Topic: (SSS) - A Sane and Simple bitcoin Savings plan - page 12. (Read 84884 times)

I don't understand all that... rakes and things...

My simple strategy I'm currently considering is:

- hold 1/3 initial stash for the longest time (ideally forever), in case it goes to millions per BTC
- remaining 2/3rds I sell at every doubling, with the amount of BTC sold starting at 5% of this 2/3rd, and each selling the amount sold increases by a fixed positive exponent such that this stash will eventually be used up when it nets me a "now I can retire" amount of $$.

Thoughts?

This thread is aimed for newbies. We don't have a problem re:squandering our bitcoin wealth and don't need a fixed plan, do we?

Fallacy: bitcoin IS cash.

Remember its initial price target is $1,000. But oh well that is not much these days...

Nice. That sounds plausibly like what they may be called. Or just a "mini" when speaking fast. "That'll be 25 mini."

This is the proof that 10% is the optimal rake. You get the most cash out, and also your remaining value in bitcoins is a remarkable 3,487mBTC.

It is good the remember that when we hit $1,000 per minicoin, there are probably only 13 billion mBTC circulating (subtracting lost coins and Satoshi coins). It is 2mBTC per person, ie. the average bitcoin wealth per person in the world is $2,000. In this sense having 1,743 times more could be considered hoarding  

No, it's great. Imagine how healthy the community will be after all the newbs learn to handle their coins responsibly!


Yeah, it is "ä", although I don't really care and use "a" myself outside N.Europe.

Selling is the root of (nearly) all mistakes.

So, #1 newb mistake: SELLING.

Newb mistakes:

- After hearing about bitcoin, discredit it based on horrendously misguided and biased 'information', derived from mainstream sources.
- Waiting several months or years, during which time the price appreciates 1 or several orders of magnitude.
- Deciding to buy after the next dip, leading to panic buying near the top before the next crash.
- Buying too late and with too great % of portfolio, instead of as early as possible with quite small cash outlay.
- Selling after a runup in anticipation of a crash. (Only sell when you are manic to buy since 'it's going to the moon')
- Selling after a crash in anticipation of buying back cheaper. (Never happens, sorry.)
- Selling after a too small gain with no strategy and no need for the funds ("I sell after 20%, 50%, 100%..." <-dude, bitcoin's appreciation so far is 50 MILLION %, want to reconsider..??")
- Selling, because you believe bitcoin has reached a 'bubble top' or a 'fair value'.
- Selling a too great % of holdings, such as going totally in and out.
- Selling.

I agree this is a great strategy and am using a variant myself.

However, for newcomers (people buying bitcoin for the first time), I think a slight variation on...


...can be used: The initial investment can be made in steps (dollar-cost average), albeit as quickly as comfortably possible. Of course this is subobtimal in situation like now when we're rallying, but it also protects the psychology of the investor in case of a harsh drop right after the buy-in.

LOL I was considering that matter going back and forth whether to include it or not when I wrote the post.

THEN I realized that new highs are never reached when you are behind trendline It is mathematically practically impossible.

Again - for most of people, I think it is most important to sell exactly according to schedule, because any deliberation leads to suboptimal results. With bitcoin, you only ever lose money by daytrading. The strict schedule guarantees you exactly a certain amount of bitcoins when they are worth a million a piece.

For most of us, the problem is selling too much too early, and it will be achieved also if you are acting greedy and try to postpone selling. When the price crashes, you then get emotional and sell in the bottom, hoping it will go down more and you will be able to buy back. Most of the time you cannot, and either lose bitcoins or lose bitcoins. Losing bitcoins is bad because you will need them when the price is higher.

