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Author Topic: (SSS) - A Sane and Simple bitcoin Savings plan  (Read 80503 times)
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rpietila
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November 24, 2013, 03:49:43 PM
 #1

This topic is unique among my many informative threads. It was reddited twice and received over 5,000 readers in the first 24 hours. Thank you!


Introduction

Bitcoin has made many rich. Consider the guy who sold two pizzas for BTC10,000. The about $20 investment has turned to $10 million - a nice 500,000x gain in less than 4 years. But what if he sold it all when the price first doubled? Then instead of millions, he would have netted $20.

Even worse, some have actually lost money with bitcoin. Buying at the tops and selling at low points is the fate of many who do not have any strategy in their actions.

It is also actual money that you lose if you do not buy, or buy with a smaller amount than you could have bought, or at a higher price than you could have bought, considering the circumstances. All my friends would have become $millionaires by now, had they acted rationally since the day the heard about Bitcoin. Even I would probably have 2-10x more coins with no corresponding increase in risk.  

The past cannot be changed, but there are enough gains waiting for us in the future to amply reward those who care to exercise their logic and invest rationally.


Bitcoin is a disruptive technology that has the potential to change the world even more than the Internet has done. If this indeed happens, the inbuilt dynamics make it happen relatively soon (by the end of the decade, at maximum). In this scenario, the value of the currency unit will have increased really much. The pizza is quite near the low-water mark of bitcoin trades, and the 500,000x gain since it, can be taken as the bitcoin value appreciation until now.

How much can bitcoin go up from here? A few months ago I had a strong realization that bitcoin's market cap could reach that of gold, which would translate to $300,000 per unit. That would be a mere 300x increase from current levels. Considering that 12-months trailing average shows almost 100x, this could conservatively be achieved in 2016, realistically in 2015 and possibly in 2014. A longer-term trendline analysis extrapolated, shows 8/2016.

But going even further, comparing Bitcoin to gold (borrowing the analogy from Zangelbert), would be akin to comparing email to postal letters. The new technology not only effectively replaces the old, but also brings so many other benefits that you cannot imagine them before seeing. In email's case, you could for example link all information in the world to your post, it would reach the recipient instantly, and not cost anything. Bitcoin does the same to something that is way bigger than the industry of delivering mail - the monetary system. A comparison to gold is probably not at all enough. The comparison to all dollars, all fiat currencies, or all liquid financial instruments may still be an underestimate. On the other hand, if something so good happens to the debt-ridden world, even those who did not buy any bitcoins, are mostly better off.

Then there is the flipside of the coin: the disruptive technology is still on beta. So far all is fine, but nobody gives any guarantees. Despite that by reading about Bitcoin you gain more confidence towards it in all levels, there still are many known threats and dangers, technical and political, and sometimes also unknown things happen. Unbelievably few understand bitcoin even now. It is an unknown thing to them. To keep things simple, we postulate that Bitcoin is in a constant danger of self-annihilating, and its exchange value going to zero. This is not necessary the most realistic negative option, but serves as a good counterweight to the mindblowing positive case.


SSS System

In investing Bitcoin, the odds are so much on your side that there is no reason to take any risks. If it goes up, any number of bitcoins makes you rich, and even if you have zero, you will still be richer than before Bitcoin (I do not own any shares of Facebook, but acknowledge its importance and the benefits that I get for free). If it goes down, you should only lose slack money, money that you did not need anyway. You cannot lose more than you put in, so don't put in more than you can afford to lose and you'll be all right, even in the most negative case.

First you need to find out how much you have. To keep keeping things simple, take first aside all the things that you need. They are not counted. Then calculate the resale value of the rest of your things, subtract all debts, and you find your financial net worth. Since house is so big, you should count house equity toward the total, but if you prefer thinking it as separate, you can also decide that you 'need' it and not count it. In this case, do not subtract the mortgage either.

Then you select the rake. You know the concept from poker establishments: some percent of all winnings goes to the house. With bitcoin we except great gains, so we want to 'tax' them to increase our living standard, or just to keep some diversified in case the negative event happens and bitcoins lose their value. The rake is the percentage to set aside, every time that the price doubles. If for example you select 10%, this will lead that 20% of your portfolio is in non-bitcoins and 80% in bitcoins. If you select 20%, the result is 40% in bitcoins/60% non-bitcoins.

For most of us, the previous percents sound extreme. But they are my recommendations. Remember, you do not need to invest more than you can afford to lose. In purist case, selecting a 10% rake would require you to invest 80% of your liquid wealth in bitcoins. But if that does not feel comfortable, you can invest 10% instead. In this case you can boost the accumulation by not raking your pot in the first doublings, only after it has increased to your target of 80% of your financial net worth.

The price now is about $1 per mBTC. (It is very much likely that we will spontaneously revert to mBTC when the average investment is no more even one bitcoin. So let's start it now.) First doubling is at $2, then at $4, $8, $16, $32, $64, $125, $250, $500 and $1000. So there are 10 doublings in total, which take the price up 1,000x. In the end, one bitcoin is worth $1 million, and one dollar is worth quite much less than it is now. The plan ends there because the world will look very much different. Before that, you stick to the plan: if it goes to zero, you net a small gain or a small loss.

Let's take an example of a person who only now finds bitcoin, has $50k in liquid assets, but is unwilling to risk more than $10k. His rake level is 10%, which starts immediately.

Code:
Price mB mB k$ mB other total BTC%
left sold out val. val. value
2 9000 1000 2 18 42 60 30 %
4 8100 900 4 32 46 78 42 %
8 7290 810 6 58 52 110 53 %
16 6561 729 12 105 64 169 62 %
32 5905 656 21 189 85 274 69 %
64 5314 590 38 340 123 463 74 %
125 4783 531 66 598 189 787 76 %
250 4305 478 120 1076 309 1385 78 %
500 3874 430 215 1937 524 2461 79 %
1000 3487 387 387 3487 911 4398 79 %

The important parameters are:
- Purchased 10,000mBTC, in the end he still has 3,487mBTC.
- Recovered initial investment of $10k in full when mBTC hits $8.
- In the end his fiat+other stuff stash is worth $0.9 million.


Discussion and tweaks

It is important to buy in as soon as possible, because waiting has in general not been a good strategy with bitcoin. Even if price drops afterwards, you should not feel any remorse at all - we are counting towards $1 million or nothing. If 'nothing' happens, you lose as many dollars, regardless of purchase price. If $1 million happens, then yes you have a smaller number of coins, but think how many are not even reading this advice, much less acting on it! Buy, and do it now. And only with funds that you can afford to lose. If you buy, and it crashes, but you have gained more determination that it is a good thing in the meanwhile, you can buy more.

When the plan is underway, and it crashes, I don't advice to buy back. Enjoy your rake rather. Bitcoin may continue to go down, you don't know it. Even if it goes to zero, you will have gained. If you need to pay taxes on the realized gains (as most of us do), it makes even less sense to go in and out.

If you want to daytrade, do it entirely separate from this, so that your daytrading has no effect on the execution of SSS plan and vice versa. In the end you will see, which one was more profitable and better use of time.

It is possible to make the selling effectively continuous, instead of discrete. You just send 10% of your coins to an exchange and divide the next doubling to small enough increments (say, 10 of them) and list your coins for sale. This way you get to sell every time the price rises to a new ATH. Because ATH's happen on times when Bitcoin is ahead of the trend, the timing of the selling is better than average.

It is entirely your own decision, how to allocate the non-bitcoin portfolio. Local differences dictate the prudent course of action.
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November 24, 2013, 04:13:47 PM
 #2

Great post. As usual. Deeply appreciated.
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November 24, 2013, 04:20:36 PM
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wow THANK YOU!

once I sold, now I hold: 1NmPGsSFQdRYbBQbYyBhVs7aiqYF7mpbAB
Buy Bitcoins: https://coinbase.com/?r=525e03600349f76de2000115
Buy Gold & Silver with Bitcoins: https://www.goldsilverbitcoin.com/index.php?plugin=wafp&controller=links&action=redirect&l=6&a=thetopham
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November 24, 2013, 04:26:18 PM
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The key here is investing the total amount of what one is ready to risk from the start rather than going gradually over time.
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November 24, 2013, 04:26:50 PM
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Thank you for infromations. Smiley
Very good post. Cheesy
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November 24, 2013, 04:27:13 PM
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Always a pleasure reading your posts.
Cheers.

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November 24, 2013, 04:27:26 PM
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A nice post and a good read. A genuine question though, does anyone really expect Bitcoin to ever go above 2 or $3k? That's only the first of 10 doubling stages with this plan. I appreciate that the plan in general is a nice, sensible programme to follow, however.
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November 24, 2013, 04:34:19 PM
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does anyone really expect Bitcoin to ever go above 2 or $3k?

This, grasshopper, you must discover for yourself.

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November 24, 2013, 04:38:55 PM
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A nice post and a good read. A genuine question though, does anyone really expect Bitcoin to ever go above 2 or $3k? That's only the first of 10 doubling stages with this plan. I appreciate that the plan in general is a nice, sensible programme to follow, however.

Yes many people expect it to go beyond 10k
Your question was asked at the 1 USD level, 5 USD level, 10 usd etc...
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November 24, 2013, 04:39:05 PM
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They really need to hear this over on /r/Bitcoin. It is flooded with newbies who have no idea what they're doing. They'll be scared of their own shadow if they put in a few grand and don't have a plan.
rpietila
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November 24, 2013, 04:39:27 PM
 #11

The key here is investing the total amount of what one is ready to risk from the start rather than going gradually over time.

I accumulated bitcoins until May, this year. Now I am dishoarding.

I think if you start now, the wisest choice is to buy as much as you dare (spread it over 3-6 months, maximum, if sum is really large) and then diversify according to the plan.

Actually what matters is the number of bitcoins. Those with 1-digit number of them are rich, 2 digits are super rich, 3 digits are hyper rich and 4 digits are ultra rich when 1 bitcoin is equivalent to millions of today's dollars.

An alternative way to this savings plan is just to buy a required number of bitcoins and put it into a paper wallet. But this is not so good because the value involved is so high that you better start preparing your new life already. It can be achieved with periodical dividends from the bitcoin stash, which gradually get bigger and enable you to upgrade your standard of living, etc. gradually.

Whether you are free or not is really not about money. I fully believe that 1 bitcoin is enough freedom what comes to money, if bitcoin truly takes off. There will mathematically never be more than 2 million holders of 1 bitcoin. (See this for discussion.) For comparison: there are 29 million dollar millionaires in the world now.
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November 24, 2013, 04:45:29 PM
 #12

Thank you for this, will put it to use.

As someone who also would like to start building a position in silver, what % of net worth or at least % of mbtc increase dividend brackets should one dedicate to silver?

Cheers, always enjoy reading your input.

Edit:  It's a silly question considering differences in personal situation / location and understand if it's unanswerable
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November 24, 2013, 05:23:56 PM
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The key here is investing the total amount of what one is ready to risk from the start rather than going gradually over time.


An alternative way to this savings plan is just to buy a required number of bitcoins and put it into a paper wallet. But this is not so good because the value involved is so high that you better start preparing your new life already. It can be achieved with periodical dividends from the bitcoin stash, which gradually get bigger and enable you to upgrade your standard of living, etc.

First, good thread. I was wondering what you actually mean by it not being wise to put your coins in a paper wallet and just forget about them? I'm assuming you mean that one day you will wake up being very rich and that will be somewhat of a shock and may not end well. Like someone winning the lotery? Is this what you mean or am I misunderstanding you? I'd like to add that for many people just forgettng about your coins now will be a much better strategy since the biggest challenge (if bitcoins do go to 1M) is not selling a majority of the coins way to early. For example I've already heard of people seelling entire holdings in this last run up in price.

Considering the above I guess one could say having a set strategy like you outline is incredibly valuable. You just have to be entirely confident that you will follow it.

rpietila, I'd also like to hear what you think your non bitcoin investments should consist of? What percentages would you allocate to gold, silver, stocks, bonds, cash etc?

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November 24, 2013, 05:58:21 PM
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Very nice guide, great ideas. I know I will be using some of it!
Thanks
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November 24, 2013, 06:21:12 PM
 #15

 
Quote
In purist case, selecting a 10% rake would require you to invest 80% of your liquid wealth in bitcoins. But if that does not feel comfortable, you can invest 10% instead. In this case you can boost the accumulation by not raking your pot in the first doublings, only after it has increased to your target of 80% of your financial net worth.

Excellent timing advice! I will not be needing a rake for a while it seems, but that is what I've been expecting.
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November 24, 2013, 06:34:24 PM
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I was wondering what you actually mean by it not being wise to put your coins in a paper wallet and just forget about them? I'm assuming you mean that one day you will wake up being very rich and that will be somewhat of a shock and may not end well. Like someone winning the lotery?

Yes. I think most people enjoy periodic cashouts and gradual increase of lifestyle more than a huge all-in gamble with the intention to cash out $100 million in one swoop or nothing.

The parameters of the savings plan (initial investment, rake%, and when to start raking) should be simulated beforehand. This way you can plan for all possible outcomes before even committing any money, and you are then much better equipped to withstand the exchange rate fluctuations. It is like flying autopilot. Also you can see that you will not become rich if you commit $100 and insist on 30% rake. If, on the other hand you commit $1,000 and rake is 0% (same as putting all in paper wallet) you will become rich.

Quote
rpietila, I'd also like to hear what you think your non bitcoin investments should consist of? What percentages would you allocate to gold, silver, stocks, bonds, cash etc?

There are two forces at work,

- What you want;

- What acts as the best diversification if Bitcoin fails.

What you want part is that you buy all the things that keep their value and increase your satisfaction, such as cars, houses, collections of exotic spirits, etc.

Diversification is instruments, which appreciate in value if Bitcoin fails. These are currencies and precious metals, financial instruments etc.

I personally seek quality real estate, and I like silver, because it is really cheap and used to be the lynchpin of global monetary system before Bitcoin. I don't like gold so much, but that is easier to sell than silver if need be (in this plan you never sell anything (except bitcoins), just buy. I don't have much currencies, but they are not necessary bad. I just abhor having positive balance in my account as much as having a negative one.
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November 24, 2013, 06:46:45 PM
 #17

I personally seek quality real estate, and I like silver, because it is really cheap and used to be the lynchpin of global monetary system before Bitcoin.

Exactly what I figured I will do in the future. I take this as further confirmation that I should stick to that plan. Grin
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November 24, 2013, 06:51:09 PM
 #18

Hi rpietila,

congrats on a great savings plan. Really nice one.  Smiley


I have another one if you would like to comment. It is intended for people who already save some money every month.
They could save a small part of that (say $100 per month) into bitcoin.
The difference would be that they wouldn't have to suffer inflation but rather deflation for the bitcoin part of their savings.

If for example over a 30 year period we have 5% yearly inflation, while bitcoin has 3% monthly deflation (being ultra conservative here),
the difference after 30 years would be astonishing!!!

Please feel free to comment. Or whoever else wishes to.

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November 24, 2013, 06:53:05 PM
 #19

For the past couple of years I've been glancing at real estate from time to time. This last week I noticed I moved my search a decimal point over.

Edit: alexeft, this is what I've been doing since February. I used to know my average cost but I have not looked at the calculation in more than a few months.
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November 24, 2013, 06:57:19 PM
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Thanks for the swift and thorough reply.

Have another question. If one uses your adviced strategy of cashing out (rake) at set intervalls should one not take the exponential trend line into account? Let's say we are well behind the trend and we just hit a target. Is it really wise to sell 10% in this case? If you answer no I'm thinking one has to set some exception rules to the outlined plan before hand.

Edit: You say you like silver more than gold based on history but at the moment it seems to me that silver is a pretty dead monetary metal. No central banks are holding silver for example. The gold to silver ratio of bellow 30 came at times silver was a monetary metal backed by governments. Doesn't this feel like a less likely scenario now?

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November 24, 2013, 07:23:49 PM
 #21

Thanks for the swift and thorough reply.

Have another question. If one uses your adviced strategy of cashing out (rake) at set intervalls should one not take the exponential trend line into account? Let's say we are well behind the trend and we just hit a target. Is it really wise to sell 10% in this case? If you answer no I'm thinking one has to set some exception rules to the outlined plan before hand.

LOL I was considering that matter going back and forth whether to include it or not when I wrote the post.

THEN I realized that new highs are never reached when you are behind trendline Smiley It is mathematically practically impossible.

Again - for most of people, I think it is most important to sell exactly according to schedule, because any deliberation leads to suboptimal results. With bitcoin, you only ever lose money by daytrading. The strict schedule guarantees you exactly a certain amount of bitcoins when they are worth a million a piece.

For most of us, the problem is selling too much too early, and it will be achieved also if you are acting greedy and try to postpone selling. When the price crashes, you then get emotional and sell in the bottom, hoping it will go down more and you will be able to buy back. Most of the time you cannot, and either lose bitcoins or lose bitcoins. Losing bitcoins is bad because you will need them when the price is higher.

If your rake% is zero, you will have all your bitcoins (10,000mBTC in this example) when we hit the target ($1M), but no rake.
If your rake% is 5%, you will have 5,987mBTC and total rake of $665k. (I like it when USD is measured with k and bitcoins with m  Grin )
If your rake% is 10%, you will have 3,487mBTC and total rake of $871k.
If your rake% is 15%, you will have 1,969mBTC and total rake of $842k.
If your rake% is 20%, you will have 1,074mBTC and total rake of $712k.
If your rake% is 25%, you will have 563mBTC and total rake of $556k.
If your rake% is 30%, you will have 282mBTC and total rake of $411k.
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November 24, 2013, 07:53:27 PM
 #22

I agree this is a great strategy and am using a variant myself.

