Topic: How much percent of your capital is invested in bitcoins? (real estate incl.) (Read 1332 times)

Some thoughts on what is an investment in bitcoins and what not.

For me it is clear that an investment in a btc company is not an investment in bitcoins because when bitcoins go up in value strongly the stock of your btc company will very likely not go up in similar value as the turnover and profits of your btc company will likely go down considerably expressed in btc.

However, I think I was wrong in stating that lending out bitcoins to be used for enterprise is not an investment in bitcoin since you do profit in full from the rise of the bitcoin value, as long as you get your loan back.  

I'm thinking of just-dice. You lend out your bitcoins and they are used to bet against. If bitcoin would go up strongly in value you might have less returns on your btc lend out since likely less btc is bet, but the ability for the borrower to pay back all your bitcoins does not go down due to a strong rise of the bitcoin value. The only danger is you have to trust someone with your bitcoins.

However when using an ewallet such as blockchain wallet you also need to trust someone with your bitcoins.

So I am changing my mind and do categorize loans made in btc as a bitcoin investment.


 

Thx for your feedback calian. It is correct that I rebalance a lot in order to keep the same % of exposure to bitcoin. However I did not lose my shirt due to this, to the contrary. A simple buy and hold would have earned me around 600% with bitcoin this year 2013, but my strategy of rebalancing, selling coins as they go up in value, and buying coins as they go down in value, resulted in a return of 1050% with bitcoins.

As long as bitcoin stays volatile this outperformance will likely continue. Only when bitcoin went parabolic my strategy was less profitable than a simple buy and hold, however my strategy was still a lot more safe as I never had such a large exposure to bitcoin than a buy and hold would have exposed me to.

A strategy that offers much more safety while also giving higher returns over the long hole is a superior strategy.



I don't think it is correct to state that they 'reduced their effective risk to zero' by taking out the initial investment.  This is a fallacy applied by so many investors.

The teachers in your example took extremely high risks by allowing their portfolio to consist of a very large concentrated position in berkshire.

This was very poor risk management, but it worked out. There are 1000 other examples of people applying the same strategy (becoming rich by letting your profits run and building up a very concentrated position in a certain stock) but losing it all as the company goes soar. Many very rich families lost their whole family fortune when some big banks went broke the past years... The same can happen one day with bitcoin millionaires.

I advise strongly to always be very conscious of how much percent of your capital is exposed to a single investment. The current poll results show that 40% of people here have more than 40% of their total capital invested in bitcoin, real estate included. This is extremely high risk these people are taking. As long as they are conscious about this I see no problem in that but much too often I see them denying the high risks they take with incorrect reasonings that should prove that they are not taking high risks. Yours being a favorite 'took my initial investment out, so reduced my risk to zero'.

If you're looking at something that moves as dramatically as bitcoin over time you can't look at it as keeping 9% or 15% in BTC on an ongoing basis. You'd be buying and selling bitcoins so often to stay rebalanced you'd lose your shirt. Something more like a starting percentage that you allocate to put into bitcoin makes more sense. Just because you allocated it to bitcoin doesn't mean you should put it all in on a single day though. I recommend dollar cost averaging to enter (and leave) the market for its powerful psychological benefits when watching some very chaotic action on the markets. It's the only thing that kept me from trading and getting whipsawed on that run up to $15 and crash to $7 within minutes several months back.

I'm reminded of some retired school teachers who had invested in Berkshire Hathaway at the get go and had doubled their $20,000 investment within a couple years so they sold half. In their later years the remaining half was worth something like $150,000,000. Obviously if they hadn't taken their initial money back out they'd have had double that. However they reduced their effective risk to zero for the rest of the years after selling the portion.

School.

The great lie of an entire generation.

Student loans are what's holding up the boomer generation's retirement accounts.  Generational slaves we are.

Your student loans are 8%? That's brutal. I hope you got a good degree out of it.

Anyway, my initial investments were a small portion but the price has risen enough that they are now a large portion.

Needs a < 0 % for people shorting.

Congratulation for you.
Seems that I take much much more risk than you ,I wired my fund between april- july, however ,I think I am still a earlier adopter, although my fund is loss about 20% of its value ,but I still confident I will be covered in the future .

It is an option yes.

I cannot change my vote. Is this standard in polls or can u change this so that people can change their vote?

nothing >100%? i have student loans outstanding I could pay since early January but i figured I could outperform 8% APR hahahah

I put $10k into the system between December - March. This is less than two months of my non crypto earnings so it's negligible.

I managed to turn it into $90k of which I withdrew $20k. So I saw a 100% return on my initial deposits.

What's left is now my play money. In truth it doesn't matter if I lose it all but I have a feeling it won't come to that.

I have no plans on making further withdrawals in the foreseeable future.

I just did my own calculation and it's currently 9% of my capital that is invested in bitcoins. I had expected it to be higher so I'm surprised myself it's this low.

I'm well protected against a failure of bitcoin as uncorrelated speculations in gold and silver can make up for that loss. If both fail I would still have half of my capital left that is protected in a permanent portfolio. I would be badly hurt though, but I can recover from it.  

I do realize now that if bitcoin were to tenfold from here I would not make the amount of money that I would want.


I think the mistake I am making today is that I have too much invested in btc companies and bitcoins lend out to others for enterprise. These are another 10% of my capital.

I made that decision due to my bearish sentiment towards bitcoin and more bullish sentiment towards btc companies in the short term. I think this is correct analyses however the truth remains that these investments can fail even if bitcoin goes up. And if bitcoin fails they too will likely fail.


I think the biggest challenge when investing in bitcoin is not losing your eye from the ball. Even if bitcoin becomes very valuable I believe many here will not profit enough from that due to all the mistakes one can make.

My long term target exposure to bitcoins is 15% and 10% to bitcoin companies & loans.  I think I need to change this to 20% bitcoins and only 5% btc companies and btc loans. This way even when bearish for bitcoin and more bullish for btc companies short term I would still end up with a current exposure of 15% to btc instead of the current 9%.

I'm curious how other people look at their own exposure to bitcoins.

(Please be strict about the definition of bitcoins. These are not stock investments in bitcoin companies, these are not bitcoins that you lend out to others to be used for enterprise, these are not altcoins, because these investments can all fail even though bitcoin succeeds and goes up in value. Only bitcoins in your own possession, or bitcoins stored in trustworthy online wallets/exchange, where the bitcoins are not used for anything else, are to be included.)

(Your capital is defined as all the assets/investments you own, your real estate included. Your debts do not matter as this is not a question about your net worth but about your risk management of the capital under your control.)  


I'm asking the question as this is crucial information when you are doing proper risk management.

What if bitcoin goes down from here and ends up totally failing?

How much percent of your capital will you lose?

Can this be neutralized by other investments that might go up in the meantime?


What if bitcoins go to new highs from here never to go back to $100?

Do you have enough invested in bitcoins so that you will profit from this the amount you would want?