Should middle-aged middle class individuals consider allocating assets to cryptocurrencies?

Author: Phyrex

Many friends have asked me why I don’t allocate some cryptocurrency, especially not allocating $BTC. I also want to discuss with friends whether middle-class middle-aged individuals should allocate cryptocurrency.

First, let’s define what the middle class is.

Everyone has a different understanding of the middle class. In my understanding, the middle class essentially means that income has clearly moved away from poverty, has a certain capacity for consumption upgrades, and possesses some risk tolerance, but is still far from achieving asset freedom or resource freedom.

Being middle-aged is different from being young. In youth, many people are willing to gamble a portion, even all, of their assets on volatility, trends, and chances of tenfold, or even hundredfold or thousandfold returns, because even if they lose everything, they still have time to start over. But middle age is not like that. The most important thing in middle age is not how high the return is, but whether asset allocation can serve real life, hedge against future uncertainties, and whether it can be liquidated, withstood, and allow for peace of mind when needed.

To be more realistic, middle-aged individuals generally have elderly parents above and children below. When they can achieve middle-class income, they must first improve their lives, such as children’s education, family housing, travel convenience, and medical insurance for the whole family. These are all expenses that must be paid every year or even every month. Moreover, in addition to these visible expenditures, they also need to consider issues for the next ten or even twenty years, such as parents’ retirement, their own retirement, children’s future further education, and whether the family has enough buffer space in case of unemployment, illness, or accidents.

Currently, many in the crypto space are young people. Those born in the 90s are practically considered old, while those born in the 00s may be thinking about these issues a bit early. However, for those who have already entered middle age and are outside the cryptocurrency realm, what often needs to be considered is not how much they can earn, but whether they can avoid losses. Once losses exceed their capacity to bear, the impact often extends beyond just themselves; the entire household’s rhythm of life may be disrupted. Therefore, middle-aged unemployment is one of the greatest fears for all middle-class individuals. Without a stable source of income, plans for mortgage, car loans, insurance, education, etc., will all be disrupted.

Some friends might say that they deserve it; why didn’t they save more or prepare better during prosperous times and reduce some “luxurious” spending?

But the problem lies in the awkward reality for the middle class: earning money is fundamentally to improve life. The pursuit of 5,000 a month is fundamentally different from the pursuit of 50,000 a month. A 5,000 income first considers survival, whereas at a 50,000 income, the focus shifts to maintaining normal family operations, preserving the next generation’s competitiveness, and covering the costs necessary for a basic decent life. Improvements in education, healthcare, and housing may not be about luxury; often, having a slightly decent car, an occasional trip, or living closer to work and school is the meaning behind many people earning money.

Sorry, I digressed, but I need to digress a bit more.

Additionally, the middle class faces a very practical issue: most assets are not as flexible as they seem. A house may appear to be worth a lot of money, but it may not be easily liquidated and could even have a mortgage. Salary income may look good, but once interrupted, cash flow pressure can quickly arise. There may be some assets in investment accounts, but very few people dare to utilize them at critical times. In simple terms, a lot of the middle class’s sense of security is built on the premise of “continuous income.” Once this premise disappears, many structures that initially seemed stable can become fragile very quickly.

So returning to the main point of today’s discussion, for a middle-aged person who is already unemployed, with 2.1 million RMB in savings, a 93-square-meter apartment, and a Honda Accord car, under these known conditions, I really believe that they shouldn’t allocate cryptocurrency.

Of course, if they are not unemployed, I believe that under these conditions, it is fine to invest a portion of their salary in cryptocurrency each month. In other words, I think the premise of investing in cryptocurrency for middle-aged individuals should not be to “gamble” on short-term tenfold or hundredfold gains, but rather to potentially gain unexpected returns over a longer period. Interestingly, I have been promoting Bitcoin for everyone to buy for five years now. Every time someone tells me they came to the crypto space to change their fate, it is not to earn threefold or fivefold returns.

However, hidden behind this is the fact that high returns often come with high risks. I actually believe that middle-class unemployment is not a very scary thing, as long as one can recognize oneself, properly use savings, and face life positively, there is a possibility for a comeback. But if the goal is to have altcoins double in a day, or meme coins explode in value, or get involved in various staking yields, on-chain yields, contract opportunities, and trending narratives, then one might unknowingly transition from allocation to speculation.

