long time horizons.
Aggressive allocation: 15-25%. This is for people who think the dollar is fundamentally broken and Bitcoin represents the future of money. You're willing to accept major volatility in exchange for potentially life-changing returns.
Never more than you can afford to lose. Bitcoin is still a volatile, speculative asset. Don't put your emergency fund or house down payment into Bitcoin. Don't take on debt to buy Bitcoin. Don't let Bitcoin be the reason you can't pay rent.
A litmus test: If you saw your Bitcoin investment drop in value by 80%, would you sell, do nothing, or buy more? This is not hypothetical, by the way! Bitcoin has dropped by 80% many times in the past.
Common Bitcoin Mistakes to Avoid
Buying on price excitement. Bitcoin gets the most attention when it's making new all-time highs. That's usually the worst time to buy. Better approach: set up recurring purchases regardless of price and stick to your plan.
This is exactly why I'm writing this to you now, and NOT when Bitcoin breaks $120k again!
Trying to time the market. "I'll buy when it drops to $30k" quickly becomes "I'll wait for $25k" then "maybe it's going to $15k." Meanwhile, Bitcoin goes to $80k and you're still waiting for your perfect entry point. Then you FOMO in at the top…
Forgetting about taxes. In most countries, Bitcoin is treated as property for tax purposes. That means every sale is a taxable event via capital gains. Keep records of your purchases and sales. Most modern exchanges will automate this for you, but an Excel spreadsheet as a backup doesn’t hurt.
Or, consider buying Bitcoin via an ETF in a tax-free account - a topic we'll cover in the future, so subscribe to Wealth Potion if you haven't already.
Falling for Bitcoin scams. Real Bitcoin transactions are irreversible. There are no Bitcoin customer service representatives who can help you recover lost funds. This is a feature of Bitcoin, not a bug. Never give your private keys to anyone. Never send Bitcoin to someone promising to double it.
Getting overwhelmed by technical details. You don't need to understand cryptographic hash functions to own Bitcoin, just like you don't need to understand TCP/IP to use the internet. Focus on the economics first, the technology second.
I am also more than happy to answer any and all questions if you are still unsure or afraid of investing in Bitcoin. Reply to this email and I'll help you in any way I can.
How to Think About Bitcoin Long-Term
As we’ve already discussed, Bitcoin isn't a stock. It doesn't have earnings, revenues, or a CEO making strategic decisions. It's more like digital gold. A store of value that derives its value from scarcity and network effects.
Think in four-year cycles. Bitcoin's halving events happen every four years and tend to drive major price cycles. Don't expect steady, predictable returns like index funds. Expect years of boring sideways movement followed by explosive growth phases.
Ignore the daily noise. Bitcoin will likely crash 50% multiple times in your holding period. It will likely also go up 300% multiple times. The daily price movements mean nothing for long-term holders. Focus on your allocation percentage, not your dollar balance.
Consider it insurance. The best way to think about Bitcoin when starting out is as insurance against monetary debasement. You hope you never need it, but you're glad to have it if the dollar's purchasing power collapses over the next decade.
Stay humble (and stack sats). No one knows what Bitcoin will be worth in 5 or 10 years. It could be worth $1 million per coin if it captures even a fraction of gold's market cap. The price could also collapse if governments somehow coordinate to ban it. Plan for both scenarios.
1 Bitcoin = 100,000,000 satoshis, which we’ll cover in just a moment.
Frequently Asked Questions
Is Bitcoin too expensive to buy at $70k?
Bitcoin is divisible to 8 decimal places. 1 Bitcoin is made up of 100,000,000 satoshis, or “sats” for short. Just like 1 dollar is made up of 100 cents. You can buy $10 of Bitcoin just as easily as $10,000. The price per coin doesn't make it “expensive”. What matters is how much purchasing power you think Bitcoin will have in the future.
What if I lose my private keys?
This is a real concern. About 20% of all Bitcoin is estimated to be lost forever due to forgotten passwords and lost private keys. This actually makes the remaining Bitcoin more scarce. For beginners, keeping Bitcoin on a reputable exchange (or holding Bitcoin via an ETF) might actually safer than trying to manage your own keys and making a mistake.
Is Bitcoin bad for the environment?
Bitcoin mining uses energy, but most of it comes from renewables or stranded sources that wouldn't otherwise be economically viable. Bitcoin miners are also incentivized to find the cheapest energy possible, which pushes them toward renewables. The energy use secures the network, so that a centralized government doesn't have to. This argument against Bitcoin is more a reflection of human bias. Christmas lights use a lot more energy than Bitcoin every year, but no one complains about its energy usage.
Should I buy Bitcoin or Ethereum?
They're different assets with different risk profiles. Bitcoin is digital money. Ethereum is a tech company. Bitcoin is more focused and has clearer monetary properties. Ethereum has more complexity and more things that can go wrong. For beginners, Bitcoin is simpler to understand and evaluate. If you're evaluating Ethereum, I'd highly recommend looking at it like a stock - look at its cashflows, its leadership team, and its early investors.
What happens when all 21 million Bitcoin are mined?
The last Bitcoin will be mined around 2140. After that, miners will be paid entirely through transaction fees instead of new Bitcoin creation. This is by design. Bitcoin's monetary policy is transparent and predictable, unlike fiat currencies.
The Bottom Line
Bitcoin isn't about getting rich quick or revolutionizing every industry. It's about revolutionizing one very important industry - the industry of money. And by revolutionizing money, it may very well have an impact that can be felt all across the global economy.
Whether that matters to you depends on what you think happens to the dollar's purchasing power over the next decade, and by extension, the United States as a global hegemon.
Start small, dollar cost average, and think of it as insurance against monetary chaos. Don't bet the farm, but don't ignore it entirely.
To your prosperity,
Brandon @ Wealth Potion
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