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

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.

Zang (and others), what links would you suggest:
how to explain Bitcoin to treasurers of a trust which has just received a hefty donation in bitcoins, with a stipulation that they cannot be sold at will, rather according to The Plan  

Selling is the root of (nearly) all mistakes.

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.

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.

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.

How much all in do you need to be in order to legitimately use this? 

Yes you are right they are not users, but I would classify them as "owners" still, with the disputed definition of ownership.

I accumulated bitcoins until May, this year. Now I am dishoarding.

I think if you start now, the wisest choice is to buy as much as you dare (spread it over 3-6 months, maximum, if sum is really large) and then diversify according to the plan.

Actually what matters is the number of bitcoins. Those with 1-digit number of them are rich, 2 digits are super rich, 3 digits are hyper rich and 4 digits are ultra rich when 1 bitcoin is equivalent to millions of today's dollars.

An alternative way to this savings plan is just to buy a required number of bitcoins and put it into a paper wallet. But this is not so good because the value involved is so high that you better start preparing your new life already. It can be achieved with periodical dividends from the bitcoin stash, which gradually get bigger and enable you to upgrade your standard of living, etc. gradually.

Whether you are free or not is really not about money. I fully believe that 1 bitcoin is enough freedom what comes to money, if bitcoin truly takes off. There will mathematically never be more than 2 million holders of 1 bitcoin. (See this for discussion.) For comparison: there are 29 million dollar millionaires in the world now.

Another thing that speaks against the millions-of-users hypothesis is bitcoin price. The market cap is $10 billion. Most of the users have bought in before this month. Even if their average investment is only $1000, this means that number of users is only 2 million. But many have bought last year or so, making their stash worth much more than $1000, even after heavy selling.

The addresses above 0.001 threshold could almost directly be mapped to holders 1:1. But I know that holders use several addresses so that has to be accounted for.

What are the 10 million dust addresses anyway? Nobody buys with $0.10  

I heard that only about 3 million bitcoin addresses are used. I would say that the number of addresses > number of users.

Myself, I have used dozens of addresses, and don't consider to be a heavy user of addresses.

Here's the much awaited bitcoin investment plan.

If only we could make all newbs stick to it until they gain full age and responsibility on bitcoin issues.

This topic is unique among my many informative threads. It was reddited twice and received over 5,000 readers in the first 24 hours. Thank you!


Introduction

Bitcoin has made many rich. Consider the guy who sold two pizzas for BTC10,000. The about $20 investment has turned to $10 million - a nice 500,000x gain in less than 4 years. But what if he sold it all when the price first doubled? Then instead of millions, he would have netted $20.

Even worse, some have actually lost money with bitcoin. Buying at the tops and selling at low points is the fate of many who do not have any strategy in their actions.

It is also actual money that you lose if you do not buy, or buy with a smaller amount than you could have bought, or at a higher price than you could have bought, considering the circumstances. All my friends would have become $millionaires by now, had they acted rationally since the day the heard about Bitcoin. Even I would probably have 2-10x more coins with no corresponding increase in risk.  

The past cannot be changed, but there are enough gains waiting for us in the future to amply reward those who care to exercise their logic and invest rationally.


Bitcoin is a disruptive technology that has the potential to change the world even more than the Internet has done. If this indeed happens, the inbuilt dynamics make it happen relatively soon (by the end of the decade, at maximum). In this scenario, the value of the currency unit will have increased really much. The pizza is quite near the low-water mark of bitcoin trades, and the 500,000x gain since it, can be taken as the bitcoin value appreciation until now.

How much can bitcoin go up from here? A few months ago I had a strong realization that bitcoin's market cap could reach that of gold, which would translate to $300,000 per unit. That would be a mere 300x increase from current levels. Considering that 12-months trailing average shows almost 100x, this could conservatively be achieved in 2016, realistically in 2015 and possibly in 2014. A longer-term trendline analysis extrapolated, shows 8/2016.

But going even further, comparing Bitcoin to gold (borrowing the analogy from Zangelbert), would be akin to comparing email to postal letters. The new technology not only effectively replaces the old, but also brings so many other benefits that you cannot imagine them before seeing. In email's case, you could for example link all information in the world to your post, it would reach the recipient instantly, and not cost anything. Bitcoin does the same to something that is way bigger than the industry of delivering mail - the monetary system. A comparison to gold is probably not at all enough. The comparison to all dollars, all fiat currencies, or all liquid financial instruments may still be an underestimate. On the other hand, if something so good happens to the debt-ridden world, even those who did not buy any bitcoins, are mostly better off.

Then there is the flipside of the coin: the disruptive technology is still on beta. So far all is fine, but nobody gives any guarantees. Despite that by reading about Bitcoin you gain more confidence towards it in all levels, there still are many known threats and dangers, technical and political, and sometimes also unknown things happen. Unbelievably few understand bitcoin even now. It is an unknown thing to them. To keep things simple, we postulate that Bitcoin is in a constant danger of self-annihilating, and its exchange value going to zero. This is not necessary the most realistic negative option, but serves as a good counterweight to the mindblowing positive case.