However, for newcomers (people buying bitcoin for the first time), I think a slight variation on...

It is important to buy in as soon as possible, because waiting has in general not been a good strategy with bitcoin.

...can be used: The initial investment can be made in steps (dollar-cost average), albeit as quickly as comfortably possible. Of course this is subobtimal in situation like now when we're rallying, but it also protects the psychology of the investor in case of a harsh drop right after the buy-in.

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November 24, 2013, 07:58:06 PM
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Newb mistakes:

- After hearing about bitcoin, discredit it based on horrendously misguided and biased 'information', derived from mainstream sources.
- Waiting several months or years, during which time the price appreciates 1 or several orders of magnitude.
- Deciding to buy after the next dip, leading to panic buying near the top before the next crash.
- Buying too late and with too great % of portfolio, instead of as early as possible with quite small cash outlay.
- Selling after a runup in anticipation of a crash. (Only sell when you are manic to buy since 'it's going to the moon')
- Selling after a crash in anticipation of buying back cheaper. (Never happens, sorry.)
- Selling after a too small gain with no strategy and no need for the funds ("I sell after 20%, 50%, 100%..." <-dude, bitcoin's appreciation so far is 50 MILLION %, want to reconsider..??")
- Selling, because you believe bitcoin has reached a 'bubble top' or a 'fair value'.
- Selling a too great % of holdings, such as going totally in and out.
- Selling.
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November 24, 2013, 08:05:27 PM
 #24

Newb mistakes:

- After hearing about bitcoin, discredit it based on horrendously misguided and biased 'information', derived from mainstream sources.
- Waiting several months or years, during which time the price appreciates 1 or several orders of magnitude.
- Deciding to buy after the next dip, leading to panic buying near the top before the next crash.
- Buying too late and with too great % of portfolio, instead of as early as possible with quite small cash outlay.
- Selling after a runup in anticipation of a crash. (Only sell when you are manic to buy since 'it's going to the moon')
- Selling after a crash in anticipation of buying back cheaper. (Never happens, sorry.)
- Selling after a too small gain with no strategy and no need for the funds ("I sell after 20%, 50%, 100%..." <-dude, bitcoin's appreciation so far is 50 MILLION %, want to reconsider..??")
- Selling, because you believe bitcoin has reached a 'bubble top' or a 'fair value'.
- Selling a too great % of holdings, such as going totally in and out.
- Selling.

So, #1 newb mistake: SELLING.

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November 24, 2013, 08:06:34 PM
 #25

Newb mistakes:

- After hearing about bitcoin, discredit it based on horrendously misguided and biased 'information', derived from mainstream sources.
- Waiting several months or years, during which time the price appreciates 1 or several orders of magnitude.
- Deciding to buy after the next dip, leading to panic buying near the top before the next crash.
- Buying too late and with too great % of portfolio, instead of as early as possible with quite small cash outlay.
- Selling after a runup in anticipation of a crash. (Only sell when you are manic to buy since 'it's going to the moon')
- Selling after a crash in anticipation of buying back cheaper. (Never happens, sorry.)
- Selling after a too small gain with no strategy and no need for the funds ("I sell after 20%, 50%, 100%..." <-dude, bitcoin's appreciation so far is 50 MILLION %, want to reconsider..??")
- Selling, because you believe bitcoin has reached a 'bubble top' or a 'fair value'.
- Selling a too great % of holdings, such as going totally in and out.
- Selling.

So, #1 newb mistake: SELLING.

Selling is the root of (nearly) all mistakes.
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November 24, 2013, 08:27:56 PM
 #26


No, it's great. Imagine how healthy the community will be after all the newbs learn to handle their coins responsibly! Smiley

Quote
EDIT: Risto, did I spell your last name correctly? I didn't think it was an "ä", but that's what I found.

Yeah, it is "ä", although I don't really care and use "a" myself outside N.Europe.
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November 24, 2013, 08:43:28 PM
 #27

If your rake% is zero, you will have all your bitcoins (10,000mBTC in this example) when we hit the target ($1M), but no rake.
If your rake% is 5%, you will have 5,987mBTC and total rake of $665k. (I like it when USD is measured with k and bitcoins with m  Grin )
If your rake% is 10%, you will have 3,487mBTC and total rake of $871k.
If your rake% is 15%, you will have 1,969mBTC and total rake of $842k.
If your rake% is 20%, you will have 1,074mBTC and total rake of $712k.
If your rake% is 25%, you will have 563mBTC and total rake of $556k.
If your rake% is 30%, you will have 282mBTC and total rake of $411k.

This is the proof that 10% is the optimal rake. You get the most cash out, and also your remaining value in bitcoins is a remarkable 3,487mBTC.

It is good the remember that when we hit $1,000 per minicoin, there are probably only 13 billion mBTC circulating (subtracting lost coins and Satoshi coins). It is 2mBTC per person, ie. the average bitcoin wealth per person in the world is $2,000. In this sense having 1,743 times more could be considered hoarding  Cheesy
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November 24, 2013, 08:46:43 PM
 #28

minicoin

Nice. That sounds plausibly like what they may be called. Or just a "mini" when speaking fast. "That'll be 25 mini."
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November 24, 2013, 08:48:11 PM
 #29

minicoin

Nice. That sounds plausibly like what they may be called. Or just a "mini" when speaking fast.

Remember its initial price target is $1,000. But oh well that is not much these days... Wink
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November 24, 2013, 08:50:46 PM
 #30



This is the proof that 10% is the optimal rake. You get the most cash out, and also your remaining value in bitcoins is a remarkable 3,487mBTC.



Fallacy: bitcoin IS cash.
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November 24, 2013, 08:59:08 PM
 #31



This is the proof that 10% is the optimal rake. You get the most cash out, and also your remaining value in bitcoins is a remarkable 3,487mBTC.



Fallacy: bitcoin IS cash.

This thread is aimed for newbies. We don't have a problem re:squandering our bitcoin wealth and don't need a fixed plan, do we?
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November 24, 2013, 09:01:31 PM
 #32

I don't understand all that... rakes and things...

My simple strategy I'm currently considering is:

- hold 1/3 initial stash for the longest time (ideally forever), in case it goes to millions per BTC
- remaining 2/3rds I sell at every doubling, with the amount of BTC sold starting at 5% of this 2/3rd, and each selling the amount sold increases by a fixed positive exponent such that this stash will eventually be used up when it nets me a "now I can retire" amount of $$.

Thoughts?

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Up, up and away with my beautiful, my beautiful Bitcoin~
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November 24, 2013, 09:04:34 PM
 #33

If your rake% is zero, you will have all your bitcoins (10,000mBTC in this example) when we hit the target ($1M), but no rake.
If your rake% is 5%, you will have 5,987mBTC and total rake of $665k. (I like it when USD is measured with k and bitcoins with m  Grin )
If your rake% is 10%, you will have 3,487mBTC and total rake of $871k.
If your rake% is 15%, you will have 1,969mBTC and total rake of $842k.
If your rake% is 20%, you will have 1,074mBTC and total rake of $712k.
If your rake% is 25%, you will have 563mBTC and total rake of $556k.
If your rake% is 30%, you will have 282mBTC and total rake of $411k.

This is the proof that 10% is the optimal rake. You get the most cash out, and also your remaining value in bitcoins is a remarkable 3,487mBTC.

It is good the remember that when we hit $1,000 per minicoin, there are probably only 13 billion mBTC circulating (subtracting lost coins and Satoshi coins). It is 2mBTC per person, ie. the average bitcoin wealth per person in the world is $2,000. In this sense having 1,743 times more could be considered hoarding  Cheesy

What would you suggest for people like me who have already been buying in?

I still have about 75% of my maximum holdings, but the question is, what do I do now?  I have more liquid capital now that I could invest, but should I?  The problem is that I could double my exposure, but only increase my bitcoin holdings by 3%.  That doesn't seem wise.

Am I missing something?
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November 24, 2013, 09:07:02 PM
 #34

I don't understand all that... rakes and things...

My simple strategy I'm currently considering is:

- hold 1/3 initial stash for the longest time (ideally forever), in case it goes to millions per BTC
- remaining 2/3rds I sell at every doubling, with the amount of BTC sold starting at 5% of this 2/3rd, and each selling the amount sold increases by a fixed positive exponent such that this stash will eventually be used up when it nets me a "now I can retire" amount of $$.

Thoughts?

Nice plan.

I think the essence why the plan is good to have is that it enables you to see to the future - given certain bitcoin price, you know in advance how many bitcoins you will have remaining and how much value you receive that you can spend in other things or invest. This rules out emotion and guards you from making mistakes.
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November 24, 2013, 09:10:27 PM
 #35



This is the proof that 10% is the optimal rake. You get the most cash out, and also your remaining value in bitcoins is a remarkable 3,487mBTC.



Fallacy: bitcoin IS cash.

This thread is aimed for newbies. We don't have a problem re:squandering our bitcoin wealth and don't need a fixed plan, do we?

Unfortunately we still have a problem spending bitcoins as not everything is available for it. A fixed plan to avoid emotions we certainly need. Or so I think.

Sorry to the newbies reading this.
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November 24, 2013, 09:29:05 PM
 #36

...
Thank you for bringing this little secret to public attention. Indeed - the most important thing to do with high-risk investments is to reduce the initial investment risk to zero and take advantage of the price appreciation according to a schedule - this is also how people make money from a ponzi or bubble formations. It takes the emotions out and helps you with building a stronger portfolio.

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November 24, 2013, 09:42:59 PM
 #37

Newb mistakes:

- After hearing about bitcoin, discredit it based on horrendously misguided and biased 'information', derived from mainstream sources.
- Waiting several months or years, during which time the price appreciates 1 or several orders of magnitude.
- Deciding to buy after the next dip, leading to panic buying near the top before the next crash.
- Buying too late and with too great % of portfolio, instead of as early as possible with quite small cash outlay.
- Selling after a runup in anticipation of a crash. (Only sell when you are manic to buy since 'it's going to the moon')
- Selling after a crash in anticipation of buying back cheaper. (Never happens, sorry.)
- Selling after a too small gain with no strategy and no need for the funds ("I sell after 20%, 50%, 100%..." <-dude, bitcoin's appreciation so far is 50 MILLION %, want to reconsider..??")
- Selling, because you believe bitcoin has reached a 'bubble top' or a 'fair value'.
- Selling a too great % of holdings, such as going totally in and out.
- Selling.

Bang on, I'm living proof of the one bolded above.
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November 24, 2013, 11:56:14 PM
 #38

I agree this should be on reddit for the newbies.

Rpietila, if you don't have an account there or don't want to post this on reddit, I can do it for you (of course linking and clearly specifying the author)


It's already on reddit.

fuck.

I searched for "SSS" and it didn't show up.

well, in that case I just made a repost: http://www.reddit.com/r/Bitcoin/comments/1rd8lc/risto_pietil%C3%A4_sss_a_sane_and_simple_bitcoin/

can you link the other post?

EDIT: Risto, did I spell your last name correctly? I didn't think it was an "ä", but that's what I found.

Yes, thanks for posting it.
Here is the other post:
http://www.reddit.com/r/Bitcoin/comments/1rcvhq/finnish_bitcoiner_risto_pietilas_simple_and_sane/
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November 24, 2013, 11:57:06 PM
 #39

Nice article!

Currently bitcoin is appreciating so fast that you have to throw in all your risk capital at the beginning of this saving plan, it will be much more difficult to acquire more coins after some time

This also raised a concern: Since people will mostly invest only once in their life and then start to cash out slowly afterwards, soon there will be less and less people buying bitcoins every year

When the market is fully saturated, there are still 370,000 babies born every day, means maximum 370K person start to invest in bitcoin each day. With about 5000 coins supply per day (from a 10% cash out per year strategy), it is 0.0135 coin per person. Suppose each of them spend $10K to acquire those 13.5 mBTC, that will make one bitcoin worth $741K

However, their purchasing power can not raise exponentially like current bitcoin price, so the price appreciation speed will eventually slowdown when it approach this level

Of course we are still far from a fully saturated market

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November 25, 2013, 07:47:21 AM
 #40

I like rpietila's plan, it's solid and what I've planned for BTC. It's what I've done for angel/VC investments (at least the one out of 10 that worked). Sold 10% at 10X (there was no liquidity before that point), then another 20% at 20X (20X total, an additional 2x I mean), and another 20% for a total of half of it sold by the time the investment was at 80X. Then it went IPO and dropped back to 20X and I feel like, hey, that sucks but it also worked ok, I sold a few times and hit it right some of the time. Now I'm selling some of the rest for BTC Wink

For BTC, something like this has been my plan: get in fast and then taper out. I came into this late and bought at about $300. Still, it has doubled already, and I don't want to pay (US) short-term ordinary income rates, so I plan to wait until 1 year for my first draw down (rake). I do wonder though, if it goes up 10X from 300 well short of 1-year--possible, depending if these weeks have been a flash or just taste of worldwide demand just opening up--should I let taxes get in my way of raking out some of it.
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November 25, 2013, 08:15:14 AM
 #41

This also raised a concern: Since people will mostly invest only once in their life and then start to cash out slowly afterwards, soon there will be less and less people buying bitcoins every year

The cashout speed is relative to value appreciation (in the hypothetical world where all current holders are SSS'ing). So only if there is demand, will the price go up, and the supply will come. Price will not go down because nobody sells to the falling market, as they have already sold to the rising, and are comfortable.

Using the 10% rake example, we can easily calculate how many dollars will need to be invested for the price to go up by the target, 1000x. How? The investment of the new entrants is equivalent to the rake of the current holders. (Should I use dividend instead of rake??) In the first runup from $1 to $2 per mBTC, 10% of all existing bitcoins are sold at an average price of about $1.4. This results in a $1.7B rake for old holders, which comes from new investors' pockets. The bitcoin market cap is raised by $12B.

The (new investment)/(rise of market cap) ratio is therefore about 14%. Loger term, this ratio has been about 25% on average. In steep runups, it gets lower and during prolonged plateaus it is higher. It is advisable to sell more when the price is trending higher, and refrain from selling altogether if it does not rise.

Like I said before, the best advice I can give to new investors (advice value is high, because it is so far from the usual new investor pattern):
- Buy sooner than you are comfortable (right now is best, dollar cost averaging sucks bad since bitcoin rises 400%-10,000% per year so far)
- Buy with less money than you normally invest (you can buy more later, but most will not need to)
- Set a rake % that suits your preference (10-20% is usually best, consult the tables)
- Decide when to start raking/cashing out/diversifying (skipping the first 1 or 2 let you retain much more coins, but make the decision now, not according to circumstances)
- Stick to the plan. It is a speculative investment from dollar point of view, and no matter how high it goes, you should not go emotional and stop selling. Also if it goes lower, you should not try to cash out. Also make a new purchase only after careful thinking since it may go to zero and the idea of rake is that you win money regardless, not lose it.


**

I understand, this kind of mathematical talk is so intimately similar to a pyramid scheme, perhaps it's good to link to a lengthy treatise of mine, explaining how Bitcoin is not a ponzi, or a pyramid scheme, but a revolutionary technology whose value is correlated to the userbase, which means that it is on its way to become a self fulfilling prophecy where the value of the network grows faster than the money invested.
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November 25, 2013, 08:15:28 AM
 #42

Wow, just wow

Thanks for this brilliant articulation

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November 25, 2013, 08:22:16 AM
 #43

dollar cost average.  buy same amount every week.   Also, hold your bitcoins locally.  Online wallets and exchanges can and have disappeared, been hacked, etc.

Psst!!  Wanna make bitcoin unstoppable? Why the Only Real Way to Buy Bitcoins Is on the Streets. Avoid banks and centralized exchanges.   Buy/Sell coins locally.  Meet other bitcoiners and develop your network.   Try localbitcoins.com or find or start a buttonwood / satoshi square in your area.  Pass it on!
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November 25, 2013, 08:38:06 AM
 #44

rpietila, would you also suggest this kind of plan for Litecoin (perhaps on a smaller scale right now)?
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November 25, 2013, 08:43:22 AM
 #45

dollar cost average.  buy same amount every week.   Also, hold your bitcoins locally.  Online wallets and exchanges can and have disappeared, been hacked, etc.

Thank you for your feedback, but:

NO. DO NOT "DOLLAR COST AVERAGE", SINCE IT LEADS TO A MARKEDLY WORSE RESULT IN EVERY SCENARIO WHERE BITCOIN CONTINUES APPRECIATING AGAINST THE DOLLAR AS HAS ALWAYS BEEN THE CASE SO FAR.

Other points are correct.
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November 25, 2013, 08:53:20 AM
 #46

rpietila, would you also suggest this kind of plan for Litecoin (perhaps on a smaller scale right now)?

It is the standard plan for all kinds of high-risk events that can be reduced to either going up or crashing. For LTC it works exactly same way, you just need to do your homework to find the target value for LTC (or make the plan open-ended so that you always sell if it goes up more, and always hold some of the bag if it goes to zero).

I think LTC is overvalued at 0.01344, it does not offer anything compared to BTC, and it cannot be used anywhere. The whole community seems to consist of pump and dumpsters. I think the risk/reward is just not there compared to BTC.

- With Bitcoin (compared to fiat), you have (nearly) unlimited reward, compared to limited risk (all of your investment, but not more).

