Bitcoin or gold?

[deisik]

Volatility must be compared at a risk adjusted basis. After adjust the risk to same 5% per year level using lower leverage, the bitcoin outperforms every single investment in the world

I think you can't do that without losing touch with reality. While you can safely throw away the probability of the gold price going to zero, but how are going to adjust the risk of the Bitcoin price hitting zero to 5% per year? I guess you could do that mathematically (thus obtaining astronomical annual profits), but would it make any sense economically?

[mayflor2]

If you had to convert all your wealth to either Bitcoin or gold and keep it there for 10 years, which would you choose? Keep in mind the fact that Bitcoin has only been around for 5 years, and could be fundamentally different in any number of ways in 10 years.

I would appreciate the option of keeping 3/4th of my wealth as an investment in bitcoin and strive on the rest 1/4th for the next 10 years. If assuming that I failed and made a bad investment, I think I can still manage the damage. The numbers will be a little different for different people. I would recommend to invest as much of your wealth as you have as 'extra' or not required.

[Scream]

When we compare gold and bitcoin, they both seem to be evenly matched.  Bitcoin is ideal for everyday transactions and given the limited amount of bitcoin in circulation, bitcoin will work based on a sound demand and supply concept as any good money should.

[bryant.coleman]

I would appreciate the option of keeping 3/4th of my wealth as an investment in bitcoin and strive on the rest 1/4th for the next 10 years.

Bitcoin is a high-risk investment. Therefore it will be ideal, if you put no more than 10% of your wealth in it. You must realize that the value of Bitcoin can go to $0 as well. If such a scenario happens, you will be left ruined and broken. So in my humble opinion, invest 90% in other forms, such as real estate, bullion and equity, and put the remaining 10% in BTC.

[dHe_zHiq]

I would appreciate the option of keeping 3/4th of my wealth as an investment in bitcoin and strive on the rest 1/4th for the next 10 years.

Bitcoin is a high-risk investment. Therefore it will be ideal, if you put no more than 10% of your wealth in it. You must realize that the value of Bitcoin can go to $0 as well. If such a scenario happens, you will be left ruined and broken. So in my humble opinion, invest 90% in other forms, such as real estate, bullion and equity, and put the remaining 10% in BTC.

your opinion is true, but when seen from the history of bitcoin prices that reached $ 1k, of course, be very profitable if it is re-occur again, but all the decisions in your hands

[cryptotipz]

i say bitcoin. gold is not a currency, and can't be. No fed. reserve will use gold as its backing and there's no way people are gonna be walking around with physical coins. Bitcoin is the way to go.

[johnyj]

Volatility must be compared at a risk adjusted basis. After adjust the risk to same 5% per year level using lower leverage, the bitcoin outperforms every single investment in the world

I think you can't do that without losing touch with reality. While you can safely throw away the probability of the gold price going to zero, but how are going to adjust the risk of the Bitcoin price hitting zero to 5% per year? I guess you could do that mathematically (thus obtaining astronomical annual profits), but would it make any sense economically?

When you comparing the financial performance of any assets, you only compare the historical performance, never the future. No one can tell the future, even for gold, it might drop to cents if some central banks decided to cash out their reserves. I can give you many reasons that bitcoin price will never hit zero but that is just subjective opinion like your opinion on gold, no use for evaluating the risk/reward ratio of certain assets

[bryant.coleman]

your opinion is true, but when seen from the history of bitcoin prices that reached $ 1k, of course, be very profitable if it is re-occur again, but all the decisions in your hands

I am not saying that Bitcoin will not touch the $1,000 mark again. But I am just reminding you that if there is a 25% probability for that actually happening, there is also another 25% chance that the Bitcoins will become worthless sometime in the near future. You will get rich in case the BTC crosses 1K mark, and you’ll be financially ruined if BTC becomes worthless. 

[ie007cheung]

your opinion is true, but when seen from the history of bitcoin prices that reached $ 1k, of course, be very profitable if it is re-occur again, but all the decisions in your hands

I am not saying that Bitcoin will not touch the $1,000 mark again. But I am just reminding you that if there is a 25% probability for that actually happening, there is also another 25% chance that the Bitcoins will become worthless sometime in the near future. You will get rich in case the BTC crosses 1K mark, and you’ll be financially ruined if BTC becomes worthless. 

Why do you think there is a 25% probability to touch $1K again, and another 25% probability to become worthless?

Why 25% and how about the remaining 50%?

