there is a time to declare an attempt dead
I NEVER declared bitcoin "dead", not even when may people were screaming so. (Talking of strawmen...
I still
wish that it will succed. I am skeptical that it will. (Desires should not be confused with forecasts.) But I believe that it will stay alive for years (unless a really serious bug is found, or the US decides to ban it -- both very unlikely in my view).
According to that strict interpretation of probabilities and their application to real life events, *all* investments are equally good or bad, and there is no way to make an informed decision.
Not at all. While probablilities are ultimately subjective, in many cases most people will assign roughly similar probabilities. And when people share what they know about something, their probability estimates usually converge.
Everybody will agree that the chance of snake eyes at dice is 1/36, for example. While diferent people will assign different probabilities to "a whale will fall from the sky into the Grand Canyon", most will pick a very small number.
For a more complicated situation, closer to the issue, consider investing on oil industry stock. Seasoned investors know a lot about the science, technology, economics, and companies in the field. They have data on how often such and such kind of field yielded so much oil, and so on. Thus the probabilities they assign to future events are often shared by other investors, and if they make money in a string of investments, that is empirical evidence that their algorithms are good. They should all assign low probability to there being oil under Campinas, and hence would say, with authority, that a company that proposes to dig there is a bad investment.
For bitcoin, however, there is no history of similar projects that one could point to in order to change other people's assumed probabilities. It is an "internet based project", sure; but that class is so vast and varied that it would be foolish to use its frequency of success as probability of bitcoin's success.
Bitcoin has many unique key features, such as the need for cooperation of thousand volunteers players to maintain the blockchain up-to-date under a very tight protocol, in exchange for a reward whose value depends on a speculative market.
Most successful internet innovations - -Google, Facebook, Twitter, Amazon, etc. -- are not at all like that. Wikipedia depends on a network of volunteers too, but it has cetralized control and processing, has only loose protocols about format, no timing requirements, no material reward, etc. GNU/Linux is almost decentralized but has even less requirements.
Tor and BitTorrent may be more similar, but again the motivations are different and they are intended for a niche "market" with little money involved.
So, without a string of "similar" projects to serve as a guide, what information could people use to pick their probabilities of Bitcoin succeding in various ways?
My probabilities are largely based on my understanding of the world, how I expect that governments, banks and people will react to it, etc. I can share some of that information and perhaps change other people's perceptions a little; but there is much in my head that I could not convey in a lifetime, and much that is subconscious too.
Simply *assume* for a moment that (through intuition, or TA) an investor has a way to roughly predict the price function of USD/BTC. My question was: which USD/BTC price function would qualify as a good investment of that (perhaps hypothetically knowledgeable) investor.
Basically, a good investment is one that has expected return per year comparable to the best predictable returns out there, over the time scale one is willing to wait and one's probabilities hold. That is usually 5% to 10% per year. So if you are 90% certain that the price will go up by 10% over the next year, and 99% certain that it will not crash below 50%, the expected return will be about 8% at least, so it would be a good investment -- in
your view.
But use slightly more pessimistic probabilities, and the expected return will be much lower, easily negative.
Obviously, if price kept on falling now, never to reach 1000 USD again, everyone who invested in the last 3 months could conclude it was a bad investment. If however price recovers, and keeps on rising, there is really no meaningful way to declare it a "bad investment" until at some point it doesn't recover anymore.
That is my point, you cannot tell whether
one investment was good or bad investment (perhaps we should say, "wise or dumb"?) from its outcome. If someone makes a series of similar investments, and makes money on the average, then you can say that his way of assigning probabilities and choosing investments must have some merit.
So, why do I say that bitcoin is a terrible investment in absolute terms, not just "for me"? Because if we were to tell to an unbiased and non-naive investor all the negative arguments, and omitted all the positive arguments that are no longer true, I am sure he would assign such probabilities to the possible future prices that his expected return will be very negative.
Telling someone only that "investing in bitcoin has a large expected return" is misleading, very close to scamming. Ditto for telling him only the positive arguments without the negative ones (like all salesmen and advertisers do) . At the very least, you should start by showing the potential investor
this chart, and then try to explain why you think that it is not important.
Poll