- With Litecoin (compared to Bitcoin), you have limited reward (small potential of a sustained LTC/BTC rate increase), compared to unlimited risk (much higher probability of going to zero, or orders of magnitude down).
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November 25, 2013, 09:10:59 AM
 #47

phelix comment deleted due to intentional snipping quote out of context. The minimum honest quote is one sentence between two periods, not a string of words in between, as a long time member you should know it. Do not post again. There are other threads for:
- strawman arguments.
- discussing whether bitcoin can possibly hit $1M or not.

Thank you.
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November 25, 2013, 09:24:17 AM
 #48

Thanks again for the answers.

I think you missed one of my questions (i added it late by edit)

"Edit: You say you like silver more than gold based on history but at the moment it seems to me that silver is a pretty dead monetary metal. No central banks are holding silver for example. The gold to silver ratio of bellow 30 came at times silver was a monetary metal backed by governments. Doesn't this feel like a less likely scenario now?"

Would love to hear your take on silver vs gold since I'm currently un-decisive on buying more silver or gold.

Thanks.

I don't think it really matters. Both will do bad if bitcoin rises. If the crypto genie can be put back in the bottle, the world will be a sad place anyway and both g&s will have their uses. Considering that gold market cap is >> silver's, I would overallocate in silver. The point is to acquire stuff that would do well if bitcoin is destroyed. Nobody cares your gold or silver if bitcoin does rise to $1M. This is called diversification.
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November 25, 2013, 10:09:27 AM
 #49

Thanks for writing all of this and sharing it with us Risto!

I will be showing this to all of my friends, who started contacting me lately because of BTC.

The nice thing is they can now buy at the ATM instead having to go through the hassle of exchanges Smiley As you mention, with the average speed of appreciation being so high, every day of delay of your initial investment is quite significant, so great to have the ATM.

It's all bullshit. But bullshit makes the flowers grow and that's beautiful.
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November 25, 2013, 11:30:45 AM
 #50

This is a wonderful plan and can effectively remove emotional trading, which is the main reason causing loss for non-professional investors like us.

There's only one question: there's no stop loss policy. So if BTC never reaches the price where we can get the original investment back by selling and then goes to 0, we will definitely lose most of the investment because we cannot sell any more. In extreme case, if BTC never reachs $2000 and goes to 0, we have no chance to get money back. Even if it reaches $2000, we cannot get much from it if it never reaches $4000 later.

Any thoughts? Is this plan completely based on the assumption that BTC will keep exponentially increasing for a while and never goes to 0? Should we set up a stop loss policy so that we can at least get something back in the real crash?
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November 25, 2013, 11:34:55 AM
 #51

NO. DO NOT "DOLLAR COST AVERAGE", SINCE IT LEADS TO A MARKEDLY WORSE RESULT IN EVERY SCENARIO WHERE BITCOIN CONTINUES APPRECIATING AGAINST THE DOLLAR AS HAS ALWAYS BEEN THE CASE SO FAR.

This requires proof. I downloaded the longest timeseries of Bitcoin trading activity available (Mt.Gox USD), and set the following:

A person wants to invest $1,000 in Bitcoin, and has the following options:

- Invest it all now, at an average price this week.
- Invest it in 4 equal lots in 4 subsequent weeks, starting this week.
- Invest it similarly over 8 weeks
- Over 12 weeks.
- Over 26 weeks (6 months)
- Over 52 weeks (12 months).

Then I calculated, how many bitcoins can be gained/lost by spreading the purchases. Result:

On average, by buying all instantly, the following advantage over other options was gained:

4 weeks = +8%
8 weeks = +20%
12 weeks = +33%
26 weeks = +79%
52 weeks = +161%.

In some cases DCA does come out ahead. In the 10% cases that most favored DCA, their advantage was (negative sign=DCA advantage):

4 weeks = -13%
8 weeks = -22%
12 weeks = -31%
26 weeks = -30%
52 weeks = -46%.

On the other hand the 10% most favorable cases for instant buying yield the following:

4 weeks = +33%
8 weeks = +77%
12 weeks = +101%
26 weeks = +214%
52 weeks = +416%.

By dollar cost averaging, the most would have been gained by having a 52-week plan instead of an instant lock-in in the week of 6.6.2011. (-77% less coins for instant).

By buying instantly, the largest advantage over DCA would have been by buying in the week of 27.9.2010 instead of during the following year (+629% more coins).
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November 25, 2013, 11:43:40 AM
 #52

This is a wonderful plan and can effectively remove emotional trading, which is the main reason causing loss for non-professional investors like us.

There's only one question: there's no stop loss policy. So if BTC never reaches the price where we can get the original investment back by selling and then goes to 0, we will definitely lose most of the investment because we cannot sell any more. In extreme case, if BTC never reachs $2000 and goes to 0, we have no chance to get money back. Even if it reaches $2000, we cannot get much from it if it never reaches $4000 later.

Any thoughts? Is this plan completely based on the assumption that BTC will keep exponentially increasing for a while and never goes to 0? Should we set up a stop loss policy so that we can at least get something back in the real crash?

Stop loss is a tool for suckers. This plan assumes that you invest what you can afford to lose. One of the most important features is that you never sell when prices are trending down. That will soon reverse the trend and keep your coin stash intact.

If you are the type that thinks in dollars and wants to cash out the original investment, I suggest the following:
at $2, do no sell
at $4, sell the original amount (which is 25% of your bitcoins now) Now you are clear.
afterwards, sell according to your rake.

If this is too risky for you, you are investing too much. Think again with a smaller initial sum.

Many forum frequents actually have too much % of portfolio in bitcoin now, after the recent runup. If you are 10% rake type of guy, it means you should have $20,000 worth other financial wealth per every BTC100. If your rake is 20%, you should have $50k per every BTC100. If not, then sell! Congratulations! You have already completed the initial doublings of your plan Smiley
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November 25, 2013, 12:02:10 PM
 #53

This is a wonderful plan and can effectively remove emotional trading, which is the main reason causing loss for non-professional investors like us.

There's only one question: there's no stop loss policy. So if BTC never reaches the price where we can get the original investment back by selling and then goes to 0, we will definitely lose most of the investment because we cannot sell any more. In extreme case, if BTC never reachs $2000 and goes to 0, we have no chance to get money back. Even if it reaches $2000, we cannot get much from it if it never reaches $4000 later.

Any thoughts? Is this plan completely based on the assumption that BTC will keep exponentially increasing for a while and never goes to 0? Should we set up a stop loss policy so that we can at least get something back in the real crash?

Stop loss is a tool for suckers. This plan assumes that you invest what you can afford to lose. One of the most important features is that you never sell when prices are trending down. That will soon reverse the trend and keep your coin stash intact.

If you are the type that thinks in dollars and wants to cash out the original investment, I suggest the following:
at $2, do no sell
at $4, sell the original amount (which is 25% of your bitcoins now) Now you are clear.
afterwards, sell according to your rake.

If this is too risky for you, you are investing too much. Think again with a smaller initial sum.

Many forum frequents actually have too much % of portfolio in bitcoin now, after the recent runup. If you are 10% rake type of guy, it means you should have $20,000 worth other financial wealth per every BTC100. If your rake is 20%, you should have $50k per every BTC100. If not, then sell! Congratulations! You have already completed the initial doublings of your plan Smiley

Great. That will be a safer plan for those who invested most of their savings.
I personally have only spent less than 15% of total investment. Maybe too conservative, but too much risk may ruin my sleep time:)
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November 25, 2013, 12:51:24 PM
 #54

This is a just for fun implementation in Pyhton, probably a bit over-engineered  Grin

You can change the parameters in main() or write an argument parser.

$ python -m sssplan
 Price  mB left  mB sold  k$ out  mB val.  k$ sum  total val.
    2   9000     1000       2       18       2       20
    4   8100      900       4       32       6       38
    8   7290      810       6       58      12       70
   16   6561      729      12      105      24      129
   32   5905      656      21      189      45      234
   64   5314      590      38      340      83      423
  128   4783      531      68      612     151      763
  256   4305      478     122     1102     273     1375
  512   3874      430     220     1984     493     2477
 1024   3487      387     397     3570     890     4461


Code:
def iter_price(initial_price, steps, base=2):
    for i in steps:
        yield initial_price * base ** i

def iter_mbtc_left(initial_btc, rake, steps):
    base = (1 - rake)
    for i in steps:
        yield initial_btc * base ** i

def iter_mbtc_sold(initial_btc, rake, steps):
    piece = initial_btc * rake
    base = (1 - rake)
    for i in steps:
        yield piece * base ** (i - 1)

def iter_kusd_out(mbtc_sold, price):
    for mbtc, usd in zip(mbtc_sold, price):
        yield mbtc * usd / 1000.

def iter_kusd_sum(kusd_out):
    s = 0
    for kusd in kusd_out:
        s += kusd
        yield s

def iter_mbtc_val(mbtc_left, prices):
    for mbtc, price in zip(mbtc_left, prices):
        yield mbtc * price / 1000.

def iter_total_val(mbtc_val, kusd_sum):
    for item in zip(mbtc_val, kusd_sum):
        yield sum(item)

def main():
    base = 2 # doubling
    numof_steps = 10
    initial_price = 1 # kUSD
    inital_btc_stash = 10000 # mBTC
    rake = 0.1

    steps = range(1, numof_steps + 1)
    prices = list(iter_price(initial_price, steps, base=base))
    mbtc_left = list(iter_mbtc_left(inital_btc_stash, rake, steps))
    mbtc_sold = list(iter_mbtc_sold(inital_btc_stash, rake, steps))
    kusd_out = list(iter_kusd_out(mbtc_sold, prices))
    mbtc_val = list(iter_mbtc_val(mbtc_left, prices))
    kusd_sum = list(iter_kusd_sum(kusd_out))
    total_val = list(iter_total_val(mbtc_val, kusd_sum))

    print ' Price  mB left  mB sold  k$ out  mB val.  k$ sum  total val.'
    fstr = ' {0:4} {1:6.0f} {2:8.0f} {3:7.0f} {4:8.0f} {5:7.0f} {6:8.0f}'
    for args in zip(prices, mbtc_left, mbtc_sold,
                    kusd_out, mbtc_val, kusd_sum, total_val):
        print fstr.format(*args)

if __name__ == '__main__':
    main()
alexeft
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November 25, 2013, 01:13:23 PM
 #55


Stop loss is a tool for suckers.

Out of curiosity, would you say the same for the forex market with magin and leverage?

Yes: Forex market with margin and leverage is a tool for suckers.

And pros. By pro I mean "full-timer with 10 years of experience".

 Grin

Indeed!
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November 25, 2013, 02:29:41 PM
 #56

Many forum frequents actually have too much % of portfolio in bitcoin now, after the recent runup. If you are 10% rake type of guy, it means you should have $20,000 worth other financial wealth per every BTC100. If your rake is 20%, you should have $50k per every BTC100. If not, then sell! Congratulations! You have already completed the initial doublings of your plan Smiley


Selling now would physically hurt me Grin

And what the hell would I do with the fiat anyway? If you have no direct expenses to use it on therefore no reason to sell. I use my liquid fiat for all current expenses and manage to do so quite easily.

When my Bitcoin holdings become valuable enough to completely discontinue earning money through work, I will probably continue to hold the majority of my worth in Bitcoin. I might diversify a little (to reduce the chances of having to discontinue my retirement) but definitely not into fiat (I would expand my stock portfolio if the price is right).

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November 25, 2013, 03:08:57 PM
 #57

This is brilliant

Will be referencing this, that's for sure

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November 25, 2013, 06:07:30 PM
 #58

Just to clarify, I signed up for Coinbase and they limit purchases to 10 until you are completely verified. The first couple of months they had shortage issues. Only so many coins available and they went first come, first serve. So they didn't have inventory. What I should have done is use localbitcoins to get my initial purchase but I had in mind only trusting coinbase. If I had it to do all over again I would have the quantity of coins I wanted. As it stands, I have half my original quantity at more than double the price I would have paid if I had just gone and found the supply instead waiting for Coinbase to get up to speed.

I don't have that problem with Coinbase now, so if you are happy with a ten coin limit per day and a fifty cap on coins per week, they are fine. All in all, I like Coinbase, they just din't allow me to purchase as many as I wanted as quick as I wanted. This is why I took the accumulation route.
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November 25, 2013, 07:28:52 PM
 #59

I must say great plan, best of all its simple and if you invest only what you can lose. You can even stop looking at prices every time and get some sleep...
Thx for sharing
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November 25, 2013, 07:32:39 PM
 #60

OP... I bought 10 BTCs for about $6900 and I don't want to look back until 2015




$6.9k is not something I can "afford to lose" since it's pretty much most of my savings at this point... but I am single, have no debts and have a job so incase bitcoins really pick up I want to take that risk of losing ~$7k when I can potentially become a millionaire. Do you think this is stupid of me? And how confident are you on the success and mainstream adoption of Bitcoin? I just want your opinion since you sound pretty smart.




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November 25, 2013, 07:40:41 PM
 #61

OP... I bought 10 BTCs for about $6900 and I don't want to look back until 2015

$6.9k is not something I can "afford to lose" since it's pretty much most of my savings at this point... but I am single, have no debts and have a job so incase bitcoins really pick up I want to take that risk of losing ~$7k when I can potentially become a millionaire. Do you think this is stupid of me? And how confident are you on the success and mainstream adoption of Bitcoin? I just want your opinion since you sound pretty smart.

sounds fine for me. Just stick to the plan so before long you will also have regained your initial investment.

(Or lost it all, but that is the risk we'll have to take.)

In the long run, there will only be about 1,000,000 people with a whole bitcoin. If you manage to keep 1/10 of your stash permanently, you are among this group. Not bad really.
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November 25, 2013, 07:42:39 PM
 #62

And yes i reconn that dollar cost averaging won't do much good, simple because bitcoin has been increasing more times than decreasing. So,in turn you'll end up paying more bit coins then you could pay initially.
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November 25, 2013, 07:52:21 PM
 #63

And yes i reconn that dollar cost averaging won't do much good, simple because bitcoin has been increasing more times than decreasing. So,in turn you'll end up paying more bit coins then you could pay initially.

Well of course Dollar cost averaging isn't going to do much good in the general case. That's not the point (also for stocks).

The point of Dollar cost averaging is to sacrifice a bit of upside for a lower volatility. If you start accumulating right before a market crash there will be a huge difference in the favor of Dollar cost averaging.

If you don't care about volatility AT ALL, and just want to maximize EV, by all means don't Dollar cost average. Of course this isn't a yes or no question and you can divide you purchase in as many discrete purchases over as long a time as you like to make your own decision with respect to minimizing volatility and maximizing EV. It's completely natural and understandable to want to minimize volatility during the buy in period, especially with respect to something as volatile as Bitcoin.

Disclosure: My initial Bitcoin purchase has not been a Dollar cost average purchase but rather one buy and all my subsequent purchases have been really erratic both in size and in timing.

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November 26, 2013, 09:10:36 AM
 #64

About dollar cost averaging, my thoughts :
- in a normal stock market it is used to lower the volatility, and if used carefully (buy or sell once a month - or even only twice a year) you can avoid most bubbles
- in Bitcoin's universe, where everything goes so fast, it can make sense to do a DCA twice a week during a one or two months period once you really believe in it. In that case you are probably sure to avoid most bubbles/crashes such as the last or the current one.

What do you think of that ?

I would rather do this way (as a guide to newbies):

1. Buy with a small amount as soon as possible (upon first hearing about this, it is unlikely that anyone will invest more than 10% of net worth, more likely 1%).

2. Every time you gain confidence in Bitcoin, buy more. Do not consciously DCA, because your inability to appreciate Bitcoin fully in your first day automatically serves as DCA Wink

3. When the combined effect of your purchases and bitcoin's value appreciation results in you having more than half of your net worth in Bitcoin, select a "percentage of other assets" you want to have as a hedge in your portfolio. The "rake" % is always half of "other assets" %, if the rake is taken after each doubling in price.

If you are already in, you can start following the plan from (2.) or (3.).


A further word about the optimal rake%:

I suggest you use 10-20% rake. This lets you keep 35% (in case of 10% rake) or 11% (in case of 20% rake) of your bitcoins when their value goes to $1,000/mBTC.

- If you use only 5%, it takes quite long before you cash out any meaningful amount, which is risky. Also your portfolio tends towards 90% bitcoins/10% everythingelsecombined, which makes most of us too emotional.

- If you use 0%, you go crazy. Many can live with this as long as bitcoins are a small % of their portfolio, but start making mistakes (such as selling 90% of the holdings, at the instant they appreciate so that he can buy a new house) when the percentage grows bigger. Better be disciplined, set a schedule to sell, and follow it. (You may skip the first several doublings if your capital is small and you want to quickly grow it.)

- If you use 30%, you only retain 3% of your bitcoins, which I think is suboptimal. If you are so concerned about getting your fiat value back, I suggest you let it go up to the second double, and then repatriate the original investment.

Better get used to the idea that it is very improbable that you will have the same number of bitcoins when their purchasing power is 1000x higher than now. In astute cases, I think you have shed 2/3 of them, whereas most have only 1-10% of the amount that they now have.

The same happened when Bitcoin was $0.5 until now. If someone has 35% of the bitcoins he had that time, he is very smart (and very rich).
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November 26, 2013, 05:16:19 PM
 #65

If someone has 35% of the bitcoins he had that time, he is very smart (and very rich).

