Moderately wealthy individual going cold-bloodedly all in

[oakpacific]

I did the same thing a year ago. Dont regret it for a second 

How "all in" were you? Mind some disclosure?

[KTE]

The argument that I just cannot refute is: "What is the point in having other investments that underperform, and what is the point in having cash, since BTC can be cashed when needed?"

If you want to ever consider yourself as a professional investor giving valuable advice to your clients, I strongly recommend learning about risk management if you are not able to refute this argument. Even if you're of a gambling sort and like to encourage people to get on the BTC train, you should at least be familiar with the basics.

[lebing]

I did the same thing a year ago. Dont regret it for a second 

How "all in" were you? Mind some disclosure?

Not going to get into numbers, but it was about 80% of my total assets.

[oakpacific]

I did the same thing a year ago. Dont regret it for a second 

How "all in" were you? Mind some disclosure?

Not going to get into numbers, but it was about 80% of my total assets.

I am not as "cold-blooded" as you are, only invested 20% of my savings, now whenever I trade it makes me super nervous coz when it's in BTCs it doesn't feel like much, when it's in fiats it feels like moving my whole bank account.

[crazy_rabbit]

I did the same thing a year ago. Dont regret it for a second 

How "all in" were you? Mind some disclosure?

Not going to get into numbers, but it was about 80% of my total assets.

I am not as "cold-blooded" as you are, only invested 20% of my savings, now whenever I trade it makes me super nervous coz when it's in BTCs it doesn't feel like much, when it's in fiats it feels like moving my whole bank account.

+1. 10 BTC? Nuthin. $500 USD? Nervous.

[lebing]

I did the same thing a year ago. Dont regret it for a second 

How "all in" were you? Mind some disclosure?

Not going to get into numbers, but it was about 80% of my total assets.

I am not as "cold-blooded" as you are, only invested 20% of my savings, now whenever I trade it makes me super nervous coz when it's in BTCs it doesn't feel like much, when it's in fiats it feels like moving my whole bank account.

+1. 10 BTC? Nuthin. $500 USD? Nervous.

Yeah thats just conditioning, it was the same for me at first. Trust me, that over time it shifts from one side to the other. I absolutely HATE to see my bitcoins decrease while now I have no issue about spending my fiat.

[Herodes]

In my work as precious metals dealer since 2006, I have got to know a variety of customers.

Now one of them revealed to me his plan of going all-in in bitcoin. I would like to follow your concerns to him.

As far as I know, this man (34) owns a house worth about € 400,000 and has a mortgage to about half that value. He also operates a business that does not have significant assets if realized, but is a specialist niche field and generates about € 100,000 profit per year. His wife is also a professional with high income but is 3 months pregnant to their 1st child. Their investments are in mostly in metals and also BTC, valued at least € 500,000 (this is hardest for me to estimate exactly).

He said that he thinks bitcoin will in all probability succeed and make them tremendously wealthy. Because nothing else is giving good returns just now, he thinks that there is no reason to keep money in other investments. Their financial situation is solid and both are able to generate income. They have their own house and live rather modest life as all Finns do. The investment is long term, there is no plan to use leverage or trade. Just go all-in and buy at least 15,000 BTC. I don't know what he wants to do with them when they are worth millions.

The argument that I just cannot refute is: "What is the point in having other investments that underperform, and what is the point in having cash, since BTC can be cashed when needed?"

The finns are brave!

[Elwar]

Tell him to wait.

At least until I can buy more BTC. Give me a few more months at least.

He should be ok with that right? No need to rush things.

[josiahgarber]

Well why not just invest half or a smaller percentage of his savings in bitcoin?  He'll still be ultra wealthy if it succeeds, but he won't have the very real chance of being broke.

Also,  I would ask his wife how she would feel about losing all of their savings.  I have a feeling she might not be ok with that, but you never know.

[justusranvier]

Your friend can go all in and still diversify by not sticking to a strictly buy-and-hold strategy.

If he uses some fraction of the bitcoins he buys to invest in Bitcoin startups, or donates to development to make the network more secure and scalable, that spending would serve to help protect the value of his savings.

[Technomage]

I think that going 80% all in is completely valid as long as one keeps track of what is going on with Bitcoin and its potential competitors. Going 100% all in I wouldn't recommend, it's good to have something to fall back on in case the worst scenario happens (basically a complete technical failure is the only one that applies).

It's also important to secure the bitcoins really well if one puts a lot of money into them. Especially if others know you have bitcoins. A Bitcoin protocol failure is NOT the only way to lose that money, as we have seen with exchanges so many times.

[KTE]

No one knows for sure what the exact right choice is before it happens. If your friend thinks he can manage his bitcoin investments and understands BTC well enough (or you can work as an intermediary) and is willing to commit to the risk of losing every penny they invest in BTC and really, really wants to take that risk, then I would say it has the possibility of paying off big time.

But the downside is huge, the man really must understand and accept that first. I'm heavily (50%+) invested myself, but I'm prepared to lose it all should it come to it. I wouldn't be if I'd have a mortgage.

[Melbustus]

Say 10yrs from now there's a 25% chance bitcoin is worth $1500/btc, but a 75% chance it's worth $0. That puts discounted present value at $173/btc (using 8% as the discount rate).

So, if he thinks those probabilities and the timeframe are in the ballpark, then he should be able to answer for himself whether being exposed to that set of outcomes has positive utility for him.

[Odalv]

Well why not just invest half or a smaller percentage of his savings in bitcoin?  He'll still be ultra wealthy if it succeeds, but he won't have the very real chance of being broke.

Also,  I would ask his wife how she would feel about losing all of their savings.  I have a feeling she might not be ok with that, but you never know.

Yeah, I personally subscribe to the 20-40% argument. Because that is also an unbelievable stash of purchasing power if/when bitcoin succeeds.


But this thread is already 34 replies long and there has been only a single argument against the idea presented so far:

"There is a very real chance of bitcoin going to zero or otherwise so low that it will decimate any savings that were invested. You should only invest money that you can lose without remorse."

My friend replies: "I have a positive cash flow, a house and perhaps we'll keep $50000 or so in silver just in case. The rest (no matter how much it is) I can lose without it affecting our lifestyle, and that part I want to invest in bitcoin."

I think, you waste your time with kids who never saw $50.

[Melbustus]

I think bitcoin is cheap at $50, if the present value is $2194.

Hey, my much more conservative PV analysis also says bitcoin is cheap at $50. I'm buying now, but if it hits $173 shortly, I'll sell to you.... :-). Would actually have to be higher than $173, since hitting that would likely entail my estimation of the probabilities becoming more favorable...

To be honest, I think the probabilities are better than I outlined anyway, but I always take a more negative view when I do the math to try and account for my own human optimism-bias.

[aghori]

Only slightly off topic re: the pictures on page 1;

The first major money transfer company like western union to integrate bitcoins is going to make a boatload of cash.

[RationalSpeculator]

But this thread is already 34 replies long and there has been only a single argument against the idea presented so far:

"There is a very real chance of bitcoin going to zero or otherwise so low that it will decimate any savings that were invested. You should only invest money that you can lose without remorse."

My friend replies: "I have a positive cash flow, a house and perhaps we'll keep $50000 or so in silver just in case. The rest (no matter how much it is) I can lose without it affecting our lifestyle, and that part I want to invest in bitcoin."

Your friend is forgetting the primary objective of capital/savings. It is to take care of you when you - cannot - work, due to illness, accident or old age.

Speculating with all your capital you risk losing it all and might have nothing to fall back on when you cannot work anymore.

I made a new post explaining that argument in more detail.