I wish that was the case, but cannot help but think that when the speculative mania hits for real, the infrastructure is still not as reliable that people would be inclined to sell their bitcoins en masse to cap it. Regulations. Taxes. Scams. AML. KYC. Happens too quickly. Fear to lose out when price is +20% per day. I'd say the bubble is almost certain, but of course more muted than the previous one (which was more muted than the one before, and that more than the one before that in 2011).

No no. Hope and "certainty" are not part of successful investing. I believe in 50% probability we'll never reach the ATH again.

Think about it.

But I still take a 60x EV in 5 years with eagerness

Let's give for the sake of argument some very different probabilities for the scenarios:

1. ($50) = 50%
2. ($500) = 30%
3. ($3000) = 15%
4. ($50k) = 5%.

50*0.5+500*0.3+3000*0.15+50000*0.05 = 25+150+450+2500 = $3,125 EV. That's still a nice 15x gain and still dominated by the fat tail.

If we go extreme and set:

1. ($50) = 75%
2. ($500) = 20%
3. ($3000) = 4%
4. ($50k) = 1%.

50*0.75+500*0.2+3000*0.04+50000*0.01 = 38+100+120+500 = $758 EV. Even now we are talking about an expected 28% annualized gain.

You would have to be in total denial of the width of the scenario universe to believe the previous. But even if:

you completely disregard the possibility of BTC reaching higher than the $3k scenario, and set the $50k to $0, the EV is $258.

That's more than the bonds are paying, right?


TL;DR:
It's possible to speculate on short-term price movements, and I also have a Bitcoin castle to testify it may be successful. But buying and holding is a stellar EV and should definitely be a part of anyone's portfolio who is reading this.

Expected value (EV) is the probability-weighted mean (average) of possible future outcomes.

We are talking Bitcoin, and about 5 years timeframe here, so 2020.

1. Let's start by everyone asking themselves: "What is the probability of Bitcoin price being lower in 2020 than what it is now?"

This scenario includes everything from total technology/network failure to a total breakdown of law and order, or unanimous draconian regulation by every government in the world to kill off everyone who has possession of a string of letters or part thereof, to just a multi-year downtrend in Bitcoin price coupled or uncoupled with increased adoption (2014 is a prime example that price (-80%) and adoption (+100%) do not correlate 1:1).

In a meeting with respected people in the area, the answers ranged from 20-50%, with a clear bias to 20%. Let's use 25% as a median. (The longest time Bitcoin has ever been below its ATH is <2 years, so history is not supporting 5 years of flatlining really.)

2. Then, "What is the probability that we will not reach the ATH in 5 years?"

Counting the major surges alone, we have set a new ATH at $32, $266 and $1242. The first two were taken, each with a 5x or 10x. Now, to be realistic, it may happen that they were isolated incidents, not happening again, but also it's possible that they were not, and there is some merit in the coin, the technology, etc. Of course I could give (and have given) several fundamental reasonings why I believe the latter, but for the purpose of this, let's keep it simple and assume that it can as well happen or not, so 50%.

This naturally includes the case 1., therefore the scenario "anything between 200-1,000 USD" is 25% probable.

3. Now, "if the ATH is reached, what will likely happen?"

Every time previously, once the old ATH was taken, a quick upsurge taking the price to 5x-10x higher in a few weeks followed. Since we are talking conservatively here, let's assume that in half of the cases, it will reach less than that, and the other half is more than that. (In 5 years, which is enough time to fit in the entire Bitcoin price history so far from $0.005 to $200, it is a conservative approach.)

4. Therefore, "In 25% probability of the total scenario universe, Bitcoin will go to higher than $10k in 5 years. How high?"

This is anybody's guess. Until now, the great majority of people who have taken a stand on the subject of Bitcoin price development in any reasonably long-term (2+ years) timeframe, have been proven spectacularly wrong. Bitcoin has exceeded the expectations of most observers.

To assess the average value of a bitcoin in this fat-tail scenario (a scenario where the expected value is dominated by the inordinately high outcomes with low and uncertain probabilities) is difficult, but let's just zoom 2 bubbles forward and assume a 5x on top of 10k.