If your rake% is zero, you will have all your bitcoins (10,000mBTC in this example) when we hit the target ($1M), but no rake.
If your rake% is 5%, you will have 5,987mBTC and total rake of $665k. (I like it when USD is measured with k and bitcoins with m   )
If your rake% is 10%, you will have 3,487mBTC and total rake of $871k.
If your rake% is 15%, you will have 1,969mBTC and total rake of $842k.
If your rake% is 20%, you will have 1,074mBTC and total rake of $712k.
If your rake% is 25%, you will have 563mBTC and total rake of $556k.
If your rake% is 30%, you will have 282mBTC and total rake of $411k.

Thanks for the swift and thorough reply.

Have another question. If one uses your adviced strategy of cashing out (rake) at set intervalls should one not take the exponential trend line into account? Let's say we are well behind the trend and we just hit a target. Is it really wise to sell 10% in this case? If you answer no I'm thinking one has to set some exception rules to the outlined plan before hand.

Edit: You say you like silver more than gold based on history but at the moment it seems to me that silver is a pretty dead monetary metal. No central banks are holding silver for example. The gold to silver ratio of bellow 30 came at times silver was a monetary metal backed by governments. Doesn't this feel like a less likely scenario now?

For the past couple of years I've been glancing at real estate from time to time. This last week I noticed I moved my search a decimal point over.

Edit: alexeft, this is what I've been doing since February. I used to know my average cost but I have not looked at the calculation in more than a few months.

Hi rpietila,

congrats on a great savings plan. Really nice one.  


I have another one if you would like to comment. It is intended for people who already save some money every month.
They could save a small part of that (say $100 per month) into bitcoin.
The difference would be that they wouldn't have to suffer inflation but rather deflation for the bitcoin part of their savings.

If for example over a 30 year period we have 5% yearly inflation, while bitcoin has 3% monthly deflation (being ultra conservative here),
the difference after 30 years would be astonishing!!!

Please feel free to comment. Or whoever else wishes to.

Exactly what I figured I will do in the future. I take this as further confirmation that I should stick to that plan.

Yes. I think most people enjoy periodic cashouts and gradual increase of lifestyle more than a huge all-in gamble with the intention to cash out $100 million in one swoop or nothing.

The parameters of the savings plan (initial investment, rake%, and when to start raking) should be simulated beforehand. This way you can plan for all possible outcomes before even committing any money, and you are then much better equipped to withstand the exchange rate fluctuations. It is like flying autopilot. Also you can see that you will not become rich if you commit $100 and insist on 30% rake. If, on the other hand you commit $1,000 and rake is 0% (same as putting all in paper wallet) you will become rich.


There are two forces at work,

- What you want;

- What acts as the best diversification if Bitcoin fails.

What you want part is that you buy all the things that keep their value and increase your satisfaction, such as cars, houses, collections of exotic spirits, etc.

Diversification is instruments, which appreciate in value if Bitcoin fails. These are currencies and precious metals, financial instruments etc.

I personally seek quality real estate, and I like silver, because it is really cheap and used to be the lynchpin of global monetary system before Bitcoin. I don't like gold so much, but that is easier to sell than silver if need be (in this plan you never sell anything (except bitcoins), just buy. I don't have much currencies, but they are not necessary bad. I just abhor having positive balance in my account as much as having a negative one.

 
Excellent timing advice! I will not be needing a rake for a while it seems, but that is what I've been expecting.

Very nice guide, great ideas. I know I will be using some of it!
Thanks

First, good thread. I was wondering what you actually mean by it not being wise to put your coins in a paper wallet and just forget about them? I'm assuming you mean that one day you will wake up being very rich and that will be somewhat of a shock and may not end well. Like someone winning the lotery? Is this what you mean or am I misunderstanding you? I'd like to add that for many people just forgettng about your coins now will be a much better strategy since the biggest challenge (if bitcoins do go to 1M) is not selling a majority of the coins way to early. For example I've already heard of people seelling entire holdings in this last run up in price.

Considering the above I guess one could say having a set strategy like you outline is incredibly valuable. You just have to be entirely confident that you will follow it.

rpietila, I'd also like to hear what you think your non bitcoin investments should consist of? What percentages would you allocate to gold, silver, stocks, bonds, cash etc?