Or small and not rich

Thank me in Bits 12MwnzxtprG2mHm3rKdgi7NmJKCypsMMQw
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November 27, 2013, 12:25:28 AM
 #66

...
Thank you for bringing this little secret to public attention. Indeed - the most important thing to do with high-risk investments is to reduce the initial investment risk to zero and take advantage of the price appreciation according to a schedule - this is also how people make money from a ponzi or bubble formations. It takes the emotions out and helps you with building a stronger portfolio.

Exactly. Good post indeed, Risto Wink

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November 27, 2013, 06:58:40 AM
 #67


What would you suggest for people like me who have already been buying in?

I still have about 75% of my maximum holdings, but the question is, what do I do now?  I have more liquid capital now that I could invest, but should I?  The problem is that I could double my exposure, but only increase my bitcoin holdings by 3%.  That doesn't seem wise.

Am I missing something?

I don't think you should buy in at this time. You are doubling your exposure, while increasing your holdings by only 3%. Your best option is to hold, however if Bitcoin's exceed 50% of your portfolio, then you should consider raking.
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November 27, 2013, 07:16:37 AM
 #68

If someone has 35% of the bitcoins he had that time, he is very smart (and very rich).

Or small and not rich

What is the smallest conceivable investment, $50?

That means, 35% of it is now $35,000.
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November 27, 2013, 02:20:45 PM
 #69

Rpietila,
I am thinking about your model and if and how I'm going to implement it. I'm not a total newbie when it comes to investing and i was thinking about a slightly more advanced model.I don't think I can ignore the exponential trend and so I think one alternative model should be one where you can buy back if the trend goes under the curve after a recent rake hits. What's your take on this idea? Thanks again.

P.s. Thanks for your time on this forum and your positive energy. May you find a nice castle.

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November 27, 2013, 02:30:05 PM
 #70

Rpietila,
I am thinking about your model and if and how I'm going to implement it. I'm not a total newbie when it comes to investing and i was thinking about a slightly more advanced model.I don't think I can ignore the exponential trend and so I think one alternative model should be one where you can buy back if the trend goes under the curve after a recent rake hits. What's your take on this idea? Thanks again.

P.s. Thanks for your time on this forum and your positive energy. May you find a nice castle.

Somebody should make a javascript calculator with all the knobs so you can compare various strategies and outcomes.
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November 27, 2013, 10:54:11 PM
 #71

Somebody should make a javascript calculator with all the knobs so you can compare various strategies and outcomes.

I've just been working on a simple JS calculator based on a spreadsheet I created a few days ago:
--> http://xzist.org/amazing-bitcoin-retirement-fund-calculator/

It's not exactly how rpietila describes, it's more aligned to my own personal goals... and I am a complete novice in anything to do with investing.. but I added a 10%, 20% preset rake buttons which I think works how it's supposed to.

only briefly tested, on Firefox and Chrome and *not* IE, tired and going to sleep now, will bugfix and check another day Tongue

HODLing for the longest time. Skippin fast right around the moon. On a rocketship straight to mars.
Up, up and away with my beautiful, my beautiful Bitcoin~
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November 28, 2013, 02:33:21 AM
 #72


I've just been working on a simple JS calculator based on a spreadsheet I created a few days ago:
--> http://xzist.org/amazing-bitcoin-retirement-fund-calculator/

It's not exactly how rpietila describes, it's more aligned to my own personal goals... and I am a complete novice in anything to do with investing.. but I added a 10%, 20% preset rake buttons which I think works how it's supposed to.

only briefly tested, on Firefox and Chrome and *not* IE, tired and going to sleep now, will bugfix and check another day Tongue

I'm finding this really useful for quickly running through scenarios. Awesome work, thanks!
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November 28, 2013, 12:56:22 PM
 #73

Very useful! It should be pointed out that it is currency agnostic.
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November 28, 2013, 08:01:04 PM
 #74

If someone has 35% of the bitcoins he had that time, he is very smart (and very rich).

Or small and not rich

What is the smallest conceivable investment, $50?

That means, 35% of it is now $35,000.
Still this is amassing, no one is complaining, but rich is a relative term.

Ultimately you need to let coins go to help distribute the risk and benefits, the wealth doesn't come into Bitcoin purely because of lack of supply, so this RAKE and SSS plans gets my support.

While not described here the goal isn't to own all the Bitcoin, it is to get everyone owning them, if ownership of all the coins is too concentrated, then people will find alternates. Embrace the volatility, it is spreading the risk and benefit.

Thank me in Bits 12MwnzxtprG2mHm3rKdgi7NmJKCypsMMQw
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November 28, 2013, 10:18:51 PM
 #75


Thank you for your feedback, but:

NO. DO NOT "DOLLAR COST AVERAGE", SINCE IT LEADS TO A MARKEDLY WORSE RESULT IN EVERY SCENARIO WHERE BITCOIN CONTINUES APPRECIATING AGAINST THE DOLLAR AS HAS ALWAYS BEEN THE CASE SO FAR.

Other points are correct.

Good point, but what do you think about this argument :

I think that's right, but for another reason : if you're new in bitcoin, then it's statistically more likely that a crash is about to happen (because of how the hype machine and bubbles work). So in that case, spreading the purchases over some time is probably better indeed. Or you could wait to buy after the crash, but in bitcoin's case it might be risky, because if you noticed the bubble early enough, the low after it pops might be higher than when you were ready to buy at the first time.

?

That certainly happened to me, buying my bitcoins all at once just before the crash of 2011 and the long, depressing "crossing of the desert" that followed. I did the "research bitcoin to decide whether it's worth investing in for a week and watch the price double during that time, then lose sleep and panic buy, then watch the price plummet in a few days" thing. Now, I guess if I was more experienced, I might have noticed the mania around bitcoin at that time, but experience is exactly what newbies lack...

Bump :
Newb mistakes:

- After hearing about bitcoin, discredit it based on horrendously misguided and biased 'information', derived from mainstream sources.
- Waiting several months or years, during which time the price appreciates 1 or several orders of magnitude.
- Deciding to buy after the next dip, leading to panic buying near the top before the next crash.
- Buying too late and with too great % of portfolio, instead of as early as possible with quite small cash outlay.
- Selling after a runup in anticipation of a crash. (Only sell when you are manic to buy since 'it's going to the moon')
- Selling after a crash in anticipation of buying back cheaper. (Never happens, sorry.)
- Selling after a too small gain with no strategy and no need for the funds ("I sell after 20%, 50%, 100%..." <-dude, bitcoin's appreciation so far is 50 MILLION %, want to reconsider..??")
- Selling, because you believe bitcoin has reached a 'bubble top' or a 'fair value'.
- Selling a too great % of holdings, such as going totally in and out.
- Selling.

P.S.: It's funny that (after one week trying to short the current bubble (?), and probably selling too much, not to mention wasting one week of my life staring at charts), I decided on a "selling plan" very similar to yours.
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November 29, 2013, 12:27:03 AM
 #76

I've thought of a Strategy I'm going to set my Son up with, I'm going to Give him, 0.1Bitcoin, which is about 4 oz of Silver.  Let's say 0.1BTC is currently worth $100.  Just to keep the numbers simple.
Wait for an increase, when he has enough to buy an Ounce of Silver, and still leave 4 oz Of Silver worth of Bitcoin.
Buy the coin, including postage etc.
Now he has an Ounce of Silver, he has Less Bitcoin of course, but he can still buy 4 ounces of Silver because of the new higher value of Bitcoin.
In this way, he can keep $100 Worth of Bitcoin, and Periodically, every few months or So, buy himself another ounce of Silver.
Obviously when Bitcoin dips in Price he doesn't have 4 oz Silver worth of Bitcoin and cannot buy an extra coin, he must sit out the dip and wait till he has 5 oz worth of Bitcoin.

So, apart from when the price dips, he always tries to keep about $100 worth of Bitcoin, as soon as he has enough to buy a coin and still have $100 in BTC, he buys the coin.
It all depends of course of Bitcoin's deflationary nature.
He's gaining silver, but losing bitcoin of course, but due to Bitcoin's deflationary nature, he always has $100 Worth of Bitcoin.
theoretically, in a year or two's time, he might have a stack of Sillver, but only 0.01 bitcoin, but by then, it will still be worth $100   (Hopefully)
Just repeat this ad infinitum.
He gets an increase in his silver, but the value of his Bitcoin remains at $100.

A slight variation is to buy the first coin, then, after buying that first coin, he has 4oz of Silver worth of bitcoin, Next time he waits for a Price rise of Bitcoin of 2 silver coins.

Now he's got enough extra Dollars to buy 2 coins and still Keep $100 Worth of Bitcoin, but he only buys One Coin, thus he gains 1 coin, Plus the value of his bitcoin holdings has risen too  (though not the amount of his bitcoin holdings obviously)

OK, he has to factor in the postage so he must wait for the price to rise to $30+ or so.

So now he has 1 extra coin, plus $125.
In this way, by waiting a bit longer between purchases, he gets silver PLUS an increase in the Value of his Bitcoin Holdings over time.

You could obviously scale this up buy starting off with more BTC.

I though it might be a good hedging strategy, buying silver with BTC Gains, so, providing Bitcoin don't crash and burn withing the first year or so, you quite possibly end up with More in silver than you risked in Bitcoin, and possibly still have some BTC too, with which to keep stacking Silver, theoretically indefiantely, seemingly Conjuring Silver out of thin air.
Obviously this only works as long as BTC continues it's deflationary Rise but might be an interesting, Cautious investment strategy, the only risk is in the first Few months or so till you've bought enough silver on your Gains to cover your initial risk.

In this way, you are effectively Conjuring silver coins out of thin air, you're not of course, they are being paid for by the increase in the price of Bitcoin.
It's almost as if you are conjuring Silver out of this air, and theoretically in ten years time, you might have 0.00001 BTC, which might by them be worth a few hundred $s , and you can keep stacking silver with it, without end.

Ideally, you should be comparing your BTC holdings to the Value of Silver, not $s as if the Dollar starts Hyperinflating, you might well have $100 but it might be worth Zilch, so you should be comparing your BTC holding to silver, not the Dollar.

By scaling this up, you could theoretically conjure out of thin air (seemingly) , your monthly mobile phone bill. Maybe Your electricity Bill, maybe, if you have enough BTCs to start with , your Mortgage on a monthly basis or a sizeable portion of your mortgage per month.
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November 29, 2013, 02:49:37 AM
 #77

very nice plan rpietila.

The only thing I would add is to take into account the purchasing power of the dollar.
In dollar hyperinflation mode, the price of bitcoin could be doubling every few days or hours.
If you stuck to this plan religiously (which I guess is the point), then you would lose big time.
Maybe add a rule linking the rake not to $ price, but a basket of commodities.

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November 29, 2013, 09:06:25 AM
 #78

silversurfer, I think your son has a better chance of a much greater return if he just forgets about those 0.1 bitcoins for a few years and doesn't sell any. Silver is a nice alternative but it's potential is so much lower than bitcoin it's not even worth discussing. Silver is great to hedge vs bitcoins but with a so small amount as 0.1btc it's just better to hold on imo.

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November 29, 2013, 09:23:18 AM
 #79

Saving is for suckers.
Buy at 10$ and sell for 1000$ in under a year.
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November 29, 2013, 12:18:59 PM
 #80

Saving is for suckers.
Buy at 10$ and sell for 1000$ in under a year.

Yep, tell that to those who bought for $0.05 in July 2010 and then sold at $20 in Summer 2011, "bringing home" a profit of 1-2 million $. Now they would have close to $100MM.

Selling most of your coins is for suckers.

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November 29, 2013, 01:19:51 PM
 #81

I will explain my simple savings plan.

I am a student, so almost inherently constantly next to broke. Both in the real world, and the Bitcoin realm. I heard about Bitcoin long ago, didn't do anything with it, poor me. I heard about it again last week, and decided to invest. I have made 2 purchases, both €100,-. I made this small investments because I can miss them. Next time I have money to spare will be end of December, therefor what happens during the upcoming month is irrelevant for me. I will not sell, because I can miss the money I invested. When will I check out? I hope not before 5 years. When will I reinvest and what? As long as I believe in it I will invest money I can loose.

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November 29, 2013, 01:42:37 PM
 #82

silversurfer, I think your son has a better chance of a much greater return if he just forgets about those 0.1 bitcoins for a few years and doesn't sell any. Silver is a nice alternative but it's potential is so much lower than bitcoin it's not even worth discussing. Silver is great to hedge vs bitcoins but with a so small amount as 0.1btc it's just better to hold on imo.


He has 1.2BTC already I gave him, he's holding that, this 0.1BTC is really a little fun, get him used to thinking about money, investments, hedging strategies, discipline,  etc, and hopefully, he gets to stack a few shiny Silver coins, so this is just a bit of fun for him, if he did only have the 0.1 you'd be right, far better for him to hold.
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November 29, 2013, 05:53:33 PM
 #83

I will explain my simple savings plan.

I am a student, so almost inherently constantly next to broke. Both in the real world, and the Bitcoin realm. I heard about Bitcoin long ago, didn't do anything with it, poor me. I heard about it again last week, and decided to invest. I have made 2 purchases, both €100,-. I made this small investments because I can miss them. Next time I have money to spare will be end of December, therefor what happens during the upcoming month is irrelevant for me. I will not sell, because I can miss the money I invested. When will I check out? I hope not before 5 years. When will I reinvest and what? As long as I believe in it I will invest money I can loose.

Don't worry you are not alone that way, according to various surveys the majority of GenY (21-35) are in huge debt or barely making enough money to get buy due to cost of living pressures. So whatever little you can put into Bitcoins will definitely help you improve your standard of living or paying off your debts.

Think of it this way, for example calculate how much you spend on useless stuff that you can cut on (expensive coffee, dining out, regular Gadget upgrades, fuel for excessive car trips etc) and cut down or eliminate them, take the same money and put into coins, that way you can put in even more money that you can afford to lose.

great post by reptila as usual  Smiley

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November 29, 2013, 06:25:17 PM
 #84

I really like the 10% rake on every doubling...  I'm basically using that with a slight modification...

As doubles tend to be far and few between, I'm using a 1% rake on each 10% increase... Over the past couple days this has resulted in a bit of excess, however long term it seems to be working out fairly well....

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November 30, 2013, 04:33:40 AM
 #85

Great strategy, thanks a lot!

we want to 'tax' them to increase our living standard, or just to keep some diversified in case the negative event happens and bitcoins lose their value.

So, the purpose of SSS is:
a) Spend some BTC on everyday life
b) Balance BTC risks with it's benefits by diversification.

Benefits of BTC are proportional to it's rate. So it makes perfect sense to schedule sells by the BTC rate.
But risks of BTC are proportional to time, rather than to rate, because whatever can happen with BTC, can happen any time, independently of the rate. So it would make better sense to schedule BTC sells by time, rather than by rate.

The same is about spending. To increase our living standards we need some regular income, while with the SSS it may be a number of BTC sales a month, followed by a half-year without any sales.

So, wouldn't it be better to sell, say, 1% a month, whatever the rate?

(Yes, we won't have benefits of ATH, but risk and income will be better spread).

Fairplay medal of dnaleor's trading simulator. Smiley
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December 01, 2013, 07:01:31 AM
 #86

The more I read reddit and the speculation forum, the more convinced I am that the logic of the OP needs to be internalized as part of every newbie's education. The Paradox of the Rake, to rename a point made by rpietila, is that performing proper rakes prevents panic selling.

"To hold onto your bitcoins through thick and thin, you must sell."

I think wide diffusion of this rake concept would significantly reduce volatility. This post or a similar one should be in the sticky at /r/Bitcoin, speculation forum stickies, youtube video (short visual one and longer, detailed one - James D'Angelo?), etc. It is critical investor knowledge and can be considered part of Bitcoin's educational infrastructure, in the sense of being a component that enables Bitcoin to take over the world faster (and happens to make Bitcoin investors richer vs. the Wall Street money that will pour in in 2014 and less stressed as a bonus).

Additionally, Risto's savings plan is not only a plan, but also solid grounds for analysis. Despite being only dimly aware of the rake concept, if at all, most early adopters have likely followed it to some (suboptimal*) degree simply because of the psychological factors at work when one is faced with the Bitcoin "binary bet." This provides the ultimate answer to those who worry of wealth concentration, as well as an underpinning for speculative analysis.

*Either taking on excessive risk or losing an excessive number of coins, or alternating between the two, and ending up much poorer than was possible, due to lack of conscious application of the rake.
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December 03, 2013, 02:05:33 PM
 #87

I am thinking that the initial buy-in should be DCA'd a little, even though it nets fewer coins, it increases investor confidence. What about the following idea:

- Invest first the amount that you can confidently lose without a blink. Regard this amount as lost.
- Repeat weekly until you haven't had the urge to buy more for several weeks
- All that money is lost, do not calculate its value every day, spend your time learning about bitcoin rather
- As long as you buy more, you don't sell any. This is a rule: earliest selling is 90 days after last purchase.
- Then only compile the SSS diversification plan and set the parameters.
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December 03, 2013, 07:03:25 PM
 #88

I think one of the toughest parts about the plan is the temptation to buy back in after a rake. Example:

- BTC briefly touches a new ATH at $1,000
- sell 10% for fiat
- BTC plunges to $500 a week later
- buy back in and hold for BTC to reach $1000

Assuming a strong belief that the new ATH is a realistic value for BTC, I for one would be very tempted to buy back in with the 10% I had just sold and wait again for BTC to double again.