=>

What we get is 4 scenarios with equal probability:
- $0-200 (mean: $50)
- $200-$1,000 (mean: $500)
- $1k-$10k (mean: $3,000)
- $10k+ (mean: $50k)

The EV for BTCUSD in 2020 is therefore $13,400/BTC. This is 6,000% (60x) higher than the current price. Even if we made gross errors in assessing the probabilities, it's hard to argue that the scenarios themselves are ill-constructed. It is very hard to make holding a position in Bitcoin a losing proposition from here. As people realize what I am saying, it is likely that this will become a self-fulfilling prophecy. Beware - 5 years is a long time!  

I don't usually try to borrow money, but when I do, no bank is ever willing to give it. So we have a mutual understanding.

It's fine. The portfolio is doing really well without, and the risk level is low as it is. Introducing borrowing, would significantly increase my risk, without a corresponding increase in return.

And what's more - the marginal utility of money goes down dramatically after a few million$ anyway. Even if you had projects to do with the excess, such as I do. The availability of financing things that are worth doing has not been a problem for me for 7 years at least, and it's little correlated to my net worth.

Of course getting to such a position is a long and rocky road. At least it was for me.

Tenders in excess of [$0.5M + BTC4,000] are appreciated. Or any kind of deal which provides for more resources to the activities there, with or without a formal change in ownership. The castle is a property of a company, making deals very easy to implement if there is any value in the collaboration. I already have such stuff in negotiation. It seems that I am still needed in the Bitcoinsphere 

My observations:

- Getting to shake hands with people IRL is a real thing for me who live far away and am generally an introvert thinker/early entrepreneur. Even more important, though - as I can't easily rid me of my personality traits - is to connect with the connectors. Which I did.

- The place was packed with guys who actually do stuff, and not everybody in the Bitcoinworld was there. We are many.

- A participant, about 3 years after first learning about Bitcoin, and 1.5 years after buying it for the first time, explained to me: "now I get it". He was using Bitcoin first time for value transfer and realized that it does work, and does work better than the alternatives, which in many cases are not even available if speed, reliability, etc. are a requirement.

We have to let the time work in our advantage. I also needed about 3 years from first hearing, to getting it. Not that I am stupid, just a human. I also first used Internet/WWW in 1995, but did not find it useful. In 1999 I started with earnest. If Internet were a token, this is equivalent to buying 1 bitcoin in 2015 for $200, then selling it at a wash after seeing no compelling usecase, and coming back 4 years later when "everybody" (a few % of world's population) uses it, and not caring that 1,000 bits cost more than an entire bitcoin did when it was still nearly useless.

- Bitcoin's future looks bright indeed. My original notion (from 2011) that in 75% it's going to fail and 25% pay off handsomely (the latter happened as I bought a castle for what was originally a <10k investment for me) is now updated to 25%/75%. The thought experiment of "in what probability BTC is trading at less than the current price in 2020?" I ran there among many people, resulted in an average 25%. I am doing the numbers for you as a scenario/EV calculation:

25%: fail (<200, average: 50)
25%: stall (200-1000, average: 500)
25%: some growth (1000-10000, average: 3000)
25%: success (>10000, average: 50000)

These are quite conservative estimates and numbers. EV = $13,400 per coin, percentage increase 6,000% (60x), annualized: 127%. Until the situation changes, I'll be happily holding onto my bitcoins, which after the recent carnage do not even constitute an oversized chunk of my portfolio of assets

After always beating the previous ATH's so far with 3 major bubbles, I am giving only a 50% chance for that happening again, still the EV is mindboggling, or at least very nice. Everybody in the world needs to erase Bitcoin from their mind, for the success NOT to materialize. Hardly likely, as research points to the adoption/usage/VC/whatever growth of 100-300% even in 2014, pricewise an abysmal year.

- I'd like to thank the organizers, Bruce & Carolann Fenton and Amy Loughran-Dolan, plus all the participants for the inspirational event, the talks, table-talks, lobby talks, beach talks and walk talks.

- I'll try to open up and follow up. Don't hesitate to contact me using any channel, please bear with me since I am sometimes concentrated with urgent and/or important matters for up to weeks, and unresponsive. Without that, I could not think so much, and would be a pretty useless guy.

- There is a smallish event/s planned at the Bitcoin castle next summer, as well as there were 3 of such last summer. That's why the castle is there. If you want to come, contact the organizers.

Daily volatility against USD is just one metric to measure stability.