Initially intending to take a small amount of funds for experimentation, but ultimately expanding positions under continuous rises and stimuli, even starting to use money that shouldn’t have been touched. This appears to be a display of capability in a bull market but will turn into a cost in a bear market. Not to mention the crypto space, just look at how many well-known individuals in X have fallen into poverty due to over-leverage. With parents above, children below, and loans in between, some even took out loans to trade cryptocurrencies. Some people consider this approach “bold,” but I see it more as irresponsible.

There are individuals in the cryptocurrency field making money, and some making big money, but those who earn big while being able to withdraw completely are still a minority. When young, if one fails, there are chances to start over; however, once middle-aged and unemployed, going all in without a stable income can lead to consequences that affect more than just oneself; an entire family, or even three families, could suffer greatly.

Therefore, my own view has always been clear: middle-class middle-aged individuals can allocate cryptocurrency, but they should not treat cryptocurrency as the core of family assets.

For middle-aged individuals who have already lost stable sources of income and have limited financial levels, facing daily expenses, buying cryptocurrency, or even buying Bitcoin may not be a very reasonable approach. Even though cryptocurrency has developed to this day, it remains a market characterized by high volatility, high emotions, and high expectation gaps. I also acknowledge Bitcoin’s long-term value and recognize its scarcity, decentralization, and unique position in global liquidity, but none of this can change the fact that BTC will experience significant volatility.

Last October, the price of Bitcoin was still $120,000, yet today, in less than half a year, it has halved. In the face of such volatility, for middle-class middle-aged individuals, it is not just a simple matter of paper losses. Once it comes time to pay loans, children’s tutoring fees, and various bills, you must decide whether to cut losses or not. If you cut losses, you believe Bitcoin will reach $200,000, but it may take two years or longer. If you don’t cut losses, even if you solve this month’s expenses, what about next month? The month after that?

Of course, many friends will say that this mindset won’t make you rich; it’s just being afraid of wolves in front and tigers behind, and if you don’t dare to take a gamble, you may end up living a life of mediocrity.

I agree with this point, but as a child, as a parent, and as a husband, there will always be responsibilities, which is simply a matter of the size of that sense of responsibility. If one is truly at a dead end, there’s nothing more to say. Interested friends can go to “Gambling Addiction Anonymous” to check it out. Although it has somewhat turned into a storytelling format now, it is indeed possible to win once in adversity, but the probability of winning every time is too low. The few survivors’ bias cannot represent everything.

Cryptocurrency has enabled many friends to achieve class leaps or financial freedom, but money is not printed out of thin air. The money in the market is finite and will not increase for no reason. The money you earn is certainly the money lost by others. If someone earns 1 million, there will be at least one or more people who have lost 1 million. Cryptocurrency is not a place where money just blows in; it requires someone to invest real money into it.

Middle-class middle-aged individuals can allocate cryptocurrency, but the premise must be that this portion of allocation cannot affect family life, cash flow, or future large expenditure arrangements; it must not be built on borrowing, leverage, and emotional impulses. It should only be considered after basic security, emergency reserves, insurance, housing, education, and retirement preparations have been completed.

If a family has not prepared three to five years of emergency funds, has not laid down the bottom line for children’s education and family healthcare, and has very limited buffer space after unemployment, then discussing whether to allocate cryptocurrency at this point is no longer an investment issue; it is more likely a matter of risk-taking. Cryptocurrency has never been savings; there is no capital preservation, and it is certainly not guaranteed to yield positive returns. Even BTC has losses, so there’s no need to mention others.

Moreover, for middle-class middle-aged individuals, allocating Bitcoin and entering the crypto space are actually two different things. The former may be based on asset allocation logic, acknowledging that this is an asset class that cannot be ignored in the future, while the latter often drags one into a high-noise, high-emotion, and high-gambling environment. For young people, this high volatility and high stimulation may still allow for trial and error, but for unemployed middle-class middle-aged individuals, the greatest fear is precisely taking on the most inappropriate risks when they can least afford to be shaken.