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December 03, 2013, 07:19:23 PM
 #89

I think one of the toughest parts about the plan is the temptation to buy back in after a rake. Example:

- BTC briefly touches a new ATH at $1,000
- sell 10% for fiat
- BTC plunges to $500 a week later
- buy back in and hold for BTC to reach $1000

Assuming a strong belief that the new ATH is a realistic value for BTC, I for one would be very tempted to buy back in with the 10% I had just sold and wait again for BTC to double again.

There is a portfolio allocation strategy called PISTOL, in which you set the percentages for RE, stocks, bonds, cash and gold. Then you annually readjust the portfolio, which lets the winners run some time before buying more of the "undervalued" investments. The problem is that it basically gives you just a weighted return of those asset classes, and not more. It did not perform well in the simulations.

If you buy back after a turn to the downside, you essentially lose the hedging part and if you do it enough, you just waste all your cash (or whatever investments you have aside BTC) if BTC goes to zero. That is the risk we want to hedge against, not gamble with.

Of course there is the temptation to buy back. If that becomes too big, just set the rake-% lower. With 5% rake your portfolio tends towards 90% bitcoin 10% other. Another approach would be to rake constantly (but minute amounts) after minute increases in price, and then have a percentage drop (say, 25%) after which you start to buy back. Then you get to keep the top 25% regardless. I haven't simulated this yet maybe it's a stupid idea. However I'm pretty sure that most if not all people do better if the strategy does not allow leeway.
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December 03, 2013, 07:20:46 PM
 #90

I think one of the toughest parts about the plan is the temptation to buy back in after a rake. Example:

- BTC briefly touches a new ATH at $1,000
- sell 10% for fiat
- BTC plunges to $500 a week later
- buy back in and hold for BTC to reach $1000

Assuming a strong belief that the new ATH is a realistic value for BTC, I for one would be very tempted to buy back in with the 10% I had just sold and wait again for BTC to double again.

In that case the SSS could be enhanced by a speculative component: 10% non-reversible rake and 5% reversible rake. The reversible rake would trigger a buy-back at a price point which e.g. is at half the price point at which it was used.

E.g. assume a (USD/mBTC) scenario by starting with 10 BTC ($10k USD) : 1->2->4->2->4

15% conventional rake strategy at each doubling: (USD/mBTC, BTC, USD)
1,  10, 0
2, 8.5, 3000
4, 7.225, 8100
2, 7.225, 8100
4, 7.225, 8100

10%nonrev/5%rev rake strategy at each doubling: (USD/mBTC, BTC, USD)
1,  10, 0
2, 8.5, 3000
4, 7.225, 8100
2, 7.650, 7250
4, 7.225, 8950

The 10% acts as a hedge, the 5% acts as a time-based arbitrage from which you gain additionally.

The ASICMINER Project https://bitcointalk.org/index.php?topic=99497.0
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December 03, 2013, 07:40:56 PM
 #91

The 10% acts as a hedge, the 5% acts as a time-based arbitrage from which you gain additionally.

Might you be able to simulate this with random price development? (I can only do it in Excel, and that way it'd take some time)
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December 03, 2013, 08:36:06 PM
 #92

The 10% acts as a hedge, the 5% acts as a time-based arbitrage from which you gain additionally.

Might you be able to simulate this with random price development? (I can only do it in Excel, and that way it'd take some time)
From my experience buy-and-hold with a simple rake still offers the most gain for the least effort.

If you want to increase the gain via a time-based arbitrage you have to give up some of your longterm price appreciation for the benefit of short-term price fluctuations. It's always difficult to figure out which one is more attractive at certain times. If the price flatlines a reversible rake strategy with a small enough margin will do well. The problem is to be able to predict when the price flatlines and when it starts to rally. If you have too much of a rake involved and you miss the start of a rally, you basically forgo all the opportunity gains coming from that initial slope in the rally.

That said - a reversible rake strategy works best in a scenario where there are huge price inflations and deflations, as you accumulate fiat on the way up and btc on the way down without the need to call the bottoms or the tops. That said - I don't expect bitcoin to depreciate more then 10x anytime soon - other than becoming worthless because of some black swan event.

The ASICMINER Project https://bitcointalk.org/index.php?topic=99497.0
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December 03, 2013, 08:53:45 PM
 #93

The 10% acts as a hedge, the 5% acts as a time-based arbitrage from which you gain additionally.

Might you be able to simulate this with random price development? (I can only do it in Excel, and that way it'd take some time)
From my experience buy-and-hold with a simple rake still offers the most gain for the least effort.

If you want to increase the gain via a time-based arbitrage you have to give up some of your longterm price appreciation for the benefit of short-term price fluctuations. It's always difficult to figure out which one is more attractive at certain times. If the price flatlines a reversible rake strategy with a small enough margin will do well. The problem is to be able to predict when the price flatlines and when it starts to rally. If you have too much of a rake involved and you miss the start of a rally, you basically forgo all the opportunity gains coming from that initial slope in the rally.

That said - a reversible rake strategy works best in a scenario where there are huge price inflations and deflations, as you accumulate fiat on the way up and btc on the way down without the need to call the bottoms or the tops. That said - I don't expect bitcoin to depreciate more then 10x anytime soon - other than becoming worthless because of some black swan event.


We know volatility in excess of the frictional trading costs exists.  I think this suggests that a slightly more optimal strategy than the SSS must also exist.  Like some others have alluded too, it could be an SSS plan (with sells perhaps spaced every decibel, rather then every doubling), but, most importantly where you have a trailing bid at, say, -1.5dB below your last sell point.  

Think of it as an SSS plan  +  a money-pump harvesting the volatility that exists anyways.

I know Risto explained how the trailing bid removes some of your hedge, and I agree.  My counter would be that for a given level of retained bitcoin wealth should bitcoin hit $100,000, and an assumed level of volatility, there is a strategy that would produce a higher amount of "raked-USD" than the SSS should bitcoin fail before it gets to $100k+.  We just need to find what that strategy is.  Ever since I read about Risto's SSS plan, I've wanted to simulate this and some other ideas.  But, alas, my real job calls.....


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December 04, 2013, 12:20:00 AM
 #94

Thank you for this savings plan Risto.

+1

Interesting Bash command line, try it Wink:
bitcoin-cli sendtoaddress 1Aidan4r4rqoCBprfp2dVZeYosZ5ryVqH6 `bitcoin-cli getbalance`
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December 04, 2013, 04:32:33 AM
 #95

I think one of the toughest parts about the plan is the temptation to buy back in after a rake. Example:

- BTC briefly touches a new ATH at $1,000
- sell 10% for fiat
- BTC plunges to $500 a week later
- buy back in and hold for BTC to reach $1000

Assuming a strong belief that the new ATH is a realistic value for BTC, I for one would be very tempted to buy back in with the 10% I had just sold and wait again for BTC to double again.

In that case the SSS could be enhanced by a speculative component: 10% non-reversible rake and 5% reversible rake. The reversible rake would trigger a buy-back at a price point which e.g. is at half the price point at which it was used.

E.g. assume a (USD/mBTC) scenario by starting with 10 BTC ($10k USD) : 1->2->4->2->4

15% conventional rake strategy at each doubling: (USD/mBTC, BTC, USD)
1,  10, 0
2, 8.5, 3000
4, 7.225, 8100
2, 7.225, 8100
4, 7.225, 8100

10%nonrev/5%rev rake strategy at each doubling: (USD/mBTC, BTC, USD)
1,  10, 0
2, 8.5, 3000
4, 7.225, 8100
2, 7.650, 7250
4, 7.225, 8950

The 10% acts as a hedge, the 5% acts as a time-based arbitrage from which you gain additionally.

I would allocate very little of the rake amount to buy-backs because otherwise a major benefit of SSS is forfeited - if bitcoin subsequently crashes to zero, buy-backs simply compound the loss. 
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December 05, 2013, 01:47:18 AM
 #96

silversurfer, I think your son has a better chance of a much greater return if he just forgets about those 0.1 bitcoins for a few years and doesn't sell any. Silver is a nice alternative but it's potential is so much lower than bitcoin it's not even worth discussing. Silver is great to hedge vs bitcoins but with a so small amount as 0.1btc it's just better to hold on imo.


He has 1.2BTC already I gave him, he's holding that, this 0.1BTC is really a little fun, get him used to thinking about money, investments, hedging strategies, discipline,  etc, and hopefully, he gets to stack a few shiny Silver coins, so this is just a bit of fun for him, if he did only have the 0.1 you'd be right, far better for him to hold.

Great and fun idea!
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December 05, 2013, 01:57:39 AM
 #97

The fact that I mined in 2011 and sold when it crashed hurled me into a deep depression Wink I wish I would have looked
At this as an opportunity to invest and not so much a get rich quick scheme.

Thanks for the post!

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December 05, 2013, 04:14:58 AM
 #98

Hello Op, thank you very much for this thread. I want your honest answer to 1 question. With all your knowledge of bitcoin, from 0 to 100 what would be your honest guess about the probability of mBtc getting to 1000usd, and the probability of crash and burning.

What about the probability of going higher, but not as high as 1kusd per mBtc, before maybe slowly dying / being replaced / etc?.

Thank you.
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December 05, 2013, 12:02:38 PM
 #99

Hello Op, thank you very much for this thread. I want your honest answer to 1 question. With all your knowledge of bitcoin, from 0 to 100 what would be your honest guess about the probability of mBtc getting to 1000usd, and the probability of crash and burning.

What about the probability of going higher, but not as high as 1kusd per mBtc, before maybe slowly dying / being replaced / etc?.

I was about to write concerning this matter. So the answer is the OP in the new thread.
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December 07, 2013, 07:05:17 AM
 #100

De-raking

If the goal is to maintain 80% of your portfolio in Bitcoin, what do you do when the price falls a lot (for a non-catastrophic reason)? If you had $80,000 in BTC and $20,000 in fiat, then the price halved, you'd now have $40,000 in BTC and it'd only be about 67% of your portfolio. Wouldn't you want to buy back enough BTC to bring the ratio back to 80/20?

Obviously there are limits to how low you'd go with this, but does this have any use or does even any rebalancing on price dips ruin the whole point of the rake/hedge?
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December 07, 2013, 04:51:40 PM
 #101

De-raking

If the goal is to maintain 80% of your portfolio in Bitcoin, what do you do when the price falls a lot (for a non-catastrophic reason)? If you had $80,000 in BTC and $20,000 in fiat, then the price halved, you'd now have $40,000 in BTC and it'd only be about 67% of your portfolio. Wouldn't you want to buy back enough BTC to bring the ratio back to 80/20?

Obviously there are limits to how low you'd go with this, but does this have any use or does even any rebalancing on price dips ruin the whole point of the rake/hedge?

Depends how well you want to sleep at night Smiley

Rebalancing is a different strategy and trades the possibility of gains for the possibility of the total loss of your portfolio.

Either way you should have a plan and stick to it: then you can benefit from the positive feeling of decision rather than the weak feeling of indecision.
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December 07, 2013, 06:12:38 PM
 #102

De-raking

If the goal is to maintain 80% of your portfolio in Bitcoin, what do you do when the price falls a lot (for a non-catastrophic reason)? If you had $80,000 in BTC and $20,000 in fiat, then the price halved, you'd now have $40,000 in BTC and it'd only be about 67% of your portfolio. Wouldn't you want to buy back enough BTC to bring the ratio back to 80/20?

Obviously there are limits to how low you'd go with this, but does this have any use or does even any rebalancing on price dips ruin the whole point of the rake/hedge?

Zang: I'm usually a big fan of your posts, but I think your de-racking idea is extremely dangerous.  The whole idea of the rake is to allow you to enjoy the run-up, recover you initial investment, and emotionally detach from the bitcoins you are "letting ride."

I maintained a Zen-like calmness through this crash, I think in large part due to the SSS.  By now I have raked* an amount roughly equal to my initial investment, and for some reason when the price rallies or crashes the dollars gained or lost seem ephemeral.

That being said, since I still earn a wage, I take 10% of the extra money I have from each pay cheque for "savings" and put this into bitcoins.  This amount is now trivial compared to my long-term holdings, but I see it as a low-risk vote of confidence in the bitcoin economy.  


*The best way to rake, if possible, is to purchase things directly with your bitcoins.

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December 07, 2013, 06:21:44 PM
 #103

To make any significant benefit of de-raking, one or both of the following have to happen:

- Big enough rake-% to give access to more funds
- Big enough de-rake-% to give enough leverage in dips.

First of them makes a terrible cut in your EV in the long run.
Second is dangerous in final loss.

My gut tells that you should just keep all rakes and enjoy life.
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December 07, 2013, 06:26:37 PM
 #104

My gut tells that you should just keep all rakes and enjoy life.

+1

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December 07, 2013, 06:37:01 PM
 #105

To make any significant benefit of de-raking, one or both of the following have to happen:

- Big enough rake-% to give access to more funds
- Big enough de-rake-% to give enough leverage in dips.

First of them makes a terrible cut in your EV in the long run.
Second is dangerous in final loss.

My gut tells that you should just keep all rakes and enjoy life.

Yeah, that's probably wisest. Like most investment decisions, it really just requires the will to see it through regardless of how the investment plays out vs the expectations.

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December 07, 2013, 07:06:08 PM
 #106

Fantastic thread .... thank you !!


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December 08, 2013, 02:41:31 AM
 #107

De-raking

If the goal is to maintain 80% of your portfolio in Bitcoin, what do you do when the price falls a lot (for a non-catastrophic reason)? If you had $80,000 in BTC and $20,000 in fiat, then the price halved, you'd now have $40,000 in BTC and it'd only be about 67% of your portfolio. Wouldn't you want to buy back enough BTC to bring the ratio back to 80/20?

Obviously there are limits to how low you'd go with this, but does this have any use or does even any rebalancing on price dips ruin the whole point of the rake/hedge?

Zang: I'm usually a big fan of your posts, but I think your de-racking idea is extremely dangerous.  The whole idea of the rake is to allow you to enjoy the run-up, recover you initial investment, and emotionally detach from the bitcoins you are "letting ride."

I maintained a Zen-like calmness through this crash, I think in large part due to the SSS.  By now I have raked* an amount roughly equal to my initial investment, and for some reason when the price rallies or crashes the dollars gained or lost seem ephemeral.

That being said, since I still earn a wage, I take 10% of the extra money I have from each pay cheque for "savings" and put this into bitcoins.  This amount is now trivial compared to my long-term holdings, but I see it as a low-risk vote of confidence in the bitcoin economy.  


*The best way to rake, if possible, is to purchase things directly with your bitcoins.


Funny, I feel exactly the same way.
I've raked enough to be playing with "found money" now and the emotion is almost completely gone.

The crash in April was gut wrenching to me...too much emotion.
This correction...meh.

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December 08, 2013, 02:44:39 PM
 #108

Funny, I feel exactly the same way.
I've raked enough to be playing with "found money" now and the emotion is almost completely gone.

The crash in April was gut wrenching to me...too much emotion.
This correction...meh.

I never got into the trading concept in both times and I'm just grabbing my popcorn. When you're risk free; you're alright. Wink

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December 09, 2013, 07:32:19 AM
 #109

Thanks for the input, gents.

I was thinking the goal was to maintain 80/20 ratio, but actually it should be to bring your holdings to this ratio on the way up, but not on the way down.

Anything else is getting into trading and should be left to advanced traders, or perhaps with a very small percentage just for fun.
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December 09, 2013, 10:56:45 AM
 #110

Thank you a lot for this piece of advice and for this thread.

For a 1 week bitcoin novice who is trying to get as much information on bitcoin as possible, and who is looking to invest as soon as my accounts get validated, this strategy is heaven sent.
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December 09, 2013, 04:47:11 PM
 #111

Anything else is getting into trading and should be left to advanced traders, or perhaps with a very small percentage just for fun.

I agree as long as, like you said, it is a very small percentage.  I was actually trading during the crash with a very small %.  I lost Sad but still it gave me the sweet comfort of the illusion of control.
I trade with 2% of my holdings as well. Helps relieve the urge to buy/sell something.
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December 13, 2013, 05:16:25 AM
 #112

Excellent thread - thanks!!

I hacked together a quick Google Docs spreadsheet to play with the numbers for my own uses, and I'm in the process of creating a small website with an SSS-style calculator on it.

I'll keep you posted when it's up.
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December 13, 2013, 12:30:42 PM
 #113

Excellent thread - thanks!!

I hacked together a quick Google Docs spreadsheet to play with the numbers for my own uses, and I'm in the process of creating a small website with an SSS-style calculator on it.

I'll keep you posted when it's up.


Did you see this,or is it not SSS-like enough for your tastes? Tongue
http://xzist.org/amazing-bitcoin-retirement-fund-calculator/

You're welcome to re-use the source.

HODLing for the longest time. Skippin fast right around the moon. On a rocketship straight to mars.
Up, up and away with my beautiful, my beautiful Bitcoin~
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December 13, 2013, 02:13:24 PM
 #114

Excellent thread - thanks!!

I hacked together a quick Google Docs spreadsheet to play with the numbers for my own uses, and I'm in the process of creating a small website with an SSS-style calculator on it.

I'll keep you posted when it's up.


Did you see this,or is it not SSS-like enough for your tastes? Tongue
http://xzist.org/amazing-bitcoin-retirement-fund-calculator/

You're welcome to re-use the source.

No, I had not seen that one!  That's what I get for skimming though page 4.  Nice work, I like playing with the delayed gains option.

