Hello - can you give me an example with numbers? I think I know where you are going but this sounds like it is caputuring more vol than the trend. I dont think it is easy to capture vol as the liquidity is so limited that as soon as you trade on it in any sort of volume you move the market back. Thoughts?

why an ounce and not 10 grams or 3 ounces? what are the fundamentals to that px?

Hi TraderTimm! thanks for your thoughts. I probably did not express myself properly - what I am trying to say that although the currency can be used to buy and sell goods and services that is not the main current use right now. If it did become a security that was used and trusted to store value instead of speculating (an ideal scenario) at that point it would change (this is what I view as the upside).

I agree with your concise summary, was also explaining the rational behind it.

I was not considering a trailing stop, just risking an amount i was more than comfortable in losing and I am not convinced if it is applicable in this sort of market (where there are dramatic price jumps both up and down as liquidity dries and relatively small orders move the market in big swings).

What do you suggest as the optimal strategy if you thought that there was a price ceiling at X and owned Y BTC?

MOS_STP --> agree, just want to hear out what other people's risk profiles are. I think the first rule is that you only put in an amount that will not affect your quality of life if you lose it. In other words, if you earn 18k a year, dont put in 5k. If you are in debt, this is not a way out. I worry a lot about people with little losing money. Not nice. Once you know you are in and have built a risk position of 1, 10, 100 or 1,000 btc how do you design a strategy to maximise your return. Now this part also answers realnowhereman, lets try and work this out from a top to bottom approach (i.e. how high can it go)

We have the downside set - its 0, you risk everything. It makes sense to derisk your initial investment and when you do that depends on your risk appetite (risk averse = take out half your bitcoins when it doubles, ultra risk taker = take out 1% of your bitcoins when it is up by 100x ---> in both cases you took your money out). At some point you should take your money out! you can't buy a car with bitcoins (yet?). Strategy still maintains a lot of the upside.

Lets look at the upside. Lets look at orders of magnitude (everything will be very approximate) just to put things into context - World equity markets $40 trillion, debt capital markets about $100 trillion, US GDP 14 trillion, Spain GDP 1.5 trillion, Colombia's GDP 0.25bn. As an asset class I think the maximum this will get to in a best best ultra optimistic scenario is in the order of magnitude of 1 trillion (i.e. hundreds of thousands of dollars per bit coin) this is on the basis that the currency becomes a secondary shadow market (like cigarettes in prison?!? where in POW camps in WWII even non-smokers gave them value) either for the grey or black markets or for people to move restricted currencies on or offshore (think ISK, RMB, etc). The best precedent is the ETF market - grew on word of mouth, retail investor (i.e. an asset class based mostly on people buying with cash, not institutional investors like pimco, axa, aig, etc). That market has grown to about $3trillion, saw explosive growth in and is now functioning, transparent and liquid (ideally where BTC will go).

I'm really enjoying seeing this mkt develop! As I said, only found out about bitcoins 10 days ago!

Freakin --> ok, you can do that. I'll profit your like. Fanks

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Hello

These are my thoughts. Was wondering what other people felt and having a bit of sense check. I base my thoughts below on limited experience (i first heard of bitcoins last monday, first bought last thursday)

Thoughts:
This is a fast moving upward spiralling self fulfilling style market where money is chasing a limited supply of a security, which behind it has no intrinsic value and is not actually actively being used to trade goods and services (although it can be and might be in the future, it is not now - I am aware that there are some sellers of real goods but not in the context of a £75m mkt)

This px is moving higher as more people become aware of it and are putting money in. News is moving from online blog to mainstream media. Last week there were 300-700 pounds moving through the gbp exchange britcoin per day, today it is closer to £10k per day. In the US they are already well into the $ millions trading per day.

Current total market size is about £75m, I think that it has the potential to go up to £1-10bn order of magnitude as it would be a shadow retail market. There would be a price barrier around the £1,000 GBPBTC mark. From there to go further it would need to have a purpose (i.e. literally moving money from china offshore in USB sticks, main instrument in the black market) to go bigger

Downside is pretty large - it is used in blackmarkets (trafficking, drugs, etc) and at some point it will be attempted to be shut down by authorities.

Facts:
Market is growing exponentially

Very illiquid, when it drops, it will go to zero

Emotional market, not moving on any fundamentals
 

Strategy:
Take emotions completely out of it, recognise that it is an upward spiral self fulfilling mkt but work with it and not against it knowing that it will drop suddenly at some point

Derisks logarithmically that will leave exposure to upside but also constantly taking profit and defined intervals (i.e. sell half when px doubles or sell one third when price triples, etc, depending on your risk appetite - my example of quadrupling is below)

The end idea is to set up some explicit trading rules, not be greedy and have some fun.
 

Numbers:
Have 200BTC bought at an average px of 12.285 GBP

Have put a sell order of 50BTC for 49.14

i.e once it has gone up by 4x (initial investment is back)

Will be left with 150 BTC

When it hits 196.56 will sell 37.5BTC for £7,397

left with 112.5 coins

When it hits 786.24 will sell 28.125 for £22,113

left with 84.375 coins

And so on, but as i said i dont think it will move much further than around that price point

Thoughts comments and suggestions more than welcome.

Fanks