Hedging Bitcoin with other digital currency a good idea?

feric

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Quote from: lightyear69 on February 04, 2014, 01:43:27 PM

At the time of writing, Bitcoin price is about @$927 with various speculations over future price. What about someone who has already reaped a great profit in bitcoin but is not too sure about the future Bitcoin price. Would it be a good idea to sell some bitcoins and buy some other coins which is relatively new and has a potential to grow.

I have decided to hedge bitcoins with XNF-NoFiatCoin for following reasons

1. Its backed by gold (So indirectly taking a position in gold)
2. Its price is not much and has a potential to increase over the time.
3. Its current price is about $6 so in worst case i may lose $6 a piece whereas on daily basis bitcoins flutfuates in the range of $20-$30

Is it a wise decision or shall hold bitcoins?

You posted this thread at a very appropriate time and i guess since then only bitcoin prices started falling. People who had given this a serious thought would have saved some of their bitcoins. Timing of the thread was just fantastic.

cointalkme

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Its always better to make sure the safety of the returns. Bitcoins have a bright future but sometimes it gets shaky so backing it up somewhere is not a bad idea.

lightyear69

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Probably today my question to hedge mined bitcoins are more relevant due to bitcoin price crash.

lightyear69

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Quote from: Sonny on February 05, 2014, 01:32:56 PM

It seems OP wants to hedge his bitcoin instead of earning more and more bitcoin lol.

Earning more bitcoin is one strategy and not losing what earned is another. Since yesterday bitcoin price has come down by $75 that is what makes people think about securing what is earned by searching for some alternates such as dogecoin or XNF-NoFiatCoin.

Sonny

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Quote from: lazyfellaw on February 05, 2014, 11:41:11 AM

Quote from: Sonny on February 05, 2014, 09:39:24 AM

Seriously, if, for whatever reason, bitcoin price crash terribly, it is very very likely values of all those altcoins will crash terribly as well.

I am NOT talking about price crash. I am talking about catching the bus early to reap profit later as in case of various cryptos like dogecoin, XNF-NoFiatCoin or PPC. Many believe bitcoin is a ship already sailed. Wink

Well, we are talking another issue then.
It seems OP wants to hedge his bitcoin instead of earning more and more bitcoin lol.

lazyfellaw

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Quote from: Sonny on February 05, 2014, 09:39:24 AM

Seriously, if, for whatever reason, bitcoin price crash terribly, it is very very likely values of all those altcoins will crash terribly as well.

I am NOT talking about price crash. I am talking about catching the bus early to reap profit later as in case of various cryptos like dogecoin, XNF-NoFiatCoin or PPC. Many believe bitcoin is a ship already sailed. Wink

Sonny

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Quote from: lazyfellaw on February 05, 2014, 09:13:10 AM

Quote from: Sonny on February 05, 2014, 08:52:13 AM

This is exactly what I want to say lol.
I was suggesting OP that, he can put part of money in gold directly, but not that XNF coin.
Sorry for my bad English and making your confused. Sad

Thanks for settling the dust

but is it wise to invest your digital currency money in gold? Returns in gold are no way comparable with a digital currency's returns. Its better to invest in other digital currencies like litecoin or even XNF but only after evaluation.

Of course, for me, I absolutely believe investing bitcoin is way better than gold.

But the point of investment diversification is to put your money in different asset classes (such as stocks, bonds, real estates, commodities and now bitcoin Tongue

), so that even when one of them performs bad, the others will stay steady or even go up.

Seriously, if, for whatever reason, bitcoin price crash terribly, it is very very likely values of all those altcoins will crash terribly as well.

lazyfellaw

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Quote from: Sonny on February 05, 2014, 08:52:13 AM

This is exactly what I want to say lol.
I was suggesting OP that, he can put part of money in gold directly, but not that XNF coin.
Sorry for my bad English and making your confused. Sad

Thanks for settling the dust

but is it wise to invest your digital currency money in gold? Returns in gold are no way comparable with a digital currency's returns. Its better to invest in other digital currencies like litecoin or even XNF but only after evaluation.

Sonny

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Quote from: lazyfellaw on February 05, 2014, 08:49:42 AM

Quote from: Sonny on February 05, 2014, 06:07:39 AM

I would suggest you to just hold bitcoin (and/or litecoin) as well, and forget about other alt-coins.

Quote from: lightyear69 on February 04, 2014, 02:11:18 PM

Quote from: s_s on February 04, 2014, 01:52:13 PM

I would hold the bitcoin.

XNF is at most backed by only 1/3 value in gold...which really isn't any form of "backing" that makes sense to me.

If you want to buy gold...buy gold.

Yeah XNF is backed by only 1/3 but who is going to redeem that I mean that would be the last resort. I am not thinking about redeeming it but yes having some backing is like an additional feature

If you want to diversify your investment, and put part of your money in gold, it is perfectly fine.
But I don't see the point of putting your money in a random new alt-coin at all.

I agree with your view point to diversifying the investment but I failed to understand how making an investment in XNF is like investing in gold because XNF is backed by gold by only 1/3 secondly, by investing in XNF people will invest in XNF not in gold. I think its the value of XNF will will matter the most not in any other ways.