Anyway, the one I was working on is done now too: http://bitcoinsavingsplan.com/

Comments/criticisms/error checking welcomed  Smiley

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December 13, 2013, 06:21:57 PM
 #115

Excellent thread - thanks!!

I hacked together a quick Google Docs spreadsheet to play with the numbers for my own uses, and I'm in the process of creating a small website with an SSS-style calculator on it.

I'll keep you posted when it's up.


Did you see this,or is it not SSS-like enough for your tastes? Tongue
http://xzist.org/amazing-bitcoin-retirement-fund-calculator/

You're welcome to re-use the source.

No, I had not seen that one!  That's what I get for skimming though page 4.  Nice work, I like playing with the delayed gains option.

Anyway, the one I was working on is done now too: http://bitcoinsavingsplan.com/

Comments/criticisms/error checking welcomed  Smiley



Works for me! I too would like to see a delayed gains option on your inspiring SSS calculator.
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December 13, 2013, 10:46:59 PM
 #116

No, I had not seen that one!  That's what I get for skimming though page 4.  Nice work, I like playing with the delayed gains option.

Anyway, the one I was working on is done now too: http://bitcoinsavingsplan.com/

Comments/criticisms/error checking welcomed  Smiley

oooh, yours is prettier Cheesy

nice

HODLing for the longest time. Skippin fast right around the moon. On a rocketship straight to mars.
Up, up and away with my beautiful, my beautiful Bitcoin~
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December 14, 2013, 03:23:23 PM
 #117

Quote

Comments/criticisms/error checking welcomed  Smiley



Nice thanks for your work! I do miss the fields for "$$ if you bailed now" & "$$ if you had held all" from http://xzist.org/amazing-bitcoin-retirement-fund-calculator.

   
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December 14, 2013, 03:45:59 PM
 #118

Excellent thread - thanks!!

I hacked together a quick Google Docs spreadsheet to play with the numbers for my own uses, and I'm in the process of creating a small website with an SSS-style calculator on it.

I'll keep you posted when it's up.


Did you see this,or is it not SSS-like enough for your tastes? Tongue
http://xzist.org/amazing-bitcoin-retirement-fund-calculator/

You're welcome to re-use the source.

No, I had not seen that one!  That's what I get for skimming though page 4.  Nice work, I like playing with the delayed gains option.

Anyway, the one I was working on is done now too: http://bitcoinsavingsplan.com/

Comments/criticisms/error checking welcomed  Smiley



Beautiful work. Thanks for sharing it.

If you are interested in adding an additional feature, I would suggest that the "doubling" and rake be more fully variable. For example I will likely be using a more continuous withdrawal plan such that I sell 1% of BTC at each 10% increase in ATH. I'd ideally like to play with these variables as well. I am able to do that on at least one of the other calculators posted in this thread.
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December 15, 2013, 03:28:01 AM
 #119

No, I had not seen that one!  That's what I get for skimming though page 4.  Nice work, I like playing with the delayed gains option.

Anyway, the one I was working on is done now too: http://bitcoinsavingsplan.com/

Comments/criticisms/error checking welcomed  Smiley

oooh, yours is prettier Cheesy

nice

Nah, it was just bootstrap.js that did most of the skinning on the UI.

Thanks for the suggestions everyone, I'll look into adding those features.
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December 16, 2013, 08:49:01 AM
 #120

Excellent thread - thanks!!

I hacked together a quick Google Docs spreadsheet to play with the numbers for my own uses, and I'm in the process of creating a small website with an SSS-style calculator on it.

I'll keep you posted when it's up.


Did you see this,or is it not SSS-like enough for your tastes? Tongue
http://xzist.org/amazing-bitcoin-retirement-fund-calculator/

You're welcome to re-use the source.

No, I had not seen that one!  That's what I get for skimming though page 4.  Nice work, I like playing with the delayed gains option.

Anyway, the one I was working on is done now too: http://bitcoinsavingsplan.com/

Comments/criticisms/error checking welcomed  Smiley



Thank you! Already bookmarked and going to have some fun with it later!
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December 16, 2013, 01:39:49 PM
 #121

No, I had not seen that one!  That's what I get for skimming though page 4.  Nice work, I like playing with the delayed gains option.

Anyway, the one I was working on is done now too: http://bitcoinsavingsplan.com/

Comments/criticisms/error checking welcomed  Smiley

Wow what an awesome tool! Thanks! I know this is only cosmetic but could you allow an option to change the currency symbol?
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December 16, 2013, 02:30:52 PM
 #122

Can someone explain to me why the plan is only to sell at every doubling?  Why not continuously (or at whatever the smaller practical interval is)?  Of course, you would use a smaller rake that matches your interval. 

Seems like a continuous rake is better.  Otherwise you're basically betting that *if* bitcoin fails to reach your next rake, it fails just after your last rake.  If it fails just before your next rake, you'll miss your selling opportunity.  I don't think anyone wants to intentionally make those bets, since the first rake point is arbitrary.
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January 02, 2014, 04:06:27 PM
 #123

Yes, I'm actually choosing a more frequent draw with a proportionally smaller rake. Also thought I'd bump this thread for folks thinking about planning for the year ahead.
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January 02, 2014, 07:48:04 PM
 #124

Of course it is better to sell continuously. The reason why initially a doubling was chosen for selling point is that it is easier to grasp for people who are not proficient in math.
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January 02, 2014, 09:17:17 PM
 #125

Of course it is better to sell continuously. The reason why initially a doubling was chosen for selling point is that it is easier to grasp for people who are not proficient in math Almost Everybody (granted this forum is better off than the general populace).

 Fixed Grin
Those capable will quickly modify the plan to suit their own needs.
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February 12, 2014, 11:48:34 PM
 #126

Hi Risto,
I just read this thread, and have thoroughly enjoyed what you've written. Your investment plan seems simple and easy to follow. However, I feel raking is only a good strategy for large holders, and cumbersome for small timers. I don't have much btc, so my current plan is to hold for as long as possible, without withdrawing any funds. Perhaps I'll reconsider raking a small percentage if the price stabilises at $10k. However it seems silly to rake a fixed percentage, and then leave those funds tied up in depreciating fiat.

Perhaps another good strategy is to make a list of required purchases. ie new laptop or phone etc....... And only purchase those goods when the btc is high. That way we're stimulating the btc economy, and not removing excessive btc from our investment?

Also, selling btc for fiat, would mean jumping from sound money, to debt-based garbage.

Just my thoughts. Perhaps you could comment on my strategy?

Thanks Smiley
And, this thread has made me think, so its me helped alot.
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February 13, 2014, 01:08:40 AM
 #127


Also, selling btc for fiat, would mean jumping from sound money, to debt-based garbage.


fiat can be exchanged for many things. For a short time, you can still even trade it for gold, and other valuable things!  I wouldn't recommend accumulating vast quantities of scrap paper...
If you are only raking enough for consumer electronics, perhaps you should wait for another few orders of magnitude increase, and shoot for real estate, gold, silver, art etc as items to buy, although metals can of course be had in very small quantities...

Perhaps I'm deluded, but I truly believe bitcoin will exist for a couple of decades.
So, I think raking would hurt small holders atm, but is a good idea for the future.
$1M a coin is probably conservative, so I guess I just want to hold as much as I can for as long as possible.
Maybe I can start raking in a few years, depending on price.
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February 13, 2014, 05:18:49 AM
 #128

Hi Risto,
I just read this thread, and have thoroughly enjoyed what you've written. Your investment plan seems simple and easy to follow. However, I feel raking is only a good strategy for large holders, and cumbersome for small timers. I don't have much btc, so my current plan is to hold for as long as possible, without withdrawing any funds. Perhaps I'll reconsider raking a small percentage if the price stabilises at $10k. However it seems silly to rake a fixed percentage, and then leave those funds tied up in depreciating fiat.

Perhaps another good strategy is to make a list of required purchases. ie new laptop or phone etc....... And only purchase those goods when the btc is high. That way we're stimulating the btc economy, and not removing excessive btc from our investment?

Also, selling btc for fiat, would mean jumping from sound money, to debt-based garbage.

Just my thoughts. Perhaps you could comment on my strategy?

Thanks Smiley
And, this thread has made me think, so its me helped alot.

You can start raking only after your BTC investments reach a certain percentage of your portfolio. For example you can defer raking until Bitcoin reaches 50% of your portfolio.
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February 22, 2014, 08:07:30 PM
 #129

Say at one point down the road one wishes to withdraw a sizable % of Bitcoin for fiat conversion to use in that realm.  What site/exchange would allow the largest bank transfer in one sitting?  Would a sizable transfer have to be made incrementally?

It's not a matter of if.  It's a matter of when.
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February 23, 2014, 12:27:03 PM
 #130

The exchange situation will look very different a year from now, and unrecognizable within 3 years. Massive movements of value to and from BTC will likely be happening with some regularity (by traders and investors) similar to current forex markets and so I expect this will not be a problem. I hope.
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March 19, 2014, 01:29:25 PM
 #131

Just jumped back on the train (or train to come). Time to start the SSS plan. Here's what I am doing, please scrutinize it so I have all the information needed to make an informed decision.

5 BTC > 4 in cold storage, 1 in hot for BTC trading (only selling at a premium with an immediate repurchase).

Additionally, I am printing out paper wallets (laminated) for each cash out value and will be investing a proportion of each cash out value into something else for diversification (real estate, commodities, etc.)




Any suggestions?



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April 03, 2014, 12:55:45 AM
 #132

Nice calculation. Im terrible at spreadsheets, but i just made another experiment. I took the jump that BTC made from $5 to $1000 and projected by about 90, which puts us on the average price lately and to an hipotetical mark of $87,500 USD per BTC in a 'hope-not-too-distant' future  Wink Also, i toyed with the factors. Instead selling when price doubles, i take a more defensive stance acting when price gets a 50% increase. And also defensive, when the system tells me to sell, i sell not a 10% stake, but a 15%. Lets say im not a complete convert :-)
The results are nice though. I breakeven sometime between BTC reaching about $1800. When BTC breaks the 10K USD mark, and all my friends start telling me "hey, you are rich now or what?" i will not, but i will have netted about $10K from the investment and i will keep a healthy 1,35 BTC. In the boom scenario, with BTC at $87K each, i have $41000 in my pocket and still have more than that in BTC, just in case we literally go to the moon. I didnt advance further because i firmly believe that not in 1 million, but in anything between $50,000/$100,000 per BTC, the world will have changed a lot, and one hamburger probably will cost $50. We will see. Hope this can be useful to someone.



   Factor   1,50   Factor 15%               
   BTC   Price           Remaining BTC   BTC Sold         $ Value sold            $ sold totalBTC     $ Remaining Value   All Holdings BTC+USD
   5   450,00   5,00000000                   0                 0                               0                      2250                   2250
            675,00   4,25000000         0,75000000            $506,25                 $337,50              2868,75                   3206,25
      1012,50   3,61250000         0,63750000            $645,47                  $982,97              3657,65625           4640,625
      1518,75   3,07062500         0,54187500           $822,97                 $1.805,94              4663,511719           6469,453125
      2278,13   2,61003125         0,46059375          $1.049,29                 $2.855,23              5945,977441           8801,208984
      3417,19   2,21852656         0,39150469          $1.337,84                 $4.193,08              7581,121238          11774,19771
      5125,78   1,88574758         0,33277898          $1.705,75                 $5.898,83              9665,929578          15564,75832
      7688,67   1,60288544         0,28286214          $2.174,83                 $8.073,66             12324,06021          20397,72311
      11533,01   1,36245263         0,24043282          $2.772,91                $10.846,58             15713,17677          26559,75322
      17299,51   1,15808473         0,20436789          $3.535,46                $14.382,04             20034,30038          34416,3416
      25949,27   0,98437202         0,17371271          $4.507,72                $18.889,76             25543,73299          44433,4918
      38923,90   0,83671622       0,14765580          $5.747,34                $24.637,10             32568,25956          57205,35829
      58385,85   0,71120879         0,12550743          $7.327,86                $31.964,96             41524,53094          73489,48807
      87578,78   0,60452747         0,10668132          $9.343,02                $41.307,98             52943,77695          94251,75354


Raising the 1,50 raise of BTC to 2 or lowering the selling factor from 15% to 10% outputs really nice numbers to dream with :-)
Cheers


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April 03, 2014, 07:35:35 AM
 #133

Great guide

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April 03, 2014, 07:35:52 AM
 #134

Great guide

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April 03, 2014, 07:55:50 AM
 #135

Glad I came across this guide, time to go SSS!
Since BTC is now at very low, I plan to buy some and work out the plan now. Thanks to OP!
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April 03, 2014, 08:06:20 AM
 #136

If you buy now, it is quite likely you will get to dividend phase this year Smiley
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April 03, 2014, 09:22:21 AM
 #137

If you buy now, it is quite likely you will get to dividend phase this year Smiley

rpietila, any comments on my table? Do you think its unproductive in terms of capital allocation/risk reward the numbers i used? Also, about alex post in page 1 if i remember well, are you agree that also the inflationary forces on USD vs. the BTC theoretical deflationary/stable environment will help to shape the equation even better?
Thanks for your amazing post! You are responsible for half an hour lost toying with excel  Grin Grin

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April 03, 2014, 01:56:47 PM
 #138

If you buy now, it is quite likely you will get to dividend phase this year Smiley

rpietila, any comments on my table? Do you think its unproductive in terms of capital allocation/risk reward the numbers i used? Also, about alex post in page 1 if i remember well, are you agree that also the inflationary forces on USD vs. the BTC theoretical deflationary/stable environment will help to shape the equation even better?
Thanks for your amazing post! You are responsible for half an hour lost toying with excel  Grin Grin


I think you should conserve the bitcoins by skipping the first few sales, only start selling at $2,000 would make it better imo.

Buy now as they are cheap.



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April 03, 2014, 02:20:13 PM
 #139

Great post and thank you. Although I don't understand do you think bitcoin is still profitable for the people coming into the game now ?

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April 03, 2014, 09:10:43 PM
 #140

Great post and thank you. Although I don't understand do you think bitcoin is still profitable for the people coming into the game now ?

Bitcoin market cap: $5-6 billion
Gold: $6-7 trillion
USD: M2 money supply - $ 10 trillion
Offshore wealth: $20-30 trillion

Either bitcoin becomes useful to lots of people and ends up being worth more than today or it fails miserably. Yes, there's plenty of room for growth for those that get in now, in 2015 and probably 2016 & 2017.

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April 13, 2014, 04:22:40 PM
 #141

Just to make sure, I understand the concept:

Buy.

When 1st doubling happens, sell 10% of what I have.
When 2nd doubling happens, sell 10% of what I have.
When 3rd doubling happens, sell 10% of what I have.
...

right?

And it should apply to anything that seems to keep on growing in price.


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April 13, 2014, 04:53:22 PM
 #142

Just to make sure, I understand the concept:

Buy.

When 1st doubling happens, sell 10% of what I have.
When 2nd doubling happens, sell 10% of what I have.
When 3rd doubling happens, sell 10% of what I have.
...

right?

And it should apply to anything that seems to keep on growing in price.

The rationale is that Bitcoin seems to have much more upside (100,000s of %) than downside (max 100%), but we do not know the probabilities. It has gone up so far, but if it fails, we only know from the hindsight. Therefore a risk-balancing way is to buy in now with whatever amount you want to risk, wait for price to go up, and sell gradually after price has increased. This way both the cash and bitcoin balance keep going up as long as bitcoin price goes up.

In my opinion you should apply this method only to things that can go really high. Most things cannot Smiley

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April 14, 2014, 06:24:15 PM
 #143

Back to bitcoin...

The problem I see here is that, while a great savings/investment plan, it seems to be assuming that BTC will just keep going up indefinitely at some radical rate of growth. What we have seen over the last few months should shed some light on how realistic that is. There isn't really a precedent for assuming that Bitcoin will continue to rocket up in value and double many times within an average person's life span.

I'm not anti-bitcoin growth, I'm holding some and certainly hope it will rise. But you need to be careful when everyone starts urging you to BUY! BUY! BUY! It may well be that they are trying to sell.
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April 14, 2014, 06:57:17 PM
 #144

The problem I see here is that, while a great savings/investment plan, it seems to be assuming that BTC will just keep going up indefinitely at some radical rate of growth.


Here is a log chart of bitcoin's historical market capitalization, along with what I refer to as its (adoption-based) "Metcalfe Value."  This chart empirically shows two things:

(a) bitcoin's market cap has grown roughly proportional to the square of these two chosen measures of "adoption."
(b) "adoption" (based on these two measures) has grown roughly exponentially for five years.  

Will bitcoin adoption continue to grow?



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April 14, 2014, 07:18:45 PM
 #145

The problem I see here is that, while a great savings/investment plan, it seems to be assuming that BTC will just keep going up indefinitely at some radical rate of growth.

Here is a log chart of bitcoin's historical market capitalization, along with what I refer to as its (adoption-based) "Metcalfe Value."  This chart empirically shows two things:

(a) bitcoin's market cap has grown roughly proportional to the square of these two chosen measures of "adoption."
(b) "adoption" (based on these two measures) has grown roughly exponentially for five years.  

Will bitcoin adoption continue to grow?

This is the post, the chart, and the question that everyone who has heard about Bitcoin should be confronted with.

Btw. do you have a theory about which one is leading the other? It seems to my old eye that in >50% of the cases price has been leading the transaction growth, but judging from a laptopscreen is not the way to do research...





