Here's a quickie response
(just kidding)Thanks, Jay. I learned from your reply, and picked up some new concepts to research.
Great.
Don't hesitate to come back at me, if your research turns up some things that seem contrary to what I was saying or even if you believe that there are good information sources out there to buttress some of the points in one direction or another.
Surely, I don't proclaim to explain some of the concepts as clearly as they might need to be explained.
Whilst I ponder that, I think that I should clarify a few points:
By the way, a lot of us try NOT to get too much caught up on short term variability of BTC prices
I must emphasize that apart from the pain of minimizing badly-timed expenditures, that is the perspective that informs my question! When the bears are out in force, I usually ignore the market as much as I can. Hereto, that has always worked out well: “It’s down. I don’t care. It will be back up.”
I am pretty sure that you and I have gone over some of these concepts previously, and of course, I don't even mind repeating myself, because sometimes when we are posting in a public thread, other readers (or even active thread participants) can use this kind of conversation to attempt to fix their ways of balancing their BTC holdings along with a kind of inevitable BTC volatility that is not always UP and is hardly guaranteed in terms of either direction nor quantity of movement.
I understand that even forum members who have been around a long time might not have completely left their BTC accumulation stage, so the three stages of long term investing are accumulation, maintenance and then liquidation, and as I mentioned several times, I consider myself to largely be in a maintenance stage that is on the cusp of entering or employing more liquidation strategies in the coming years.
The accumulation stage remains amongst the most difficult and part of the reason is because sometimes accumulators have difficulties figuring out a balance that works for them in order to reach their goal, so if you have not come close to reaching fuck you status, you still may largely be accumulating BTC on a regular basis until either you reach fuck you status or you merely are at an age where liquidation is starting to seem practical.
So far, I am presuming that you have resolved some of the particular personalized questions around your BTC investment amounts and your accumulation target (your allocation percentage), and those would be your cash flow, your other investments, your view about bitcoin as compared with other investments, your risk tolerance, your timeline, and finally your skills, time and abilities to research and learn, and tweak your holdings or trade from time to time.
Accounting for all of the above personal variabilities, you arrive at some resolutions regarding how much allocation is your BTC target, so when I got into BTC my allocation target was to have BTC as 10% of my investment portfolio, but I ended up with close to 13%, and bitcoin price appreciation had caused BTC to become around 70% currently of my investment assets.
I hope that I am not being reckless by suggesting that my BTC allocation is 70% because my allocation came from BTC price appreciation, so the remainder of my investments are able to completely sustain me, even if BTC were to go to zero, but I am more than willing to just allow my winner (BTC) to continue to ride because there is not any stress on the rest of my various allocations. I have largely NOT touched my BTC in terms of withdrawing any since I started in late 2013.. so I had been building my allocation in the first few years, and largely met my accumulation goal and just have been in a maintenance status since about early 2017 (if NOT earlier).
What I am trying to get at is that I personally believe it is ridiculous for people to over-allocate in BTC because they need to have their cashflow projected out, so many times, my finances had been a bit complicated, so for about the past 20 years, I have been accustomed to projecting out my cash flow for at least 18 months and sometimes even projecting out a bit further than that, using an Excel spreadsheet.
So, if you already have gotten past your conviction in BTC that you believe it is a good investment, then you have already come to a determination regarding how much of your cashflow that you would be willing to invest in BTC long term and even give up if BTC were to go to zero, and hopefully your timeline is at least 4 years minimum and if your timeline is longer then that is even better.. 10 years or longer is good, because there is no get rich quick, even if with bitcoin you may well be able to get rich quicker than you would have with traditional assets, so long as you play your cards correctly.
By the way, when I got into BTC in 2013, I had already been investing around 25 years in various traditional assets, and I had already established a pretty decently sized investment portfolio, so moving 10-13% into bitcoin was a decent chunk of already established profits in various investments and appreciation of investments over those 25 years.
So having an investment timeline of 4-10 years or even 30 years is not unreasonable, even though it seems to me that with bitcoin there are ways that they investment timeline can still end up cutting much shorter than what i had to do in order to build the size of my investment portfolio... so maybe with bitcoin the portfolio size can reach high levels in a stable way that I had not been able to accomplish with traditional investments (and of course, still no guarantees with any of this, either).
In other words, if you do not invest more than you can afford to lose, then you do not worry about what the bears are saying or what they are doing and what the short term movements of the BTC price are.
Hopefully, you are dollar cost averaging and buying on dips until you reach your accumulation target, then you you reach your accumullation target, they you may go more into a maintenance stage which might involve shaving some profits when the BTC price goes up and using those proceeds to buy back BTC, but if you have not reached your BTC target, then you might not be able to afford to sell any BTC because you ONLY remain in a DCA of BTC on a regular basis, buy on dip and HODL strategy, until you happen to reach such accumulation target.
