Topic: Price Volatility alone is not a Measure of Risk. (Read 206 times)

With all respect, you clearly don't get it. Let's leave it at that as contrary to your assumption, I haven't posted anything here to have an argument with anyone, especially not  someone who are fiat-based and don't see the fiat Ponzi scheme and system of thievery for what it is. And I am not here to entertain your half-assed assumptions.

Take your fiat and keep it in a traditional savings account. Enjoy the 'low risk' while kissing government and bankster ass!

I find it a bit difficult to argue with someone who uses terms like “theft”, “stealing” and “lie”, when talking about the traditional system of bank deposits. I am not saying that you are currently not losing money when you simply put your money into a bank account but that this loss is predictable. So there is less risk involved. You would lose even more money if you keep your money hidden under your pillow. Inflation of around 2% is necessary for a healthy economy so you can’t blame the banks for it. If there is someone to blame it is the central banks, who keep the interest rates low, this is however a completely different story.

Moreover, if you e.g. look at historical data in the Eurozone (sorry, but that’s where I live) you will see that there were also times when traditional deposits where quite profitable. Just to give you an example: in 2000 the EURIBOR was around 5% and inflation around 2%. Currently the EURIBOR is around 0% and inflation around 1,5%.

Yes, savings kept in a savings account have seen a predictable loss for a long time - so why is it not deemed high risk? Because most people cannot see the indirect theft of inflation where the official inflation rate is nothing short of the rate at which they admit they are stealing from us (by creating more and more dollars, they steal an increasing part of every dollar's worth, especially when not backed by healthy economic growth). The real rate of inflation is of course much higher. Governments and banksters lie about it. Point in case... shadow stats. Google it. This makes a loss predictable in terms of savings in a savings account, but the exact loss cannot be determined that easily. But most have been conditioned to accept that predictable loss as something that carries low risk.

In terms of BTC, the historical record shows that those who were patient got rewarded. This is exactly why some - rightly or wrongly - claim that cryptos are part of a wealth transfer from the impatient to the patient. And yes, BTC could go to zero and end up to be a high risk vehicle, especially on the back of the segwit and lightning network shenanigans (a story for another day), but the historical record shows that there was way less risk in holding a $100 in Bitcoin than a $100 in a savings account.

Thus, as I've stated: "This is not to say that high price volatility carries no risk. It is only to say that high price volatility is not automatically a sign of high risk."

In addition, what I've stated is not by any stretch of the imagination an attempt to define risk in its totality. I've only covered a couple of components. E.g. the loss of a $100 could be devastasting to many - high risk, while some use $100 notes as toilet paper - no risk.

You're reading something into it that isn't there. The whole point is not to get emotional, because high price volatility is not automatically a sign of high risk - even in business terms. E.g. if I run a business and wish to accept cryptos as a means of payment, I don't have to expose the cash flow of my business to the high price volatility of cryptos. There are various businesses and services that are willing to take that risk - perceived and real - onto themselves at a small fee. Thus, if I want $10 for a product, but want to give buyers the option to pay in cryptos as well - expanding the potential market of buyers in the process, I can have that without getting exposure to the cryptos itself at a small fee. Yet, when I listen to some, one would swear that you have to open a foreign currency exchange or the sky will fall on the back of the high price volatility.

Thanks. It is the thought that ultimately counts.

I see where you are going with your argument but I don’t agree with your definition of risk. While you may loose money on your savings due to inflation, it is a very predictable loss, because interest rates have been stable for a very long time. BTC on the contrary has fluctuated heavily in the past and there is hardly any historic track record that proofs that every dip will go back up. We may see a point where BTC won’t recover for a long time or even not at all. Nobody knows for sure, so there is a lot of risk involved.

I think that you don't fully understand the concept of risk in business terms. Your post is very emotional and I am sure that those that get emotional about crypto will enjoy it.

Id merit you if i had available. Your points are very good, and pretty much my thoughts on the matter.
I did not get in crypto to get rich in a month, but over many years  If it does not recover and go to new ath it is still ok, the risk/reward for holding is for me very good.

I cannot help to notice how many automatically make the mistake to assume that volatility in price, especially wild price swings, is standalone a measure of risk. Many also make the mistake to assume the higher the volatility and/or price swings, the higher the risk. Nothing could be further away from the truth. To understand risk and the level of risk, you should always ask yourself: Do I get rewarded for hodling through that volatility or accepting that volatility as the status quo? If yes, then consider the size of the reward (and it is not always expressed in terms of the monetary alone). E.g. Bitcoin went up over 8,000,000% since July 2010 despite all of the wild price swings. Those who hodled Bitcoin throughout all the price volatility got amply rewarded for their loyalty, while holding up a middle finger to the establishment in the process (the non-monetary part of the reward).

This is not to say that high price volatility carries no risk. It is only to say that high price volatility is not automatically a sign of high risk. E.g. a $100 kept in a savings account at a bank since July 2010 has seen very little volatility in terms of wild changes in the balance. However, given the fact that the cost of living for one went up considerably since that time and interest earned on savings accounts are extremly low (and in some cases even negative), one can safely say that keeping a $100 in a savings account since 2010, carried way more risk than buying a $100's worth of Bitcoin way back.

Is the same still true today? Nobody knows for sure, but given the proven history of fiat currency failures, is it really that hard to believe that Bitcoin and cryptos will not continue to award us generously for accepting volatility (regardless of the source of the volatility)? Will the 'savings and investment' options offered by the establishment all of a sudden richly reward us - enable us to break free from a centralized, fiat-based monetary system designed to fully enslave us? I think not.

So don't let the media or anyone scare you away from Bitcoin and cryptos in general on the back of wild price swings alone. Wild price swings can be your friends, especially when you stay loyal.

In addition, monetary award and/or losses, especially as expressed in fiat profits and losses, should not be the only factor to consider when getting into Bitcoin and altcoins - or when measuring the risk of getting involved with cryptos. There is a much bigger, better and more noble reason to get and stay involved, namely a once in a lifetime opportunity to be part of a non-violent revolution that aims to free us from the shackles of governments and centralized banking. Those who are primarily responsible for all the wars, pain, poverty and chaos we've seen and experienced for millennia now.

Make no mistake, the embracement and mass adoption of cryptos, especially of what I deem to be true cryptos, can put an end to their shenanigans in no time. With true cryptos, I mean cryptos that for one enable private, peer-to-peer, trustless (bankless) transactions within peer-to-peer economies driven by decentralized blockchains. True cryptos are not competing to see which can cater the best to the demands of the establishment as expressed in regulations (centralization) and what not. True cryptos don't care what you had for lunch, but it does level the playing field to the point where you have a realistic chance to have food on the table in order to feed yourself and your loved ones. The type and kind of cryptos that are built, maintained, expanded and supported by teams, players and supporters who refuse to accept failure as an answer - those who truly care where we came from and where we're heading.