By such small changes as replacing the denominator USD in the equation with "purchasing power" (or the value of anything else but USD), or the "daily" for "any other time" you get completely different results.

Everybody who says dollar is more "stable" than gold is a sad, misinformed person. Dollar is stable strictly when measured in dollars.

As for Bitcoin, it is on track to overtake dollar's "stability" once it rises to any sustainable level first. The rise may take a longish time, because we are talking at 100x or much more.

Upon coming back from the far foreign lands, from a trip that felt like it lasted for years, our royal carriage again hits the familiar cobbled streets.

Lo and behold! It is as if the time has not progressed at all here    The words of Zenon, of our father the Duke, the very ancient writings, every letter of wisdom, come to our mind as we behold the sun. Then, slowly, the shadows start moving again.

We have to investigate the matter..

This must be related to the coming changes in 1600, that year when the time will readjust itself. We are still puzzled. Perhaps the Satoshi Roundtable had such a profound energy that time did not pass anywhere else??! Or maybe just here. Anyway, we hope it is over now.

Multiple years shall not pass at once, the game continues from where it is.

Relatively the same as my original buy then. Smart guys buy now, at the low point of confidence. And don't buy too much.

To buy 10 million bits now for $2200 is actually smarter than buying one million for $5,000 soon.

Reading the thread might help...

Following. Nice methodology. Sometimes when you cannot observe the stuff directly, it is indeed valuable to construct the distribution solely based on theory, maths and bounds. Otherwise you have nothing to play with, and obviously something is better than nothing, if you know the limits of the something.

My current understanding of the number of bitcoin owners is in the ballpark of 2-5 million (many services report that many wallets), but when we put this into the Gini perspective, the results show that only about 100k own a meaningful amount.

In Satoshi Roundtable, my closing comment was that Bitcoin early adopter period (usually defined as the first 0.1%-2.5% of the eventual adoption of the technology) is hopefully about to begin in 2015 (innovator stage of the 0-0.1% being soon fulfilled )

The liquidity of Monero is simply non-existing currently. Christmastime showed that a $XXk investment could double XMR price. No way even a $250k could ever be done in the current environment without going back to BTC0.004.

$250k = nothing. Any one of the current owners could do that if they wanted to, but hey why would they, they are already well invested and if anything, want to keep the price low while seeing what happens technologywise, and to BTC, and so on. Patience.

Greetings from the Roundtable. I am safely back home, also the event did not show obvious signs of hijack/sabotage.

Yes, we did have a 20-yo reporter guy posing as one who had a message from Satoshi (later expelled from the scene), Bruce's luggage with all the conference stuff was lost (for the first time in his life of hundreds of flights), some attendees were suspected of being employed by TLAs (which is statistically the case anyway, considering how enormous their secret budget is, and what is the average pay), Internet was working only in the rooms (which were a mile away from the venue, making the logistics hard), etc.

On the positive side, we had a nice gathering of quite prominent people (my ticket to the party, the Bitcoin castle, was among the most expensive ones though), the place and the weather there was nicer than what I left in Finland when leaving (coming back, it was a surprising +6°C here, considering midwinter), my talk (about the 3 approaches to investing, and why the gambling/VC one is actually both the least risky and the most profitable) was well received with almost half of the ones listening giving personal positive feedback afterwards, I got a much needed update on what is happening in Bitcoinworld (after all, this was my first BTC conference ever, apart from the ones I organized), and an even more exclusive event in the castle is already planned for the next summer

Why did you ignore all the higher bids?

Soul: 20 @ 0.5

Good that you are defending the exponential model I am joining the ranks again soon after finding some time..

The Royal Majesty announces his intention to buy it at 850 if no buyer is found before that.

Arrived in conference venue. Updates will likely be scarce from now on. Let's see how it works, so far has been great

It is the proverbial game of chairs. As long as the music is played, it seems that there are plenty of chairs, and all the chairs are empty. Once it stops, for any reason, you cannot buy any serious quantity for the previous price any more.

This is well observed by checking any price chart of any coin, alt or BTC. The spikes come suddenly, violently, relentlessly, overshoot, and then crash. If the coin is good, the post-crash level is a multiple of the previous level.

XMR has not demonstrated itself pricewise, you have to check the fundamentals when buying. Technically, it's bad, but remember - when the music stops, the opportunity to buy anything but crumbs is gone.