This is exactly what I want to say lol.
I was suggesting OP that, he can put part of money in gold directly, but not that altcoin.
Sorry for my bad English and making your confused. Sad

lazyfellaw

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Quote from: Sonny on February 05, 2014, 06:07:39 AM

I would suggest you to just hold bitcoin (and/or litecoin) as well, and forget about other alt-coins.

Quote from: lightyear69 on February 04, 2014, 02:11:18 PM

Quote from: s_s on February 04, 2014, 01:52:13 PM

I would hold the bitcoin.

XNF is at most backed by only 1/3 value in gold...which really isn't any form of "backing" that makes sense to me.

If you want to buy gold...buy gold.

Yeah XNF is backed by only 1/3 but who is going to redeem that I mean that would be the last resort. I am not thinking about redeeming it but yes having some backing is like an additional feature

If you want to diversify your investment, and put part of your money in gold, it is perfectly fine.
But I don't see the point of putting your money in a random new alt-coin at all.

I agree with your view point to diversifying the investment but I failed to understand how making an investment in XNF is like investing in gold because XNF is backed by gold by only 1/3 secondly, by investing in XNF people will invest in XNF not in gold. I think its the value of XNF will will matter the most not in any other ways.

nasamanBoy

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Sure
You're so much increases the possibilities

Sonny

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I would suggest you to just hold bitcoin (and/or litecoin) as well, and forget about other alt-coins.

Quote from: lightyear69 on February 04, 2014, 02:11:18 PM

Quote from: s_s on February 04, 2014, 01:52:13 PM

I would hold the bitcoin.

XNF is at most backed by only 1/3 value in gold...which really isn't any form of "backing" that makes sense to me.

If you want to buy gold...buy gold.

Yeah XNF is backed by only 1/3 but who is going to redeem that I mean that would be the last resort. I am not thinking about redeeming it but yes having some backing is like an additional feature

If you want to diversify your investment, and put part of your money in gold, it is perfectly fine.
But I don't see the point of putting your money in a random new alt-coin at all.

lightyear69

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Quote from: s_s on February 04, 2014, 01:52:13 PM

I would hold the bitcoin.

XNF is at most backed by only 1/3 value in gold...which really isn't any form of "backing" that makes sense to me.

If you want to buy gold...buy gold.

Yeah XNF is backed by only 1/3 but who is going to redeem that I mean that would be the last resort. I am not thinking about redeeming it but yes having some backing is like an additional feature

lightyear69

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@Rannasha,

Its not right to say 'a hedge is a bet that you hope to lose' as I am an active commodity trader and we do hedge positions to ensure all gains are not lost with a good prospect that the hedge will make a good return. As per my own experience in commodity hedging, more than 80% hedge positions return with good returns.

Secondly, common substituting a digital currency with commodity is just too boring. Shocked

Rannasha

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Quote from: lightyear69 on February 04, 2014, 01:43:27 PM

At the time of writing, Bitcoin price is about @$927 with various speculations over future price. What about someone who has already reaped a great profit in bitcoin but is not too sure about the future Bitcoin price. Would it be a good idea to sell some bitcoins and buy some other coins which is relatively new and has a potential to grow.

I have decided to hedge bitcoins with XNF-NoFiatCoin for following reasons

1. Its backed by gold (So indirectly taking a position in gold)
2. Its price is not much and has a potential to increase over the time.
3. Its current price is about $6 so in worst case i may lose $6 a piece whereas on daily basis bitcoins flutfuates in the range of $20-$30

Is it a wise decision or shall hold bitcoins?

1. According to their website, XNF only has ~33% of the value of the coins backed by precious metals.
2. The price of my poo is also not much, but that doesn't mean it has potential to increase. Current price is only a relevant measure if it can be compared to some underlying value that is guaranteed to back the coin.
3. Counting in absolute prices is silly. If you measure your Bitcoins in mBTC, you'll find that on a daily basis they only fluctuate with $0.02-$0.03 and in the worst case you lose $0.80 a piece. See what happened there? Look at price volatility and potential gains/losses as percentages not absolute values.

Finally, a hedge is a bet that you hope to lose. It's a safeguard that limits your losses when your main investment(s) go down. This makes other cryptocurrencies often terrible ways to hedge a Bitcoin investment as the price is strongly correlated. While this XNF may have some precious metals behind it, it isn't nearly fully backed and therefore a large part of its price will probably still undergo the same fluctuations that other cryptos undergo.

You hedge a Bitcoin investment with stuff like actual precious metals, real estate, commodities, etc... Not with more crypto.

s_s

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I would hold the bitcoin.

XNF is at most backed by only 1/3 value in gold...which really isn't any form of "backing" that makes sense to me.

If you want to buy gold...buy gold.

lightyear69

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Activity: 24

Merit: 0

At the time of writing, Bitcoin price is about @$927 with various speculations over future price. What about someone who has already reaped a great profit in bitcoin but is not too sure about the future Bitcoin price. Would it be a good idea to sell some bitcoins and buy some other coins which is relatively new and has a potential to grow.

I have decided to hedge bitcoins with XNF-NoFiatCoin for following reasons

1. Its backed by gold (So indirectly taking a position in gold)
2. Its price is not much and has a potential to increase over the time.
3. Its current price is about $6 so in worst case i may lose $6 a piece whereas on daily basis bitcoins flutfuates in the range of $20-$30

Is it a wise decision or shall hold bitcoins?

Topic: Hedging Bitcoin with other digital currency a good idea? (Read 1254 times)