Bitcoin's Risk and Reward Balance

[Upgrade00]

Bitcoin is the fastest growing asset class of the last couple of years and has attracted lots of attention, first from retail investors and more recently with the influx of institutional funds. As a Bitcoin discussion forum there are lots of people here who are very enthusiastic about Bitcoin and the potential it has. Following Bitcoin discussions on social media as well, there is a lot of hype around it, influencer accounts are springing up everywhere advising people to, keep stacking and keep holding as we launch to the moon.

The possible problem:
Amidst all the hype and fomo, is it possible we may have abandoned risk management in our acquisition of Bitcoin? We've had reports about individuals literally selling everything to buy Bitcoin and tweets about using loans to purchase as well.
I understand that crypto Twitter is not the best place to get investment advise, but it could be a reflection of general sentiment. People who have identified Bitcoin as the innovation of the future could fear not holding enough and possibly acquire more than they can afford to lose.

Is this really a problem:
Some would argue that Bitcoin has established itself over the years and always recovered value lost, backing it up with the price, as we are at an all time high range and everyone who has ever bought Bitcoin at any price is certainly in profit (except you bought at the quick spike above $23.5k) and if you have lost, it is because you didn't hodl long enough.
There are some who have the idea that it's actually a risk not to hold Bitcoin, as whatever alternative asset you're holding would not give you as much security and ROI.

Follow up:
• What percentage would you consider safe to invest in BTC? (This is regardless of how much you actually hold).
• With your idea of the Bitcoin network would you consider it shrewd for one to aggressively purchase it and possiby risk more than they can afford to lose?
• Which of these assets would you rather have majority of your funds in: Bitcoin, Gold or Fiat?

*The poll above is to have a broad idea of how deep btt users have their feet in the pool as this is the largest Bitcoin discussion forum..

[1715205170]

1715205170

[dunfida]

Follow up:
• What percentage would you consider safe to invest in BTC? (This is regardless of how much you actually hold).
• With your idea of the Bitcoin network would you consider it shrewd for one to aggressively purchase it and possiby risk more than they can afford to lose?
• Which of these assets would you rather have majority of your funds in: Bitcoin, Gold or Fiat?

-When it comes to investment then the word "safe" wont really always fit out.. Talking about on how much for me to put in btc in overall asset then i had chose 5-20%.

-Each person do have its own jurisdiction or perception towards things and if theyre level of greed is something on that gambler side then they would do it without any hesitance.

-Dont put all of your eggs in one basket and this had been a common line but only a few do really able to follow it out.

[Obi theo]

Investing can be simplified as a risk and gain operation, and going into an investment of bitcoin really don't need any Twitter whatever to change ur mind or make a choice for you, you need to settle and think it out before taking your fiat and investing it into crypto.as for people that aggressively purchase bitcoin, I really don't know what to say to them at the moment than it's their choice
5-20% is enough in  investing in BTC.
If I didn't know about bitcoin I would honestly go for gold , but with BTC reaching this height 😏 I would go for it without hesitation

[Upgrade00]

-When it comes to investment then the word "safe" wont really always fit out.. Talking about on how much for me to put in btc in overall asset then i had chose 5-20%.

By safe, I meant what percentage would you be able to comfortably put in considering the risk and reward ratio.
5-20% is a very conservative bet, would be interesting to know what a lot of other people think, if they would vote.

-Dont put all of your eggs in one basket and this had been a common line but only a few do really able to follow it out.

That's why I used the term majority. Diversification requires spreading out your investments, doesn't mean it would be done equally. Which asset would you rather have the higher share of your funds?

.
If I didn't know about bitcoin I would honestly go for gold , but with BTC reaching this height 😏 I would go for it without hesitation

I was considering this; that people would be influenced by the price spike and choose BTC over the others. Would you also consider Bitcoin if we slip into a bear market in the future which lasts a while?

[bitmover]

-When it comes to investment then the word "safe" wont really always fit out.. Talking about on how much for me to put in btc in overall asset then i had chose 5-20%.

By safe, I meant what percentage would you be able to comfortably put in considering the risk and reward ratio.
5-20% is a very conservative bet, would be interesting to know what a lot of other people think, if they would vote.

I don't think 5-20% is a conservative bet.

A conservative bet would be like 1%.

One thing is to put 3% of your live savings when bitcoin was 2k, and now that it is 20k you still hold and you have 30%. That's ok, you are still playing conservative.

if invest 30% of your life savings in bitcoi, I see 2 possible options:
1-You are very aggressive and do not mind losing money
2- You don't have life savings at all.