SSS System

In investing Bitcoin, the odds are so much on your side that there is no reason to take any risks. If it goes up, any number of bitcoins makes you rich, and even if you have zero, you will still be richer than before Bitcoin (I do not own any shares of Facebook, but acknowledge its importance and the benefits that I get for free). If it goes down, you should only lose slack money, money that you did not need anyway. You cannot lose more than you put in, so don't put in more than you can afford to lose and you'll be all right, even in the most negative case.

First you need to find out how much you have. To keep keeping things simple, take first aside all the things that you need. They are not counted. Then calculate the resale value of the rest of your things, subtract all debts, and you find your financial net worth. Since house is so big, you should count house equity toward the total, but if you prefer thinking it as separate, you can also decide that you 'need' it and not count it. In this case, do not subtract the mortgage either.

Then you select the rake. You know the concept from poker establishments: some percent of all winnings goes to the house. With bitcoin we except great gains, so we want to 'tax' them to increase our living standard, or just to keep some diversified in case the negative event happens and bitcoins lose their value. The rake is the percentage to set aside, every time that the price doubles. If for example you select 10%, this will lead that 20% of your portfolio is in non-bitcoins and 80% in bitcoins. If you select 20%, the result is 40% in bitcoins/60% non-bitcoins.

For most of us, the previous percents sound extreme. But they are my recommendations. Remember, you do not need to invest more than you can afford to lose. In purist case, selecting a 10% rake would require you to invest 80% of your liquid wealth in bitcoins. But if that does not feel comfortable, you can invest 10% instead. In this case you can boost the accumulation by not raking your pot in the first doublings, only after it has increased to your target of 80% of your financial net worth.

The price now is about $1 per mBTC. (It is very much likely that we will spontaneously revert to mBTC when the average investment is no more even one bitcoin. So let's start it now.) First doubling is at $2, then at $4, $8, $16, $32, $64, $125, $250, $500 and $1000. So there are 10 doublings in total, which take the price up 1,000x. In the end, one bitcoin is worth $1 million, and one dollar is worth quite much less than it is now. The plan ends there because the world will look very much different. Before that, you stick to the plan: if it goes to zero, you net a small gain or a small loss.

Let's take an example of a person who only now finds bitcoin, has $50k in liquid assets, but is unwilling to risk more than $10k. His rake level is 10%, which starts immediately.


The important parameters are:
- Purchased 10,000mBTC, in the end he still has 3,487mBTC.
- Recovered initial investment of $10k in full when mBTC hits $8.
- In the end his fiat+other stuff stash is worth $0.9 million.


Discussion and tweaks

It is important to buy in as soon as possible, because waiting has in general not been a good strategy with bitcoin. Even if price drops afterwards, you should not feel any remorse at all - we are counting towards $1 million or nothing. If 'nothing' happens, you lose as many dollars, regardless of purchase price. If $1 million happens, then yes you have a smaller number of coins, but think how many are not even reading this advice, much less acting on it! Buy, and do it now. And only with funds that you can afford to lose. If you buy, and it crashes, but you have gained more determination that it is a good thing in the meanwhile, you can buy more.

When the plan is underway, and it crashes, I don't advice to buy back. Enjoy your rake rather. Bitcoin may continue to go down, you don't know it. Even if it goes to zero, you will have gained. If you need to pay taxes on the realized gains (as most of us do), it makes even less sense to go in and out.

If you want to daytrade, do it entirely separate from this, so that your daytrading has no effect on the execution of SSS plan and vice versa. In the end you will see, which one was more profitable and better use of time.

It is possible to make the selling effectively continuous, instead of discrete. You just send 10% of your coins to an exchange and divide the next doubling to small enough increments (say, 10 of them) and list your coins for sale. This way you get to sell every time the price rises to a new ATH. Because ATH's happen on times when Bitcoin is ahead of the trend, the timing of the selling is better than average.

It is entirely your own decision, how to allocate the non-bitcoin portfolio. Local differences dictate the prudent course of action.

Well I also don't own a TV, go shopping, read magazines/newspapers, eat processed food, use microwave, never had a 9-5 job etc.

A clear recipe for becoming a business magnate. Try it, you may be surprised  

Not really. We had a small farm and none of us kids has a university degree.

Now, meaning 'at the moment', I am not buying back in. The price is above $500. My average sale price is $672 and I am not a daytrader. It has to go down a lot before I care to buy back.

Now, meaning 'whether I changed the strategy concerning what to do', the answer is: strategy stays the same until something new happens. Just that price follows some of my old scenarios (goes up, down, or stays put) is not considered 'new'. I don't think I will ever buy bitcoins above $500. If it goes to the moon, my next problem will be when and how much to sell more, as my bitcoins are worth $100M and the rest of my wealth is just a few million$.

I should really post my wisdom concerning position management, because so many are clueless about it.

My quick odds for the different scenarios would be:
- Going to the moon = 20%
- Grinding below $1k for some time, then rise to $2-$3k, followed by crash to below $1k = 50%
- Trending down towards $500, probably dipping lower short term = 30%

Since in 80% of the scenarios it will come down to these levels or less, I am in no hurry to buy back. It helps that in the event of moon, I am still numbered among the ultra rich.

EDIT: I read Zangelbert's estimates only after producing mine.