The question people ask about Bitcoin is “should I buy it.” I think that’s the wrong first question. The right one is “how much could I own and still be completely fine if it went to zero?”
Answer that honestly and the buy decision mostly answers itself.
This is not financial advice and it is definitely not a recommendation to buy anything. Bitcoin is extremely volatile and a total loss is a real possible outcome, not a theoretical one. This is just how I sized my own position. Do your own research.
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Start With the Risk, Not the Upside
Every conversation about crypto starts with what it could become. I want to start with what it has already done, because that part isn’t speculation – it’s history.
Bitcoin has, more than once, lost 70% to 80%+ of its value from a high and stayed down for a long time. Not a bad week. Multi-year stretches where holders were deeply underwater and every headline told them they were fools.
So the honest sizing question isn’t “what if this goes up 10x.” It’s: if this drops 80% next month and stays there for three years, does my life change? If the answer is yes in any structural way – a delayed goal, a missed payment, a fight with my wife, a sleepless month – the position is too big. Full stop.
And you have to hold room for zero. Not because I think that’s the likely outcome, but because a young, unproven asset class with no obligation to anyone can go to zero, and any sizing that quietly assumes it can’t isn’t sizing at all.
One thing that helped me size it honestly: read the strongest version of the bull case before you buy, not after. The Bitcoin Standard is the clearest statement of that case I’ve found, and reading the best argument for an asset is a decent way to find out whether you’re buying a thesis or a vibe.
The Sleep Test
Here’s the actual test I run, and it takes about five minutes:
- Write down your total net worth. One number.
- Pick a candidate percentage for Bitcoin. Say 5%.
- Multiply. On $200,000 net worth, 5% is $10,000.
- Now imagine that $10,000 is gone. Permanently. Not down – gone.
- Ask: does any goal on my plan move? Does any bill go unpaid? Do I feel sick, or just annoyed?
“Annoyed” is the target emotion. If you feel sick, the number’s too high. If you feel nothing at all, it might be smaller than it needs to be to matter – though there’s nothing wrong with that either.
I landed in the low single digits as a share of net worth, and I keep it there deliberately. I’m not going to pretend that number is derived from a model. It’s the largest position where an 80% drawdown is a story I tell at dinner rather than a problem I have to solve.
The Three Rules I Don’t Break
Never with borrowed money. No margin, no credit card, no loan, no “I’ll just put it on the card and pay it off.” Leverage on top of an asset that routinely moves 20% in a week is how people get permanently removed from the game. This is the same principle as everything in why we killed $62,000 of debt before doing anything else – you don’t build on top of a liability.
Never the emergency fund. Emergency money has exactly one job: be there, in full, on the worst day. Crypto cannot do that job, because the worst day for your car and the worst day for the market have an ugly habit of being the same week.
Never money with a date on it. A down payment 18 months out, tuition, a wedding. Anything with a deadline doesn’t belong in an asset that can be down 70% on that deadline.
How I Actually Buy It
Whatever percentage you pick, buying it all in one afternoon means one price decides your entire outcome. I don’t want to be that precise about something I can’t predict, so I buy on a fixed schedule and ignore the price entirely. I DCA through River because the schedule runs whether or not I have an opinion that week, and I wrote up the mechanics of that in how to automate Bitcoin DCA.
Two other things that matter more than most people realize once you actually own some:
Custody. Owning it on an exchange means trusting the exchange. Enough exchanges have failed that this is a live risk, not paranoia. If your position is large enough that losing it would hurt, learn self-custody. I use a Ledger for cold storage, and I went through the beginner version of that setup in storing Bitcoin safely with a hardware wallet.
Taxes. In a lot of places every sale, and sometimes every swap, is a taxable event. People find this out in April after a busy year of trading. I learned it the annoying way and wrote it down in crypto taxes for small investors.
What To Do When the Percentage Drifts
Volatile assets don’t stay at their target weight. A big run-up can take a 5% position to 12% without you doing anything, and now you’re carrying a risk you never actually agreed to.
My approach: set a band – say, act if it drifts more than a few percentage points off target – and rebalance back when it breaches, in either direction. Trimming after a run feels terrible. Adding after a crash feels worse. That discomfort is roughly the point; it’s the mechanism that keeps the position sized to my plan instead of to the last twelve months of price action.
One caveat I’ll be blunt about: rebalancing has tax consequences, so check what a sale costs you before you make it a habit.
Where This Sits in My Head
Bitcoin is not my plan. Index funds, a paid-off balance sheet, and income I control are my plan – that’s the boring machinery I keep writing about, like why I stopped picking individual stocks.
Bitcoin is a small, deliberate, fully-losable bet sitting on top of a plan that works without it. That framing is what lets me hold it through the ugly stretches without checking a chart at 2am, and it’s the only framing I’d defend to someone I like.
If you can’t write down the number you’d be fine losing, you don’t have a position – you have a hope. Write the number down first.
