Some decades ago, I was an expatriate field engineer, then an expatriate manager. The countries in which I worked predominantly linked their economies to the USD - I was in the oil business. So during my life overseas l always did my personal financial planning in USD. When I returned to the UK about 20 years ago, I slowly changed my mentality to thinking in terms of GBP. Even though my wife managed a small overseas company whose accounts were maintained in USD, most of our personal costs were in Pounds Sterling. So my mindset gradually migrated from USD to GBP as a currency of account.
What bothered me in this transition of “unit of account” was that during my working life, I had experienced extreme exchange rates of GBP 1.00 = 1 USD 1.05 (1982) and GBP 1.00 = 1 USD 2.40 (1978). Unfortunately for me, my wages were paid in USD in 1978 and in GBP in 1982. I remember feeling sorry for myself.
In the 2000s, I became aware of the concept of ratio investing. This is comparing one asset to another and determining whether one asset class is relatively expensive or inexpensive when compared with the other. For example, when comparing average UK house prices with ounces of gold, an average house in 1980 was worth 78 ounces of gold, in 1999 was worth 430 ounces of gold and in 2020 was worth 166 ounces of gold. Put another way, if you had 78 ounces of gold in 1980 and bought an average UK house, and sold it in 1999, you would have realised 430 ounces of gold from the original 78 ounces from 20 years ago. (a gain of 450%). You could then have bought an average property in 2020 for 166 ounces of gold, leaving the remaining 264 ounces of gold on deposit, having a value of 1.6 average UK houses.
The preamble above is the rationale behind me accounting for long term wealth in “ounces of gold”. In 2020, I changed that unit of accounting for the first time in thirty years from ounces of gold to Bitcoins. Whilst Bitcoin was not around in 1980 or 1999, its value at the end of 2020 was approximately $20,000 up from one tenth of one cent in 2009. Whilst it would have required around 240 million bitcoin (11 times the total issued), to purchase an average UK house in 2009 (£149K), it would require only 8.4 bitcoins at the end of December 2020 to buy the same.
Since we do not put a dollar or a pound value on our gold holding - we use ounces of gold as the unit of measurement, we decided to use quantity of Bitcoins as a unit of measurement regarding our (new) asset class of cryptocurrencies.
Having used this new unit of account for the last three months in our Crypto investment and trading, it hugely simplifies the maths. Are we doing well or are we not doing well compared with the market? Having established a baseline holding at the end of 2020, we now have a granular plan to increase that baseline by a linear percentage per week for each week of 2021. That plan will be addressed by a combination of crypto investment (funded on a weekly or monthly basis by cash addition to buy BTC) and crypto trading (buying / selling Alt coins when their value relative to BTC increases or decreases by a proportion that is recoverable within a month or two). The measure of gain or loss on each trade is measured in % BTC gain or % BTC loss. No leverage is planned.