[Amph]

i say bitcoin. gold is not a currency, and can't be. No fed. reserve will use gold as its backing and there's no way people are gonna be walking around with physical coins. Bitcoin is the way to go.

i see gold as a plan B, in the case Bitcoin pla A, will make you lose all your investments, you should invest at least 10% in gold, to be super safe(we know that gold we not die ever, because it has another use , which is vastly used in the industries

your opinion is true, but when seen from the history of bitcoin prices that reached $ 1k, of course, be very profitable if it is re-occur again, but all the decisions in your hands

I am not saying that Bitcoin will not touch the $1,000 mark again. But I am just reminding you that if there is a 25% probability for that actually happening, there is also another 25% chance that the Bitcoins will become worthless sometime in the near future. You will get rich in case the BTC crosses 1K mark, and you’ll be financially ruined if BTC becomes worthless. 

Why do you think there is a 25% probability to touch $1K again, and another 25% probability to become worthless?

Why 25% and how about the remaining 50%?

i think he did a mistake , because if there is a 25% chance of bitcoin reaching the moon, than there can only be a 75% chance that it will fade away, and not 25

[BITCOINERSEJATI]

any 1 think Litecoin is better than gold ? but bitcoin is still number 1 ? 
I like litecoin the price is very sexy

[deisik]

Volatility must be compared at a risk adjusted basis. After adjust the risk to same 5% per year level using lower leverage, the bitcoin outperforms every single investment in the world

I think you can't do that without losing touch with reality. While you can safely throw away the probability of the gold price going to zero, but how are going to adjust the risk of the Bitcoin price hitting zero to 5% per year? I guess you could do that mathematically (thus obtaining astronomical annual profits), but would it make any sense economically?

When you comparing the financial performance of any assets, you only compare the historical performance, never the future. No one can tell the future, even for gold, it might drop to cents if some central banks decided to cash out their reserves. I can give you many reasons that bitcoin price will never hit zero but that is just subjective opinion like your opinion on gold, no use for evaluating the risk/reward ratio of certain assets

I'm curious if you understand that by saying this (namely, "you only compare the historical performance, never the future"), you actually shoot yourself in the foot? It was you, after all, who suggested to "adjust the risk". How on Earth are you going to obtain the risk estimation (and volatility) if not from the past performance?

No one can tell the future, even for gold, it might drop to cents if some central banks decided to cash out their reserves

I think you may want to learn how much gold all central banks actually have in their stash (in respect to total gold out there, plus paper gold)

[bryant.coleman]

Why do you think there is a 25% probability to touch $1K again, and another 25% probability to become worthless?
Why 25% and how about the remaining 50%?

That is just my individual opinion/ prediction. You don't need to take it seriously, as I am not a financial expert (not saying that expert predicitons can be 100% accurate). I just predicted the future rates, based on the historical movements. And regarding the remaining 50%, that is for Bitcoin to remain at the same levels as it is now.

[Slunt]

your opinion is true, but when seen from the history of bitcoin prices that reached $ 1k, of course, be very profitable if it is re-occur again, but all the decisions in your hands

I am not saying that Bitcoin will not touch the $1,000 mark again. But I am just reminding you that if there is a 25% probability for that actually happening, there is also another 25% chance that the Bitcoins will become worthless sometime in the near future. You will get rich in case the BTC crosses 1K mark, and you’ll be financially ruined if BTC becomes worthless. 

I think it should be quite simple for bitcoin to hit 1k again. If it can get there before when much less people had heard about bitcoin then it can sure as hell get there again. If big businesses or industries start adopting bitcoin then 1k should be easy.

[bryant.coleman]

If big businesses or industries start adopting bitcoin then 1k should be easy.

It is not as simple as it sounds. A lot of big businesses are already accepting payments in Bitcoin. A few examples are Dish TV, Dell, Tiger Direct, Overstock.etc. Many of these companies are having market capitalization of tens of billions of USD. So the adoption by big business is not a major factor. However, I feel that when the block size halves in 2016, we might see a spike in the exchange rate.

[dHe_zHiq]

your opinion is true, but when seen from the history of bitcoin prices that reached $ 1k, of course, be very profitable if it is re-occur again, but all the decisions in your hands

I am not saying that Bitcoin will not touch the $1,000 mark again. But I am just reminding you that if there is a 25% probability for that actually happening, there is also another 25% chance that the Bitcoins will become worthless sometime in the near future. You will get rich in case the BTC crosses 1K mark, and you’ll be financially ruined if BTC becomes worthless. 

but in my opinion the possibility for bitcoin to be $ 0 nearly 0%, it means very little possibility of bitcoin will become worthless, if in the view of consumers that exist today, and will continue to increase over time

[bryant.coleman]

but in my opinion the possibility for bitcoin to be $ 0 nearly 0%, it means very little possibility of bitcoin will become worthless, if in the view of consumers that exist today, and will continue to increase over time

Nearly 0% means that it can be 0.4% or 0.3%, instead of 0.000000%. That is still a significant risk.

