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Well part of that is how we define bubble, since it can only be post hoc, then by definition a bubble is bad since you're going to lose your money when it pops.

Well part of that is how we define bubble, since it can only be post hoc, then by definition a bubble is bad since you're going to lose your money when it pops. But basically it's because we don't try to time the market in that sort of way. Bubbles are great if you can sell right when you need to and (1) Bitcoin is fucking godawful at that and (2) we don't want to try and do that. Better to invest long term and ride an economic wave. Timing in the sense of "we think European stock are going to do well so we'd likely to slightly increase the allocation across our portfolios" is alright but timing in the sense of "we think we can buy a new type of highly volatile asset with no underlying fundamentals and which doesn't fit neatly into any of our extant asset classes and sell it before it goes bad even though we can't do the same thing with regular old GE stock" is really bad. Think of it this way, would you ever put 2% of your IRA on a roll of the craps wheel? No, because that's not what that account is for. EDIT: Maybe a better example would be like buying TSLA options. You wouldn't do that in a portfolio because it's volatility for basically no reason.

charlesdm 9y ago
To be fair, I don't think your comparison to the craps wheel is fair. From a risk level, it's probably less risky than any form of angel investing.
- frgtpsswrdlame 9y ago
  Yeah I thought about that so I edited the comment to compare to TSLA options, bad timing, should've thought more before I submitted. To be fair though, it's my opinion that angel investing is also basically a craps wheel but I might be in the minority on this board in that opinion.
  - charlesdm 9y ago
    I don't disagree with that, but by that definition, no investor should be taking any above average risk. I think being aggressive with a few percentage points of your portfolio on "long shots" or high risk stuff is not necessarily bad. We have no idea how far cryptocurrencies will run. There will be corrections along the way, but if it actually is a major bubble it might very well run up to $10tn in market cap before we see a major correction. But I agree with the options example. Just being OK with risking a part of your portfolio doesn't mean being stupid about it. You want to make sure that the upside is sufficient and the true downside isn't 0. Which is why I would say crypto currently seems like a better investment than angel investing or buying options. You are probably putting 50% of your capital at risk, for a potential 5 to 10x return.
    - frgtpsswrdlame 9y ago
      >We have no idea how far cryptocurrencies will run. There will be corrections along the way, but if it actually is a major bubble it might very well run up to $10tn in market cap before we see a major correction. Come on man... That number is straight from your ass. >I don't disagree with that, but by that definition, no investor should be taking any above average risk. I think being aggressive with a few percentage points of your portfolio on "long shots" or high risk stuff is not necessarily bad. Not necessarily, it's more about minimizing timing risk. If you think Bitcoin will continue to run up in some sort of Keynesian-Beauty-Contest-Unpoppable bubble and/or is the new gold or what have you then yeah as a long term investment, cool. Most people don't think that though. >But I agree with the options example. Just being OK with risking a part of your portfolio doesn't mean being stupid about it. You want to make sure that the upside is sufficient and the true downside isn't 0. Which is why I would say crypto currently seems like a better investment than angel investing or buying options. You are probably putting 50% of your capital at risk, for a potential 5 to 10x return. None of these numbers come from anywhere though. The real answer is that with crypto you're putting ??% of your capital at risk for a potential ? to ?x return. There's no numbers to pin on anything, it's completely baseless. It's like a currency in that respect, it's only worth what people think it is with no underlying fundamental. You can't quantify anything about it because it's based on the psychology of individual investors and the sociology of investing groups. If some guy in Barron's wrote a really good and well researched article about how bitcoin is bad because it can't scale and you really need one of the scaling coins and you should get out now because BTC valuation is only based on there being a greater fool after you and so on the thing and if some guy on reddit wrote the same thing you don't think the price would dip? Of course, BTC is a meme, it only works because people believe in it. So how much do you want to bet on other people buying into it?
      - Pyxl101 9y ago
        > It's like a currency in that respect, it's only worth what people think it is with no underlying fundamental. This is my biggest concern with Bitcoin right now. There doesn't seem to be any rational way to justify or explain its price. How would someone go about making the argument that Bitcoin is over or undervalued at $10, or $100, or $100K? What's the justification? Even currencies have far more fundamentals. Currencies at least represent faith in the governments that issue them, and those governments' ability to pay treasury bonds and manage inflation. I have never heard a good explanation for what the price of Bitcoin should be in terms of USD.

charlesdm 9y ago

To be fair, I don't think your comparison to the craps wheel is fair. From a risk level, it's probably less risky than any form of angel investing.

frgtpsswrdlame 9y ago
Yeah I thought about that so I edited the comment to compare to TSLA options, bad timing, should've thought more before I submitted. To be fair though, it's my opinion that angel investing is also basically a craps wheel but I might be in the minority on this board in that opinion.
- charlesdm 9y ago
  I don't disagree with that, but by that definition, no investor should be taking any above average risk. I think being aggressive with a few percentage points of your portfolio on "long shots" or high risk stuff is not necessarily bad. We have no idea how far cryptocurrencies will run. There will be corrections along the way, but if it actually is a major bubble it might very well run up to $10tn in market cap before we see a major correction. But I agree with the options example. Just being OK with risking a part of your portfolio doesn't mean being stupid about it. You want to make sure that the upside is sufficient and the true downside isn't 0. Which is why I would say crypto currently seems like a better investment than angel investing or buying options. You are probably putting 50% of your capital at risk, for a potential 5 to 10x return.
  - frgtpsswrdlame 9y ago
    >We have no idea how far cryptocurrencies will run. There will be corrections along the way, but if it actually is a major bubble it might very well run up to $10tn in market cap before we see a major correction. Come on man... That number is straight from your ass. >I don't disagree with that, but by that definition, no investor should be taking any above average risk. I think being aggressive with a few percentage points of your portfolio on "long shots" or high risk stuff is not necessarily bad. Not necessarily, it's more about minimizing timing risk. If you think Bitcoin will continue to run up in some sort of Keynesian-Beauty-Contest-Unpoppable bubble and/or is the new gold or what have you then yeah as a long term investment, cool. Most people don't think that though. >But I agree with the options example. Just being OK with risking a part of your portfolio doesn't mean being stupid about it. You want to make sure that the upside is sufficient and the true downside isn't 0. Which is why I would say crypto currently seems like a better investment than angel investing or buying options. You are probably putting 50% of your capital at risk, for a potential 5 to 10x return. None of these numbers come from anywhere though. The real answer is that with crypto you're putting ??% of your capital at risk for a potential ? to ?x return. There's no numbers to pin on anything, it's completely baseless. It's like a currency in that respect, it's only worth what people think it is with no underlying fundamental. You can't quantify anything about it because it's based on the psychology of individual investors and the sociology of investing groups. If some guy in Barron's wrote a really good and well researched article about how bitcoin is bad because it can't scale and you really need one of the scaling coins and you should get out now because BTC valuation is only based on there being a greater fool after you and so on the thing and if some guy on reddit wrote the same thing you don't think the price would dip? Of course, BTC is a meme, it only works because people believe in it. So how much do you want to bet on other people buying into it?
    - Pyxl101 9y ago
      > It's like a currency in that respect, it's only worth what people think it is with no underlying fundamental. This is my biggest concern with Bitcoin right now. There doesn't seem to be any rational way to justify or explain its price. How would someone go about making the argument that Bitcoin is over or undervalued at $10, or $100, or $100K? What's the justification? Even currencies have far more fundamentals. Currencies at least represent faith in the governments that issue them, and those governments' ability to pay treasury bonds and manage inflation. I have never heard a good explanation for what the price of Bitcoin should be in terms of USD.