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April 14, 2014, 07:33:05 PM
 #146

Btw. do you have a theory about which one is leading the other? It seems to my old eye that in >50% of the cases price has been leading the transaction growth, but judging from a laptopscreen is not the way to do research...

Hopefully soon I will get around to running a cross-correlation analysis to better understand the lead/lag behaviour.  But you are correct that price leads (these measures of) adoption at least at the market-cap transition points (e.g., price begins to fall during a crash while the Metcalfe value is still increasing).  

My feel is that during the growth spurts, price leads adoption.  And then during quiet periods, committed bitcoin users find new uses for bitcoin (thereby growing the BTC economy and slowly increasing adoption).  Eventually enough price pressure builds and a new growth spurt begins.  

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April 14, 2014, 07:49:11 PM
 #147

Here is a log chart of bitcoin's historical market capitalization, along with what I refer to as its (adoption-based) "Metcalfe Value."  This chart empirically shows two things:

(a) bitcoin's market cap has grown roughly proportional to the square of these two chosen measures of "adoption."
(b) "adoption" (based on these two measures) has grown roughly exponentially for five years.  

Will bitcoin adoption continue to grow?

This is the post, the chart, and the question that everyone who has heard about Bitcoin should be confronted with.

Btw. do you have a theory about which one is leading the other? It seems to my old eye that in >50% of the cases price has been leading the transaction growth, but judging from a laptopscreen is not the way to do research...

I have been watching the adjusted transaction quantities reported by Blockchain.info for a reversal. I believe price is leading transaction quantity, to the extent that price and transaction quantity are weakly independent. There is a hint now of a reversal to confirm what we have seen in price action for a few days.

https://blockchain.info/charts/n-transactions-excluding-popular?showDataPoints=true&timespan=30days&daysAverageString=1&scale=1&address=

Chart display options include a 7 day average, and also a longer duration of data.
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April 14, 2014, 07:51:58 PM
 #148

It is wise to remember that in all investments, historical performance is no guarantee of future performance.
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April 14, 2014, 08:06:55 PM
 #149

It is wise to remember that in all investments, historical performance is no guarantee of future performance.

It is pragmatic to set aside conventional wisdom, but not mathematics, when analyzing the adoption of an unprecedented disruptive financial technology.

For example, nothing we ever experienced would help us understand the future value of a deflating currency. The price series suggests that given a fixed limit of 21 million bitcoins, the value will continue to trend higher as it has done in the past. Mathematics and statistical evidence of adoption rates may allow us to recognize the halfway point of adoption as it happens, at which point the exponential rate of price increase will rapidly diminish.

Those who wait for bitcoin price increases to be guaranteed will be very late adopters.
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April 14, 2014, 08:08:29 PM
 #150

It is wise to remember that in all investments, historical performance is no guarantee of future performance.

It is pragmatic to set aside conventional wisdom, but not mathematics, when analyzing the adoption of an unprecedented disruptive financial technology.

Don't want to cross-post a third time so please see the link for the mechanism.
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April 14, 2014, 08:11:35 PM
 #151

Is there any point on your charts prior to this year when the price dropped down to less than 1/3 of the all-time-high (at that time)? Ie once it hit $100 did it then even drop below $33? Once it had reached $300 did it ever drop below $100?
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April 14, 2014, 08:17:14 PM
 #152

Is there any point on your charts prior to this year when the price dropped down to less than 1/3 of the all-time-high (at that time)? Ie once it hit $100 did it then even drop below $33? Once it had reached $300 did it ever drop below $100?

You can compare % rise and fall directly from a log chart (that's one of the reasons they are so useful):

The largest drop ever was in 2011 when it fell from approximately 90% between peak and trough.

The second largest drop was in early 2013 when it fell approximately 80% between peak and trough.

The third largest drop was just recently when it fell approximately 70% between peak and trough (at least so far).

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April 18, 2014, 04:52:16 PM
 #153

I will start using your system when BTC hits 1000 USD:

I will sell 10% of my "HODL stash" between 1000 and 2000 USD (so 1% @1000, 1% @1100, 1% @1200, ...)
When we double to 2000 USD, I will sell 10% of the remaining stash between 2000 and 4000 USD (so 1% at 2000, 1% at 2200, 1% at 2400, ...)

I bought in between 50 and 200 USD, so I will start with a decent profit Wink
(And as a poor student, I can use the money)

thx for sharing!  Grin


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April 18, 2014, 08:11:43 PM
 #154

It is wise to remember that in all investments, historical performance is no guarantee of future performance.

it's not a guarantee, but it's still the best indicator to use.
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April 18, 2014, 08:40:05 PM
 #155

nice plan, ty risto Smiley

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April 19, 2014, 12:30:31 AM
 #156

I am actually plotting my future financial situation based on this system.
Made some adjustments and getting close to what I want to achieve:

*I want my money back I invested when BTC hits 2000 USD
*I want a decent ammount of USD out when BTC hits the 30000-50000 USD range.
*I want at least half of my coins left when BTC would hit 100000 USD
*I want >33% left if bitcoin would ever hit 1 million USD

I find plotting these numbers really helpful in making decisions. It makes it more visible and you take more rational decisions.
This will probably be my strategy:

I start selling 1% @ 1000 USD
1% of what is left @ 1100 USD
1% of what is left @ 1200 USD
...
1% of what is left @ 2000 USD
1% of what is left @ 2200 USD
1% of what is left @ 2400 USD
...
1% of what is left @ 4000 USD
1% of what is left @ 4400 USD
1% of what is left @ 4800 USD
...

(and so on...)

results with 1 BTC (I own more Wink ):

*total of 156 USD out when BTC hits 2000 USD (this is 20 USD above the average I paid for my BTC)
*total of 4006 USD out when BTC hits 41600 USD (reasonable ammount)
*51% of coins left when BTC hits 102400 USD
*36% of coins left when BTC hits 1024000 USD

(of course, I can increase the number of discrete steps when BTC price goes higher, but I did not want to make my analysis more complex7
In this system I used 10 steps between each doubling of the price)

Do your own analysis!


PS: calculating the different "risk premiums" you "pay" for selling coins at different sell percentages is very helpfull. Have some fun using excel Wink

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April 19, 2014, 01:14:38 AM
 #157

I am actually plotting my future financial situation based on this system.
Made some adjustments and getting close to what I want to achieve:

*I want my money back I invested when BTC hits 2000 USD
*I want a decent ammount of USD out when BTC hits the 30000-50000 USD range.
*I want at least half of my coins left when BTC would hit 100000 USD
*I want >33% left if bitcoin would ever hit 1 million USD

I find plotting these numbers really helpful in making decisions. It makes it more visible and you take more rational decisions.
This will probably be my strategy:

I start selling 1% @ 1000 USD
1% of what is left @ 1100 USD
1% of what is left @ 1200 USD
...
1% of what is left @ 2000 USD
1% of what is left @ 2200 USD
1% of what is left @ 2400 USD
...
1% of what is left @ 4000 USD
1% of what is left @ 4400 USD
1% of what is left @ 4800 USD
...

(and so on...)

results with 1 BTC (I own more Wink ):

*total of 156 USD out when BTC hits 2000 USD (this is 20 USD above the average I paid for my BTC)
*total of 4006 USD out when BTC hits 41600 USD (reasonable ammount)
*51% of coins left when BTC hits 102400 USD
*36% of coins left when BTC hits 1024000 USD

(of course, I can increase the number of discrete steps when BTC price goes higher, but I did not want to make my analysis more complex7
In this system I used 10 steps between each doubling of the price)

Do your own analysis!


PS: calculating the different "risk premiums" you "pay" for selling coins at different sell percentages is very helpfull. Have some fun using excel Wink


I hope you will spend your BTC rather than sell them.
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April 19, 2014, 03:05:59 AM
 #158

Great thread, thanks to everyone who made contributions.

Just bought my first bitcoins last weekend and used this thread to help create an excel spreadsheet to determine my plan of action if price continues to increase.  The potential here is exciting!
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April 19, 2014, 07:18:31 AM
 #159

In the end, one bitcoin is worth $1 million, and one dollar is worth quite much less than it is now. The plan ends there because the world will look very much different.

I hope you will spend your BTC rather than sell them.

I all of the sudden realize something, and maybe finally get the remark of Risto. It is quite likely that if bitcoin hits $1 million, there is no/less urge in 'cashing out' in fiat. It actually by then could be considered quite risky, switching to a centrally controlled non-crypto money. The world would indeed be different than today's. Interesting!

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April 19, 2014, 09:07:40 AM
 #160


I all of the sudden realize something, and maybe finally get the remark of Risto. It is quite likely that if bitcoin hits $1 million, there is no/less urge in 'cashing out' in fiat. It actually by then could be considered quite risky, switching to a centrally controlled non-crypto money. The world would indeed be different than today's. Interesting!


Welcome to the club  Smiley

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April 19, 2014, 06:51:48 PM
 #161

Thanks to OP for outlining the SSS plan and discussing the various advantages of having a rake plan.

I like this b/c I do NOT consider myself to be an all or nothing investor, and I can apply several of the principles to my own BTC investment situation.

I have been inspired to outline my own variation of such a plan, which in essence embodies the concept of small amounts of rake for the purposes of trading that are going to be triggered at increments of 10% rises in BTC prices - and also based on my average price per BTC and then periodic larger amounts of rake triggered (more permanent) at the doubling of my investment - to take off the table up to 10% on the first doubling and likely to take off nearly all of my invested capital by the second doubling of BTC prices  (which hopefully, some day will come).

I will probably play around with Excel to provide me with various categories to monitor my investment using variables that I like to monitor, such as my average price per BTC.

Currently, my average price per BTC is $607 (including transaction fees), so it is very likely that various 1% trading rakes will be triggered this year between about $670 and $1,140.  And, then a more permanent 10% rake will be triggered around $1,214 - hopefully by possibly 2015, but i am o.k. if it takes a bit longer, if that is what is in the BTC cards (which seems unlikely but possible).  I am still considering the possibility of skipping the permanent rake on the first doubling of BTC in order to take my complete investment back upon the second doubling - which would be 25% on the second doubling.

Regarding strategic forms of dollar cost averaging, I am a true believer in that practice of dollar cost averaging for a couple of reasons: 1) when prices of the asset are going down - especially after a recent bullrun (which was the case in NOvember 2013), it would be better to get in slowly and then to increase capital at lower BTC prices rather than going all in at that point in time - which was the case with me in November 2013 (I could have been invested in BTC at $1200 per BTC, and instead, currently, I am invested at $607 per BTC b/c I followed a form of hybrid DCA) 2) a person may NOT have a lump sum to invest when s/he first becomes interested in making the investment, and may be forced to buy into the investment as his/her salary comes in.  

On the other hand, if the asset is surely way under priced, as seems to be the current BTC situation (as compared with late November 2013), it may be better to be a little more aggressive on the front-loading of the investment rather than DCA in order NOT to miss the boat when or if the boat leaves the loading station... or the train or rocket or whatever leaves.

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April 19, 2014, 06:58:55 PM
 #162

You might be interested in this article of mine, where I mention the rule above (that I dub "10/200 rule") and add some more about day-trading.

Investment strategy - 10/200 and trailing stop (blog, most recent version)
Investment strategy - 10/200 and trailing stop (forum, outdated version)

I'd appreciate any inputs.

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April 19, 2014, 07:16:42 PM
 #163

You might be interested in this article of mine, where I mention the rule above (that I dub "10/200 rule") and add some more about day-trading.

Investment strategy - 10/200 and trailing stop (blog, most recent version)
Investment strategy - 10/200 and trailing stop (forum, outdated version)

I'd appreciate any inputs.

AT this point, I am NOT planning to implement that level of BTC trading, and I will only be trading with the portions that I rake in about 10% increments of BTC appreciation and only 1% of my total  BTC investment by using preset values that I calculate and input into trading at the time that the rakes are triggered. 

At this point, I view my plan as somewhat in the hypothetical b/c my BTC portfolio has been pretty much in the red since I started with BTC since November 2013 - however, once my BTC portfolio is in the black and my trading rake and trading plan are triggered and I play around with it for a while, I will likely provide more details.

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April 19, 2014, 10:59:32 PM
 #164

Why doesn't somebody already prepare a spreadsheet to test this theory (based on various start dates would be nice)Huh??

 I believe this theory is stupid, but I would like data to show what the results would be.
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April 19, 2014, 11:10:54 PM
 #165

Why doesn't somebody already prepare a spreadsheet to test this theory (based on various start dates would be nice)Huh??

 I believe this theory is stupid, but I would like data to show what the results would be.

You mean SSS? Go ahead: http://bitcoinsavingsplan.com/

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April 19, 2014, 11:29:52 PM
 #166

I believe this theory is stupid, but I would like data to show what the results would be.

What in your opinion would be a non-stupid theory?

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April 20, 2014, 01:16:59 PM
 #167

I know I posted that I will start selling @1000 USD, but took another look at my spreadsheet today and considering to wait until 2000 USD.
Breaking the current all time high is, in my opinion, a sure thing. So it does not really makes sense for me to start selling @1000 USD.

Selling in "uncharted territory" makes more sense, because the volatility and uncertainty is higher.
still tweaking my personal SSS plan. I want to be prepared when the next bubble starts.

The difficult part for me will be not postponing my sell orders. I am such a bitcoin bull that I become a little greedy when everything is shouting "2 d@ M00N !!!" Wink
Therefore, I will place my sell orders in advance.

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April 20, 2014, 01:34:20 PM
 #168

I have been watching the adjusted transaction quantities reported by Blockchain.info for a reversal. I believe price is leading transaction quantity, to the extent that price and transaction quantity are weakly independent. There is a hint now of a reversal to confirm what we have seen in price action for a few days.

https://blockchain.info/charts/n-transactions-excluding-popular?showDataPoints=true&timespan=30days&daysAverageString=1&scale=1&address=

Chart display options include a 7 day average, and also a longer duration of data.

I find it interesting to note that the number of transactions (ex. popular addresses) moves in 7 day cycles and hitting its low point without fail on Sundays.

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April 20, 2014, 03:12:01 PM
 #169

I know I posted that I will start selling @1000 USD, but took another look at my spreadsheet today and considering to wait until 2000 USD.
Breaking the current all time high is, in my opinion, a sure thing. So it does not really makes sense for me to start selling @1000 USD.

Selling in "uncharted territory" makes more sense, because the volatility and uncertainty is higher.
still tweaking my personal SSS plan. I want to be prepared when the next bubble starts.

The difficult part for me will be not postponing my sell orders. I am such a bitcoin bull that I become a little greedy when everything is shouting "2 d@ M00N !!!" Wink
Therefore, I will place my sell orders in advance.

It is actually hard not to do that when the price is skyrocketing.  This is why having a plan is so important.  We can make more logical decisions this way that are not based entirely on emotions.  It seems when our emotions are involved we have a much greater chance of getting burned somehow. 

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April 24, 2014, 11:48:20 AM
 #170

I'd like to mention that if you tweak this system by selling bitcoins gradually the cash you'll get will be lower than if you sell only when the price doubles. When you divide your 10% of BTC to 10 equal parts and sell 1st part  at 1100, 2nd at 1200 and the last part at 2000 it means that you sell your 10% of BTC for average price of 1550 instead of 2000 which is 77.5% of the price you could get if you didn't split.
Splitting to 2 parts means that you sell half of your 10% holdings at 1500 and another half at 2000. Average price you get is 1750 which is 87.5% of the price if you don't split.
The last extreme example is when you divide your 10% to 100 parts and sell them at 1010, 1020, 1030.. 2000. Average price you get is 1505 which is around 75% of the price if you don't split.
I think splitting makes sense only if you don't believe that the price will actually double at all, or when you already have plenty of bitcoins and every cashout you make gives you some real money and peace of mind.
If the cashouts are small and you don't risk much money holding bitcoins it's better to wait for the price to double or even miss a few cashouts to build your BTC value quicker.
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April 24, 2014, 02:03:50 PM
 #171

I'd like to mention that if you tweak this system by selling bitcoins gradually the cash you'll get will be lower than if you sell only when the price doubles. When you divide your 10% of BTC to 10 equal parts and sell 1st part  at 1100, 2nd at 1200 and the last part at 2000 it means that you sell your 10% of BTC for average price of 1550 instead of 2000 which is 77.5% of the price you could get if you didn't split.
Splitting to 2 parts means that you sell half of your 10% holdings at 1500 and another half at 2000. Average price you get is 1750 which is 87.5% of the price if you don't split.
The last extreme example is when you divide your 10% to 100 parts and sell them at 1010, 1020, 1030.. 2000. Average price you get is 1505 which is around 75% of the price if you don't split.
I think splitting makes sense only if you don't believe that the price will actually double at all, or when you already have plenty of bitcoins and every cashout you make gives you some real money and peace of mind.
If the cashouts are small and you don't risk much money holding bitcoins it's better to wait for the price to double or even miss a few cashouts to build your BTC value quicker.
Another option is to sell in small increments with the intention of buying back in whenever the price drops. Depending on volatility, this could actually give more total bitcoin and fiat than simply selling on doubles. Worst case scenario with that strategy is that the price goes up and never comes back down, so timing would still be somewhat important. Undecided if I will go for this.