So really difficult to say for you, nullius, if I am not really knowing if you have reached your accumulation strategy yet and if you have your fiat cashflow sufficiently projected out on a long enough timeline.. that you are NOT going to get into any kind of cashflow pickle.
If, however, the fundamentals of the market have changed—not Bitcoin’s own fundamentals, but the foundation of the whole economy—then I think it’s worthwhile to re-evaluate that stance in the context of the current situation. Not from turning bearish on Bitcoin—to the contrary! Panic and infectious negativity are bad; so is sticking one’s head in the sand. Bitcoin has huge potential right now, but also faces dangers to which I should not blind myself.
I am having a hard time considering how our current macro circumstances should cause any kind of significant change to the whole concept of making sure that your shit is in order and figuring out a BTC accumulation target.
Maybe we can attempt to use a hypothetical, here? Let's say that you have $100k invested in various assets.
You have $35k in stocks, $15k in bonds, $25k in property, $5k in gold/silver, $12.5k in bitcoin, $7.5k in cash. That would be 12.5% in bitcoin.
Are you saying that you want to move everything to bitcoin because you have lost confidence in those various other investments based on the latest and greatest in macro economic dynamics that have caused you to lose confidence in various traditional investments?
Personally, part of the reason that I did not change the allocations of some of my traditional investments was because they were in 401ks, so they were continuing to be tax deferred and then part of my investments were a pain in the ass to move (so not very liquid), so when I got into bitcoin, largely I move my value or increase my bitcoin allocation by just adding to what I had in bitcoin until I reached my 10% to 13% target.
So, if you are sufficiently, liquid in terms of those other assets, sure it is possible for you to just merge more and more of them into bitcoin to end up having higher allocations in bitcoin, and maybe you would end up having higher allocations in cash, too because you end up wanting to have some of the cash available in order to have strategies to DCA and buy on the dip, and various other ways to attempt to take advantage of BTC volatility.
So maybe one year later, you position might end up looking more like this:
$12.5k in stocks, $2.5k in bonds, $5k in property, $7.5k in gold/silver, $57.5k in bitcoin, $15k in cash. That would be 57.5% in bitcoin.
In the end, you are the one who has to decide both how to make your allocations or to make adjustments to your allocations in order to feel comfortable with whatever are your choices, including if you believe macro circumstances have sufficiently changed in order to cause drastic reallocations in your various holdings.
By the way, frequently, we are speaking to the situation of people who need to get off zero in terms of their bitcoin, and people who want to get rich quick, so some of those people might be either be reluctant to invest anything into bitcoin, and frequently we might be telling them that they do not have to place high allocations in bitcoin in order to profit stupendously from bitcoin, especially if bitcoin ends up going up crazily, you may not even need to have a lot in bitcoin and it ends up becoming a high percentage of your holdings because if your scenario plays out in terms of the bullish bitcoin scenario, then your traditional assets may have stayed
about the same value but bitcoin goes shooting up.
A problem of over allocating your value into bitcoin is that if your investment thesis in regards to a bullish bitcoin does not end up playing out, then you end up being screwed because you did not have value allocated in those other possible scenarios... .. which ends up being a kind of gambling rather than investing, from my perspective, and I don't really believe in gambling when it comes to significant portions of my investment portfolio.
I think that the current economic situation is unprecedented: Never before have markets been so globally interdependent, and all based in total fiat currencies unbacked by anything whatsoever, and suddenly hit simultaneously, in numerous countries, with government policies that are tantamount to economic arson. It is only rational to take a fresh look at what probable scenarios may come to pass, if the cycles and trends of the past eleven years wind up totally broken.
I still do not believe that you need to over allocate in bitcoin in order to profit stupendously from your doom and gloom scenario playing out... so even if you are correct about the doom and gloom scenario, if you merely have a decent investment in BTC, your BTC will greatly outperform the remainder of your holdings, so you will still be rich either way, so long as you have some bitcoin without having to devote more than 50% of your current holdings to BTC, and you can even stick with a more modest holdings, even 10% to 20% (of course, depending on the totality of your personal circumstances that only you can specifically assess - not that you want to share all of your information on a public BTC thread - though we could talk in terms of percentages of a hypothetical person, too).
Oh? Now I see that you are describing such a black swan event as including the BTC prices going up, rather than down, and sure, I doubt that we really need to pinpoint exactly whether BTC prices are going up because BTC price is being appreciated and adopted more (normal supply and demand type price appreciations) or BTC prices are going up because fiat values are going down so much because of their irresponsible behaviors, inflation or whatever.
Actually, I was eliciting a question mark: Will we get an upward spiral, or a downward spiral? I expect the upwards one. Whereas I am admittedly biased, given that I am not only heavily invested in Bitcoin, but financially dependent on it.
