Should i allocate 100% of my savings to bitcoin ?

[thoughtfan]

It all depends on your perception of what is more likely. I, for one do not believe it would at all be unreasonable for bitcoin to either:

1. Be 1000/btc +
2. To fail and lose all of its value

Therefore, I do not believe that this analogy fits into the possibilities for bitcoin. Both are almost equally as likely, it just depends on whether corruption and existing power will win out over the possibility of the new and the people.

I'm not intending to say I think one is more likely than the other (although it's not hard to guess which my money's on).  In terms of black swan events though, as far as I can see nothing other than 'more of the same' is required for Bitcoin to continue on a trajectory towards widespread adoption whereas something else (either one of the possibilities being talked about or something entirely different and unforeseen) would be required for Bitcoin to fail and lose all of its value.

One of the characteristics of black swan events (as I understand it from the Wikipedia entry) is that it's not easy to calculate odds of an event (not a specific event but any event that would have the outcome being assessed) occurring.  I don't think one of these is necessary for Bitcoin to succeed to the extent implied in CurbsideProphet's post whereas I do for it to fail.

I can't remember who it was said 'All big decisions are made with insufficient data' - the argument being if there was sufficient data it wouldn't be that big a decision!  

[wachtwoord]

y = 100x -15(1-x) =0
Gives x = 0.0148

So if (1) and (2) are the options the chance of (2) needs to be at least 1.5% to be profitable. If the target price for 2 is larger than $1k smaller percentages are possible.

Do you believe the chance of Bitcoin failing is larger than 98.5%?

[lebing]

..read Taleb's book, he even tells you what percentage of your investment portfolio should be allocated toward black swan events. 

http://en.wikipedia.org/wiki/Black_swan_theory

What percentage does he suggest?

I'm guessing less than 10%

[FreeMoney]

If you feel you have good reasons and evidence that a certain 'surprising-to-other-people' thing will happen I don't think it's really right to call it a black swan. Plus, even if you are just like "Oh, that would be unlikely" that doesn't make it a black swan. We know monetary revolutions happen. We know technology can change how payments are made. Plus we know that normal people are willing to use bitcoin. So the 'bitcoin revolution' will just be more of the same.

[ElectricMucus]

Bitcoin isn't a black swan. It's more like an albino squirrel 

[fcmatt]

Getting investment advice here about investing in bitcoin is terribly biased. Tread carefully.

[Hexadecibel]

Getting investment advice here about investing in bitcoin is terribly biased. Tread carefully.

In which direction? According to the poll its biased against putting all of his savings in.

Most of the comments here have been pretty level headed.

In my opinion, if you personally believe bitcoin is going to be the commodity/money of the future, then by all means invest every spare cent you have in it.

If you have doubts, then don't.

[FreeMoney]

Getting investment advice here about investing in bitcoin is terribly biased. Tread carefully.

In which direction? According to the poll its biased against putting all of his savings in.

Most of the comments here have been pretty level headed.

In my opinion, if you personally believe bitcoin is going to be the commodity/money of the future, then by all means invest every spare cent you have in it.

If you have doubts, then don't.

That isn't the bias of the poll that is the result of the poll. You can't really tell from a result which direction the bias is in unless there is unanimity, then you can rule out bias in the opposite direction.

If you don't know wtf to do and people at 'the bitcoin forum' are telling you not to then maybe you should not.

[CurbsideProphet]

Thanks for introducing me to the 'black swan event' concept.  I'm far from understanding it properly but reckon it's worth getting Taleb's book to check it out properly (would you recommend the original 2004 book -which I like the idea of because it was prior to the 2008 financial crisis - or the later 'The Black Swan'?).  It sounds to me like one of those concepts which at first seems to describe nothing new but could well be a concept that draws to itself enough distinct characteristics so as to give the concept the power to allow us to see and understand certain things better.

I read the 2008 version.  I think either version you will glean the basic premise of the concept.  

Your use of it in the case of Bitcoin is intriguing me in that you're saying 'It will likely take some sort of black swan event in order for Bitcoin to reach [high] numbers'.  An example from the Wikipedia entry of black swan events is the rise of the internet yet it is also talking about these things from the perspective of 'the observer'.  To those who were around the net and playing with html in 1996 I would say the rise of the internet was not a black swan event (it was neither one prior to that because it hadn't had the global impact nor since because to those who were around its rise was not unexpected).

I'm guessing if Bitcoin rises as the internet did, with respect to the financial and political worlds who know very little about it, it will indeed be seen to have been a black swan event, yet to many of us here now there would be no major surprises were it to become massive and have huge implications on the way the financial and political worlds work.  And should it do so then Bitcoin being valued at $100 and $1,000 USD are merely markers predicted and expected to be passed along the way.

I think you need to take a more macro perspective.  A black swan event is a rare event that cannot be predicted by trends.  This doesn't mean no one can predict a black swan ahead of time, it just means the vast majority of the population does not see it coming.  The reason I attribute the rise in BTC price to a black swan event is because most people here subscribe to the theory of a major fiat disruption or breakdown.  That would be a considerable black swan event.

Or it could be similar to the internet, a revolutionary piece of technology that is slowly adopted over time.  The point is not really to try and predict what the event will be (as by definition they are nearly impossible to predict) but to acknowledge that these events do occur throughout history and invest accordingly.