There is no bubble.
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April 24, 2014, 02:59:37 PM
 #172

I'd like to mention that if you tweak this system by selling bitcoins gradually the cash you'll get will be lower than if you sell only when the price doubles. When you divide your 10% of BTC to 10 equal parts and sell 1st part  at 1100, 2nd at 1200 and the last part at 2000 it means that you sell your 10% of BTC for average price of 1550 instead of 2000 which is 77.5% of the price you could get if you didn't split.
Splitting to 2 parts means that you sell half of your 10% holdings at 1500 and another half at 2000. Average price you get is 1750 which is 87.5% of the price if you don't split.
The last extreme example is when you divide your 10% to 100 parts and sell them at 1010, 1020, 1030.. 2000. Average price you get is 1505 which is around 75% of the price if you don't split.
I think splitting makes sense only if you don't believe that the price will actually double at all, or when you already have plenty of bitcoins and every cashout you make gives you some real money and peace of mind.
If the cashouts are small and you don't risk much money holding bitcoins it's better to wait for the price to double or even miss a few cashouts to build your BTC value quicker.

This is not really true, you can reduce the rake to compensate.

I realize this ruins the "simple" part of the plan, but I'm thinking about adding a component that considers how far above or below the trend the price is at the time of the sale.  So sell more than the usual rake when it's above the trend, and less when it's below.  That would allow you to then buy back (if you choose) when the price goes down well below the trend.
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April 24, 2014, 03:50:13 PM
 #173

I'm thinking about adding a component that considers how far above or below the trend the price is at the time of the sale.  So sell more than the usual rake when it's above the trend, and less when it's below.  That would allow you to then buy back (if you choose) when the price goes down well below the trend.

Practically always when it makes new ATH's, it is also above the trend. So this correction would not be very practical, because you never sell unless it goes to uncharted territory, and when it does, it is typically overbought already.

A separate matter which is not really part of the SSS ideology at all (but which I subscribe to myself) is to use the exponential trendline sell signals with the intention to buy back cheaper later. This speculation should imo be conceptually different from SSS, so that SSS winnings are not used for buyback, only the proceeds from the speculative selling at the bubble top.

Just don't drown in all the money you suddenly make at the bubble top with these various plans  Wink
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May 19, 2014, 09:14:14 PM
 #174

I just want to thank you again, rpietilla

I did some small investments in an altcoin and price exploded today. I had my sell orders in place based on your SSS plan
with one djustment: to avoid panic sells, I would only start the plan when I had my invested BTC back Wink

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May 27, 2014, 10:16:08 PM
 #175

I quote these two Risto's posts because they deserve to be remembered it in this thread:



For most people, holding 100% of the initial amount is not a wise choice. It is good to diversify by selling into strength to account for the possibility of a black swan event in Bitcoin technology. This way you steadily accumulate also non-BTC assets, and can learn how to handle wealth. You sleep better and don't see dips in price as an opportunity to panic, but rather an opportunity to buy back if you really feel like so. The selling plan must be based on percentages, which means that no matter how high bitcoin goes, you still have more value in your remaining BTC.

If you have BTC1,000 and you absolutely want to have the same number when it hits $million, then it is best to just bury the paper wallet into ground and wake up when you are a billionaire. Trading only makes you lose the most of it over time with no gain. But it is not healthy for anyone to suddenly become a billionaire.

If instead, you flex your Excel muscle and devise a plan to sell BTC900 in decreasing increments at exponentially rising price points, you will already be rich and well-established when bitcoin hits $1 million, and totally content with the idea that your remaining stash is still worth a cool $100M.




I was quoting prices is dollars for convenience, because this is a large forum where most readers do not use bitcoin as their accounting unit.

Wealth is the same, regardless whether it is measured in bitcoins or dollars, because (in any point of time), bitcoin is a fixed multiple of dollar.

I do advocate using dollar as your accounting unit, since its value (purchasing power) is relatively constant, whereas Bitcoin's purchasing power increases tenfold every year. It is just handy.

But I also encourage to carefully consider that every one of your bitcoins is increasingly likely to reach $1 million in value quite soon. It should be treated as an inheritance, not to be wasted away. Every bitcoin you give away must give you more value than an extra $ one million would have given you in a few years of time. This is accomplished by selling only so little that the remaining amount is worth more (more dollars, houses, or gold) than the whole stash was in the previous stage.

How you allocate the non-bitcoin part of your portfolio is up to you. I do not advocate holding dollars as any % of it, unless you do arbitrage or something. The value converted from bitcoin should be used to buy silver, gold, castles with apple gardens, businesses, etc.

If you are a world dominator, then it makes sense to acquire as many bitcoins as possible and not care about the above. But who wants in that kind of game anyway...

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June 05, 2014, 08:57:29 AM
 #176

I love you SSS plan http://bitcoinsavingsplan.comSmiley I am using it for Nxt now. Too bad there is not an option to add other crypto's like Nxt.

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LINKBUILD asset Join crowdfunding Linkbuilding.io Dividend+commission+signature-rewards
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June 05, 2014, 10:10:22 PM
 #177

[I find it interesting to note that the number of transactions (ex. popular addresses) moves in 7 day cycles and hitting its low point without fail on Sundays.

Because payments to miners from pools occur every day, I suppose the day-of-week variation is due to consumer and investor behavior. Likewise bitcoin exchange volume drops on weekends.
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June 06, 2014, 12:26:28 AM
 #178

I love you SSS plan http://bitcoinsavingsplan.comSmiley I am using it for Nxt now. Too bad there is not an option to add other crypto's like Nxt.

Thanks, I think it should still work fine as long as you ignore the BTC units  Smiley

I just updated it today based on some requests to be able to modify the "doubling" to other values.  You can now modify the cycle multiplier to trigger a sell on 2x, 1.5x, 1.1x, etc.

Also, if you want to set up a fixed withdrawal rate in fiat, there is an option under the cycle multiplier to calculate that for you based on a given rake %.

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June 06, 2014, 06:27:37 AM
 #179

Hi rpietila,

congrats on a great savings plan. Really nice one.  Smiley


I have another one if you would like to comment. It is intended for people who already save some money every month.
They could save a small part of that (say $100 per month) into bitcoin.
The difference would be that they wouldn't have to suffer inflation but rather deflation for the bitcoin part of their savings.

If for example over a 30 year period we have 5% yearly inflation, while bitcoin has 3% monthly deflation (being ultra conservative here),
the difference after 30 years would be astonishing!!!

Please feel free to comment. Or whoever else wishes to.



Can someone do up an example of this scenario with US$1K over 10 years?

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June 06, 2014, 11:23:18 AM
 #180

Hi rpietila,

congrats on a great savings plan. Really nice one.  Smiley


I have another one if you would like to comment. It is intended for people who already save some money every month.
They could save a small part of that (say $100 per month) into bitcoin.
The difference would be that they wouldn't have to suffer inflation but rather deflation for the bitcoin part of their savings.

If for example over a 30 year period we have 5% yearly inflation, while bitcoin has 3% monthly deflation (being ultra conservative here),
the difference after 30 years would be astonishing!!!

Please feel free to comment. Or whoever else wishes to.



Can someone do up an example of this scenario with US$1K over 10 years?

Just go here: http://bitcoinsavingsplan.com/ and play with the numbers. Best easiest and fastest way to learn and get a feel for this.

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June 07, 2014, 09:25:13 AM
 #181

I love you SSS plan http://bitcoinsavingsplan.comSmiley I am using it for Nxt now. Too bad there is not an option to add other crypto's like Nxt.

Thanks, I think it should still work fine as long as you ignore the BTC units  Smiley

I just updated it today based on some requests to be able to modify the "doubling" to other values.  You can now modify the cycle multiplier to trigger a sell on 2x, 1.5x, 1.1x, etc.

Also, if you want to set up a fixed withdrawal rate in fiat, there is an option under the cycle multiplier to calculate that for you based on a given rake %.



I really like this tool, also. 

I do have one suggestion that may make the tool even more amazing, and that would be able to individually modify the multiplier for each cycle.  In that regard, each line would have its own multiplier and I would NOT want to rake very much in earlier cycles; however, in later cycles my rake multiplier would be higher.  So, if I could set the multiplier on each line, then I would really be able to customize the plan to my individualized preference(s)




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June 08, 2014, 01:11:16 AM
 #182

Hi rpietila,

congrats on a great savings plan. Really nice one.  Smiley


I have another one if you would like to comment. It is intended for people who already save some money every month.
They could save a small part of that (say $100 per month) into bitcoin.
The difference would be that they wouldn't have to suffer inflation but rather deflation for the bitcoin part of their savings.

If for example over a 30 year period we have 5% yearly inflation, while bitcoin has 3% monthly deflation (being ultra conservative here),
the difference after 30 years would be astonishing!!!

Please feel free to comment. Or whoever else wishes to.



Can someone do up an example of this scenario with US$1K over 10 years?

Just go here: http://bitcoinsavingsplan.com/ and play with the numbers. Best easiest and fastest way to learn and get a feel for this.

thnx...nice lead

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June 08, 2014, 04:07:25 AM
 #183

I love you SSS plan http://bitcoinsavingsplan.comSmiley I am using it for Nxt now. Too bad there is not an option to add other crypto's like Nxt.

Thanks, I think it should still work fine as long as you ignore the BTC units  Smiley

I just updated it today based on some requests to be able to modify the "doubling" to other values.  You can now modify the cycle multiplier to trigger a sell on 2x, 1.5x, 1.1x, etc.

Also, if you want to set up a fixed withdrawal rate in fiat, there is an option under the cycle multiplier to calculate that for you based on a given rake %.



I really like this tool, also. 

I do have one suggestion that may make the tool even more amazing, and that would be able to individually modify the multiplier for each cycle.  In that regard, each line would have its own multiplier and I would NOT want to rake very much in earlier cycles; however, in later cycles my rake multiplier would be higher.  So, if I could set the multiplier on each line, then I would really be able to customize the plan to my individualized preference(s)





Next you will want your customizations to be saved for you, because you will feel it's too annoying to redo all the tweaking tomorrow, when you have a new idea. I think the tool is good as it is. If you want something more personalized, you can create your own spreadsheet. Takes just a few minutes. If you want it to be accessible from anywhere, use Google Docs or some other similar service.
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June 08, 2014, 09:52:20 AM
 #184

I love you SSS plan http://bitcoinsavingsplan.com.  Smiley I am using it for Nxt now. Too bad there is not an option to add other crypto's like Nxt.

Thanks, I think it should still work fine as long as you ignore the BTC units  Smiley

I just updated it today based on some requests to be able to modify the "doubling" to other values.  You can now modify the cycle multiplier to trigger a sell on 2x, 1.5x, 1.1x, etc.

Also, if you want to set up a fixed withdrawal rate in fiat, there is an option under the cycle multiplier to calculate that for you based on a given rake %.



I really like this tool, also.  

I do have one suggestion that may make the tool even more amazing, and that would be able to individually modify the multiplier for each cycle.  In that regard, each line would have its own multiplier and I would NOT want to rake very much in earlier cycles; however, in later cycles my rake multiplier would be higher.  So, if I could set the multiplier on each line, then I would really be able to customize the plan to my individualized preference(s)





Next you will want your customizations to be saved for you, because you will feel it's too annoying to redo all the tweaking tomorrow, when you have a new idea. I think the tool is good as it is. If you want something more personalized, you can create your own spreadsheet. Takes just a few minutes. If you want it to be accessible from anywhere, use Google Docs or some other similar service.


Raindex:  Your comment seems to contain several incorrect assumptions about my motivations in making my earlier comment/ suggestion.

I was making a suggestion for an improvement for the tool for others, and NOT for myself.  

The improvement does NOT need to made if others do NOT believe my suggestion would be helpful...

Certainly, we can have different opinions about this kind of thing without making assumptions about nit-picky or negative motives of others.  

Personally, I also made the comment/suggestion because I doubt that it would be a good idea to have a rigid plan that has a set multiplier over a long period of time...  Even though such a rigid projection may work for some peope, it may NOT work out or be realistic for real world, application,.. but to each his own, especially if some people believe that it projects well for their needs and their calculations and planning.

 I do NOT know how to create these kinds of web-based charts, and to post them on the web; however, I DO know how to utilize various Excel calculation tools for my own personal calculations, projections and plans, and I do NOT mind sharing my various plans with others, to the extent that other may find my plans and conceptions useful, and to the extent that i have solidified my projections into a raking plan.  

At this point, my average BTC investment cost is around $600, so I currently do NOT intend to make any meaningful rake before $2,400-ish.  I am waiting for a couple of real large sums of fiat to hit my banking account soon, as well, so the amount and the timing of that money may affect my average BTC cost(s), depending on the price of BTC at the time that my new lump sums of fiat hit my bank account.  

Additionally, I may begin to trade a portion of my profits between $800 and $2,400, depending on how quickly BTC prices rise, and what is my average BTC price while BTC is within those price ranfgs... At this point, I am a little nervous about making any sales of BTC below $1,000 based on my own investment costs and my own beliefs concerning where the BTC trendline is at the moment.      







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June 09, 2014, 02:44:04 AM
 #185

I was making a suggestion for an improvement for the tool for others, and NOT for myself.  
I have no doubt about that. Sorry if you felt hostility in my comment; it wasn't my intention.
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June 12, 2014, 06:19:42 AM
 #186

Saw someone else link to this plan in a thread and it looked like a good strategy so just commenting here
Starting in 2009 with those pizzas and moving forward Bitcoin development started to grow at a rapid pace
And now we are starting to see merchant adoption rising at a similar rate
In my opinion that means it will only  be a matter of time before the individual usage rate starts to spread due to the networking effect.

As you said
The past cannot be changed, but there are enough gains waiting for us in the future to amply reward those who care to exercise their logic and invest rationally.

So thanks for sharing
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July 01, 2014, 02:30:45 AM
 #187

Very nice one. I just going to adopt something like this but with different %.
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July 05, 2014, 07:01:31 PM
 #188

I made a Google spreadsheet template if anyone wants it.

https://docs.google.com/spreadsheets/d/1ImKoEk72HK7zuOf3FBa2mbcf6qxoe7tmvWgYIWwwnPM/edit?usp=sharing

On the template I put a 5%, 10%, and 20% rake at doubling intervals. Right now the first rake is set at $1000, but you can adjust it to what works for you. I personally have my first rake set at $4000. I'm hoping that happens later this year.

EDIT: After reading JayJuanGee's suggestion I added a way to choose your own multiplier and rake rather than having presets.
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October 14, 2014, 05:05:35 AM
 #189

I made a Google spreadsheet template if anyone wants it.

https://docs.google.com/spreadsheets/d/1ImKoEk72HK7zuOf3FBa2mbcf6qxoe7tmvWgYIWwwnPM/edit?usp=sharing

On the template I put a 5%, 10%, and 20% rake at doubling intervals. Right now the first rake is set at $1000, but you can adjust it to what works for you. I personally have my first rake set at $4000. I'm hoping that happens later this year.

EDIT: After reading JayJuanGee's suggestion I added a way to choose your own multiplier and rake rather than having presets.

Thanks, very nice.

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October 24, 2014, 03:10:46 AM
 #190

Thanks OP for providing such a informative thread.
I'll mark this thread and read it in detail later.  Cheesy

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November 12, 2014, 09:48:35 AM
 #191

(...) the one I was working on is done now too: http://bitcoinsavingsplan.com/

Comments/criticisms/error checking welcomed  Smiley



I have paid you a small tip of 1 million satoshis to 1Save78yHN1S6oaFwoeWjhfrciDTsvWtu  Grin
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November 12, 2014, 12:50:58 PM
 #192

for now the easiest way to get this is to follow the forum and follow the sig. campaign, in which a certain level you will get a large enough number of constructive post your results, there are paid weekly and there are monthly, various payments made, just how do you adjust the level of payment that you will receive ...  Cool
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November 13, 2014, 04:08:13 PM
 #193

(...) the one I was working on is done now too: http://bitcoinsavingsplan.com/

Comments/criticisms/error checking welcomed  Smiley



I have paid you a small tip of 1 million satoshis to 1Save78yHN1S6oaFwoeWjhfrciDTsvWtu  Grin

Thank you!
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November 15, 2014, 04:57:17 AM
 #194

Excellent thread - thanks!!

I hacked together a quick Google Docs spreadsheet to play with the numbers for my own uses, and I'm in the process of creating a small website with an SSS-style calculator on it.

I'll keep you posted when it's up.


Did you see this,or is it not SSS-like enough for your tastes? Tongue
http://xzist.org/amazing-bitcoin-retirement-fund-calculator/

You're welcome to re-use the source.

No, I had not seen that one!  That's what I get for skimming though page 4.  Nice work, I like playing with the delayed gains option.

Anyway, the one I was working on is done now too: http://bitcoinsavingsplan.com/

Comments/criticisms/error checking welcomed  Smiley



Awesome site!
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September 08, 2015, 07:54:23 AM
 #195

I made a Google spreadsheet template if anyone wants it.

https://docs.google.com/spreadsheets/d/1ImKoEk72HK7zuOf3FBa2mbcf6qxoe7tmvWgYIWwwnPM/edit?usp=sharing

On the template I put a 5%, 10%, and 20% rake at doubling intervals. Right now the first rake is set at $1000, but you can adjust it to what works for you. I personally have my first rake set at $4000. I'm hoping that happens later this year.

EDIT: After reading JayJuanGee's suggestion I added a way to choose your own multiplier and rake rather than having presets.

WOW!!!!!   

I just went to the link and I played around with it, and I made a copy and inserted some of my own ideas of numbers that would be fitting to my current situation and thinking..

The spreadsheet is short and sweet and works really nice to allow the tweaking of the numbers and percentages to consider what could be a fitting plan for individuals who have differing ideas regarding rake points and BTC price performance probabilities.

Thanks Dennydotco.

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