Well, isn't that the million dollar question about whether you are too much allocated into bitcoin and you are potentially not adequately prepared for other possible scenarios?
In the absence of that crystal ball that so many people claim to have, I thought to ask around in WO, where the best regulars are much better informed about the markets than I am.
My goal tends to be that if BTC is performing at least 6% per year on average, then it is outperforming the average returns of my traditional investments. So, personally, I never have a high goal in terms of my expectations in regards to bitcoin. My first few years investing in BTC, I did not get my average of 6% per year because I was in the negative, and since late 2016, my investment largely started to meet and exceed my 6% per year expectations.. so even from here, when we are bouncing around at supra $10k, I still remain happy with 6% per year, but I also have a bit of a cushion, too... so I am cheating to some degree.
It seems that, at least at a first impression, you think I may not be wide of the mark in my expectation that fiat inflation should significantly drive up the dollars-to-bitcoins ratio due to the dollar’s fall, not Bitcoin’s rise—though of course, adoption can simultaneously push Bitcoin up further. Well, I may have overshot
when last I mentioned it in March; I hope so!
Well, you March 18 post came right after we experienced the March 12 dip down to $3,850, so we were bouncing in the $6k price arena on that particular day.
Of course, many of us realize that inflation is frequently understated, especially since our basket of goods might even vary from what the govt is supposedly measuring when it says that the dollar is only inflating at 2% per year, and many of us know better than that.
So, if matters really go to shit, in terms of the dollar, then instead of me expecting my BTC to appreciate by 6% per year to merely keep up with the previous performance of my earlier traditional investments, I might be better off having higher expectations for my BTC to appreciate by more than that in order to account for the devaluation of the dollar... Maybe double it to 12%? or maybe just add 50% to it, such as 9%? I can play around with my numbers in order to help to keep myself realistic (and not deluded) about what might be happening in the real world, too.
Sure, of course, having a healthy allocation to bitcoin seems to be a prudent approach in these times, and of course, individual circumstances are going to vary too. If you have a lot of expenses in fiat, such as business, family and even other kinds of payments that you are due, then you may well want to make sure that you have a sufficient savings/holdings in fiat to cover those expenses and a 6 to 18 month cashflow projection may well be prudent because no one should want to be forced to sell BTC that is NOT of a time of their own choosing merely because they had over-allocated in BTC, yet on the other hand, if your income and cashflow comes in BTC, then you are in a different kind of dynamic in which you might be forced to cash out some BTC on a regular basis, too. So sure, individual cashflow situations and expenses are going to vary in terms of what kinds of levels of allocation into BTC would be prudent for their particular circumstances.
Sound advice. Speaking from hard experience.
We frequently find guys getting themselves into a pickle because they had not adequately accounted for their cashflow, and then some kind of emergency comes up (emergencies are always going to come up, especially if BTC price crashes, then more likely some other emergency is going to come up), so they end up having to sell some or all of their BTC stash because they need to deal with the emergency or they are afraid that they do not have enough cash to deal with the emergency. Of course, they are going to buy back later, but when they end up selling at $4,500, and then the BTC price goes up to $7k or more, they spend too much time waiting for the BTC price to come back down, and it does not come back down and they had not adequately prepared for their emergency situation... because they had to sell their BTC at a time that really was not of their own choosing. It happens quite a bit, and many guys will not admit it.
Even when I project out my cashflow 18 months or more, sometimes, I do have moments in which my cashflow is not adding up very balanced in the positive, and some rebalancing has to be done in order to make sure that there is enough balance to cover all expenses, and surely the more kinds of investments that you have does also help in choosing from which of the investments to draw in terms of resolving short term cashflow shortcomings that arise from time to time and perhaps more frequently when there are more complexities in the expenses and sometimes more cushion needs to be kept in the accounts when there are more complexities too... so instead of having an ongoing $500 cushion (no matter what at low points in the cycle), the cushion might need to be $1,500 or even $2k at low points in the cycle.
End of the economy if JJG ran out of words! Depression! Collapse! DOOMSDAY!
I will not proclaim to having any ability to live beyond the measurement of one being, similar to the rule against perpetuities, which remains an interesting concept...
In other words, at some point, hopefully not soon, the words of this particular being will have run their course.
And here I expected some technical analysis evaluating the stock-to-flow model of your words. The rule against perpetuities is a more interesting take, however. Do you suppose that in the absence thereof, you could will your distant descendants to continue producing your words in accord with your own present wishes?
Those can be complex instruments, and you know how the terms of a will could be measured in terms of a life in being.. in this case, I would be the life in being rather than the terms. If that makes any sense? in other words, so when the "life in being" (myself in this hypothetical) is not longer ready, willing or able to spout out words, then likely it is no longer a life in being.
Poll