There are several scenarios in which the Bitcoin can become really worthless. Consider these:

1. Bitcoin gets replaced with some altcoin, such as Litecoin or Terracoin.
2. Some flaw is discovered in Bitcoin, that makes double spending possible.
3. Some super computer is invented, which can crack the private keys of all the Bitcoin wallets.

[hunnaryb]

but in my opinion the possibility for bitcoin to be $ 0 nearly 0%, it means very little possibility of bitcoin will become worthless, if in the view of consumers that exist today, and will continue to increase over time

Nearly 0% means that it can be 0.4% or 0.3%, instead of 0.000000%. That is still a significant risk.

There are several scenarios in which the Bitcoin can become really worthless. Consider these:

1. Bitcoin gets replaced with some altcoin, such as Litecoin or Terracoin.
2. Some flaw is discovered in Bitcoin, that makes double spending possible.
3. Some super computer is invented, which can crack the private keys of all the Bitcoin wallets.

I Agree, Bitcoin will definitely face a competition from new digital currencies in the future and at that time the future of bitcoin will decide whether it will keep all new currencies aside and move ahead or bitcoin would just be a history but I don't think gold will face such competition and it is safe to invest in gold.

[johnyj]

Volatility must be compared at a risk adjusted basis. After adjust the risk to same 5% per year level using lower leverage, the bitcoin outperforms every single investment in the world

I think you can't do that without losing touch with reality. While you can safely throw away the probability of the gold price going to zero, but how are going to adjust the risk of the Bitcoin price hitting zero to 5% per year? I guess you could do that mathematically (thus obtaining astronomical annual profits), but would it make any sense economically?

When you comparing the financial performance of any assets, you only compare the historical performance, never the future. No one can tell the future, even for gold, it might drop to cents if some central banks decided to cash out their reserves. I can give you many reasons that bitcoin price will never hit zero but that is just subjective opinion like your opinion on gold, no use for evaluating the risk/reward ratio of certain assets

I'm curious if you understand that by saying this (namely, "you only compare the historical performance, never the future"), you actually shoot yourself in the foot? It was you, after all, who suggested to "adjust the risk". How on Earth are you going to obtain the risk estimation (and volatility) if not from the past performance?

No one can tell the future, even for gold, it might drop to cents if some central banks decided to cash out their reserves

I think you may want to learn how much gold all central banks actually have in their stash (in respect to total gold out there, plus paper gold)

Risk Adjusted Return is a standard way of comparing return for securities with different risks
http://www.investopedia.com/terms/r/raroc.asp

If a government bond have 2% risk (volatility) but 4% return per year, the risk/reward ratio is 1:2, however bitcoin have 90% risk while have 4500% return, the risk/reward ratio is 1:50, 25 times higher than government bond

You can always reduce the risk of bitcoin investment to 2% by investing only 1/45 of the capital, achieving the same risk level as government bond, but much higher return at 100% per year. Even if bitcoin's value goes to zero, you lose maximum 1/45 of your capital

[deisik]

Risk Adjusted Return is a standard way of comparing return for securities with different risks
http://www.investopedia.com/terms/r/raroc.asp

If a government bond have 2% risk (volatility) but 4% return per year, the risk/reward ratio is 1:2, however bitcoin have 90% risk while have 4500% return, the risk/reward ratio is 1:50, 25 times higher than government bond

You can always reduce the risk of bitcoin investment to 2% by investing only 1/45 of the capital, achieving the same risk level as government bond, but much higher return at 100% per year. Even if bitcoin's value goes to zero, you lose maximum 1/45 of your capital

My point is that you can't satisfactorily gauge the Bitcoin risk at all (let alone set it to some specific value), since risk is a measure of deviation between annual returns of a financial instrument or investment, but you just don't have enough input to reach a conclusion that wouldn't be a wild guess. So how are going to accurately measure the risk of Bitcoin if it is only 6 years old and the majority of these years it languished in oblivion with its price next to nothing (yeah, I know it is painful to see)?



There is nothing which could be farther from the bell curve than Bitcoin volatility ("fat tails"), even if you take months instead of years to measure it