Bitcoin could be 35k or 5k next month. Both scenarios are as much likely. it is not conservative to have more than 2 digits in that kind of asset.

[ChrisPop]

There is no "safe" percentage allocation to any investment. It all depends on the circumstances of the individual. If one has a steady monthly cash flow which can comfortably cover his expenses for several months or years ahead he shall be more prone to invest his money because his wellbeing does not depend on them. The age factor has some importance as well. It is not the same situation if I have 50 years in front of me to build a future or I have to provide for a family.

Financial literacy is imperative to progress financially. Sooner or later those who cannot control their impulses will 'burn' their portfolios. Be it in crypto space or in the stock market.

Last point: Definitely Bitcoin.

[Eureka_07]

<snip>
Follow up:
• What percentage would you consider safe to invest in BTC? (This is regardless of how much you actually hold).
• With your idea of the Bitcoin network would you consider it shrewd for one to aggressively purchase it and possiby risk more than they can afford to lose?
• Which of these assets would you rather have majority of your funds in: Bitcoin, Gold or Fiat?
<snip>

Below 20% investment in bitcoin is I think a safe investment to consider. But if it happens that I gain more trust on investing in bitcoin, I could go higher than that. For the mean time, the priority is the savings and the money for needs.
Probably if that person is purchasing it on bitcoin's high value times. I consider it as panic buying(sometimes), and is risky coz you dont't know how long you will need to hold it for you to take profit (you aren't even surer if you'll get profit though). So just invest what you can afford to lose.
For now fiat. But I prefer having more bitcoins than fiat in the near future.

[Upgrade00]

I don't think 5-20% is a conservative bet.

A conservative bet would be like 1%.

Fair point.
I'll edit the poll to include a 'below 5%' option.

Bitcoin could be 35k or 5k next month. Both scenarios are as much likely. it is not conservative to have more than 2 digits in that kind of asset.

While the price is unpredictable. I do not think the likelihood of 35k within the next month is same with 5k, the bullish sentiment is higher now and the price has been building strong support levels. If the direction of Bitcoin was that sporadic and unpredictable we'll probably not have as much people interested in it.
By 2 digits, you probably mean less than 10%?

If one has a steady monthly cash flow which can comfortably cover his expenses for several months or years ahead he shall be more prone to invest his money because his wellbeing does not depend on them.

For someone with a steady cash flow and wishes to allocate some of that income into Bitcoin regularly. What percentage would you consider ideal, even if they could afford to spare the whole of it?

[RapTarX]

The problem you shared is created for bitcoin? Or I misread you? People selling everything to invest in crypto or taking loan to invest in crypto have serious problem with their money management I would say. It's not potential problem arising for bitcoin, it's the people.

• What percentage would you consider safe to invest in BTC? (This is regardless of how much you actually hold).
• With your idea of the Bitcoin network would you consider it shrewd for one to aggressively purchase it and possiby risk more than they can afford to lose?
• Which of these assets would you rather have majority of your funds in: Bitcoin, Gold or Fiat?

1. To be honest, I only have invested the surplus money I had and saved the payment I received through BTC for my freelancing works. Most importantly, I'm here because I found BTC useful for my payment; not because it's giving X% return.
2. No, only the surplus money.
3. BTC if I could spend it everywhere.

[BrewMaster]

• Which of these assets would you rather have majority of your funds in: Bitcoin, Gold or Fiat?

it may be hard to decide what to choose and how much to invest in bitcoin but one thing is super easy and nobody can deny, and that's the fact that owning fiat is the worst thing that anybody can do. at all times, fiat is losing its value because of its inflation. in recent times with all the money governments are printing it will lose even more of its value. which is why people should never own any more fiat than they have to (like for emergencies).

[Sterbens]

Is this really a problem:
Some would argue that Bitcoin has established itself over the years and always recovered value lost, backing it up with the price, as we are at an all time high range and everyone who has ever bought Bitcoin at any price is certainly in profit (except you bought at the quick spike above $23.5k) and if you have lost, it is because you didn't hodl long enough.
There are some who have the idea that it's actually a risk not to hold Bitcoin, as whatever alternative asset you're holding would not give you as much security and ROI.

Follow up:
• What percentage would you consider safe to invest in BTC? (This is regardless of how much you actually hold).
• With your idea of the Bitcoin network would you consider it shrewd for one to aggressively purchase it and possiby risk more than they can afford to lose?
• Which of these assets would you rather have majority of your funds in: Bitcoin, Gold or Fiat?

*The poll above is to have a broad idea of how deep btt users have their feet in the pool as this is the largest Bitcoin discussion forum..