[CurbsideProphet]

..read Taleb's book, he even tells you what percentage of your investment portfolio should be allocated toward black swan events. 

http://en.wikipedia.org/wiki/Black_swan_theory

What percentage does he suggest?

I'm guessing less than 10%

He suggests what he calls a "barbell" strategy where one is better off investing at the extreme ends of the spectrum, so hyper-conservative and hyper-aggressive at the same time.  He argues that investing in medium risk investments is pointless because of the difficulty in computing risk.  If I were to turn that into percentages, I would say for the hyper-aggressive he's advocating 10%-20%.

Again, this is my interpretation of the book.  It's better if you read it yourself and adapt its strategies (if you agree with the author) to your investing strategies accordingly.

[coqui33]

He suggests what he calls a "barbell" strategy where one is better off investing at the extreme ends of the spectrum, so hyper-conservative and hyper-aggressive at the same time.  He argues that investing in medium risk investments is pointless because of the difficulty in computing risk.  If I were to turn that into percentages, I would say for the hyper-aggressive he's advocating 10%-20%.

Interesting. So 20% in BTC (on the off-chance it takes off), 80% in precious metals (safe as houses) and zero in stocks, bonds, T-bills, etc.  (too middle-of-the road).

Works for me.

[payb.tc]

80% in precious metals (safe as houses)

if this is true, just buy houses.

[fcmatt]

80% in precious metals (safe as houses)

if this is true, just buy houses.

And rent them out for income instead of just storing gold which pays you nothing.

[Cluster2k]

Would you invest 100% of your savings in one company on the share market?  Bitcoin is no different.  I know it's all smiles at the moment as we've seen a massive ramp up in price from $2 to $16, but consider being on the other end of it buying in at $32 and seeing it drop to $2.

[Grant]

Interesting variety of opinions

I guess this poll would have been much more bullish had i asked this same question when bitcoin was at 30$, before the big exchange hacks and before the ponzi scams

Would you invest 100% of your savings in one company on the share market?  Bitcoin is no different.  I know it's all smiles at the moment as we've seen a massive ramp up in price from $2 to $16, but consider being on the other end of it buying in at $32 and seeing it drop to $2.

If that one company was the only company in the world that had a realistic solution to a very big problem, i absolutely would.

I've been involved in ecommerce for quite a few years. One of the most depressing thing about it is that consumers pay a very high price, because the current online-transaction systems are so easily exploitable. By an estimate, in 2008 online fraud had grown to 4billion USD, today this figure is likely only to grow exponentially. http://www.practicalecommerce.com/articles/996-Chart-of-the-Week-Online-Fraud-Cost-Merchants-4-Billion-in-2008 Especially when added, the post 2008 crisis obsessive regulations on financial institutions, the hidden cost of fraud, regulations, and so on is only going up. My own little business has an operating margin of just 1%, but the "spread" for my clients is ±30% (primary due to fraud).

Bitcoin seems to be the creature, that appears just crazy enough to be able to solve it. But the issue remains that most businesses as well as consumers still need exchanges to pay their bills (in other currencies than bitcoins), and exchanges are the point where the fraud will continue to happen, hence the lowcost bitcoin is still not so low cost for most people. Wide adaption would solve this, or perhaps bitcoin is just too crazy of a creature for wide adaption.

[twolifeinexile]

Bitcoin's fate is binary, and what is your saving's purpose, if the purpose is provide future income, then no, do not invest 100%, if the purpose is to speculate ( and accept the fail if it happens), then I think it is fine. Prepare yourself psychologically first

[molecular]

guys, the "black swan" is bitcoin failing.

the "normal mode" for bitcoin is to go up up up

[n8rwJeTt8TrrLKPa55eU]

80% in precious metals (safe as houses)

if this is true, just buy houses.

And rent them out for income instead of just storing gold which pays you nothing.

Gold can also be rented out, albeit not for trivial amounts:
http://www.kitco.com/lease.chart.html
http://neilski.typepad.com/chicago_gold_and_silver_i/2012/12/the-big-lie-that-gold-cannot-earn-revenue.html

[DeathAndTaxes]

Can "someone" put 100% of their savings in Bitcoin?  Sure if they are young, and can handle the risk.

Should YOU?  No. You have no conviction.  You sold off based on a poll.  If you had 100% of your wealth in BTC you would be the proverbial weak hand and likely lock in a loss in any crash.

Ask yourself what is the most amount I can keep in BTC and simply not care.  Maybe it is 5% of your wealth?  Maybe it is only a handful of coins.  Whatever the amount is you shouldn't be holding more than that.

[arepo]

i'm skeptical about 'price-averaging'. given a stochastic market, aren't the chances that you end up with an average price higher than whatever initial buy-in price equal to the chances that you can achieve a lower average price?

i understand that large buys are prone to slippage, and that is one advantage of multiple smaller bids, but does the technique really average dollar cost?

But by that logic you're 50% likely to lose money as you are to make money in any investment, in which case investing is pointless.

Dollar cost averaging just provides a simple way to buy more when it's cheap and less when it's more expensive, without having to spend your whole life doing analysis, or beating yourself up when you call the bottom wrong.

if you have no information about price direction, then yes, you are no more likely to win than to lose. that is the point.

'investments' are usually made with a positive expected return, so that's different. what im trying to say here, is that without knowing anything about price direction, your chances of getting a lower mean price through cost-averaging are no better than getting a higher mean price. is that wrong?