In my opinion, it is very difficult to enlighten someone whose ambition is to sell everything to buy bitcoin. especially if the price has touched ATH. this action is not recommended. obviously really doesn't care about bitcoin as a whole. to minimize losing everything it would be better to trade even at 5-20% (according to your example) to learn the ins and outs of how prices move and master at least a few indicators on the chart.

besides that it all comes back to those who are very ambitious, because one's emotions cannot be controlled when looking at the current price of bitcoin. to be honest, especially me personally

[danglongbtc]

1. I have invested 100% of monthly income into bitcoin and ethereum for many consecutive months and I am proud of that. I think I am lucky as I could do that because of not holding responsibilities. So, as of now, it is 80% for me.
2. One thing I have learned is invest what you can digest.
3. Bitcoin, anyday!

[webtricks]

Inflation rate in my country is higher than the Risk Free Rate^[1]. So, technically it doesn't make sense for me to put the money in fixed deposits or debt market. To make any kind of profit with fiat money, I have to invest in Equity or Capital markets which involves risk too.

I have tested and invested in many assets, securities, commodities, real estates over the last 6-7 years. If I analyse the performance of my portfolio, crypto investment (specifically bitcoin) has given me much more inflation-adjusted return than any other class of asset. So, I am constantly increasing the share of bitcoin in my portfolio recently. Currently it's standing around 68-69% of my total net worth (special thanks to recent rise).

• What percentage would you consider safe to invest in BTC? (This is regardless of how much you actually hold).

Even 100% is okay for me. Bitcoin is constantly meeting the expectation of investors and market, I don't see any reason why someone shouldn't invest in bitcoin. But an investor needs to understand the difference between three terms - investment, savings and leverage. Before making the investment, person should keep enough as savings to meet the emergencies and contingencies. Then considering the proven track record of bitcoin over last 10 years, I am completely fine with investing whole surplus in bitcoin. But taking loans for bitcoin investment is foolishness. Even though long term bitcoin trend is constantly positive, it is highly volatile in short term. Creating any kind of leverage by taking loan will result in high chance of losses due to fixed outward obligations in the form of interest. So, only invest surplus after making adequate savings and don't create leverage.


^[1] Risk Free Rate of Return (RFR) refers to the return on the investment with zero risk. Although, RFR doesn't exist in real world but some safe assets are considered for calculating RFR. Such assets generally include fixed bank deposits, investment in government bonds and investment in debt markets. If Real RFR i.e. RFR less inflation rate is negative then it's foolishness to invest in such assets for long term.

[cr1776]

One should never have more than they could afford to lose.  That has been the refrain since 2010.  Every year since then the risk of total failure has decreased.  With many huge companies and funds buying hundreds of millions in bitcoin, the risk further decreases.

The question is really the asymmetric risk/reward involved here.  Putting $20000 in now with a potential 1 or 2 orders of magnitude increase in fiat price still possible, could make sense for some people.  Others it might only be $200.  It depends on income, total net worth, age and other factors.  

The key is that the risk has been decreasing year by year while the reward is still there.  Just the size of the potential reward has decreased since the price was at $0.10 or $1 or $100 or $1000.

1. I don't believe that there is a hard and fast answer as a percentage.  If you have $20,000,000 in other assets and have $20,000,000 in bitcoin, it is a lot different than if you have $2000 in other assets and $2000 in bitcoin.  Or $0 in other assets and $200000 in bitcoin and no earning potential.   If you have no debt, are making $100,000/year, and have no assets, but $50,000 in bitcoin, that is significantly different than making $30,000/year, and $20,000 in debt, and $30,000 in bitcoin.  

2. Everyone should have at least a few % of their assets in bitcoin as insurance and protection. Anyone who understands bitcoin should have something in it.  Anyone who wants to protect their own assets and family should having some in it.

3. Bitcoin, obviously.  Then gold, then fiat given the way the statists have been printing fiat like mad.

Others might have a significant percentage of their wealth in bitcoin because bitcoin has increase in price so much since they purchased and it might be money they don't need and they are willing to let it ride.

[fullhdpixel]

Yep, I have heard stories of people who sold their properties and invested in Bitcoin and now have to live in their car. A lot of people now wants to own Bitcoin but selling everything you have or taking a loan just because you want to buy Bitcoin is very risky, and the worst part about it is that so many people are doing this or claims so at this time that the price has been going up, which is quite a huge risk, because we saw how a lot of people invested in Bitcoin in 2017 when Bitcoin reached the peak $19.7k plus price and then they lost their money when everything came crashing.

It’s still their choice, it can still work out for them. There will always be losers and winners.

[tekara]

50% of my investment portfolio is in bitcoin, the balance in US blue chip equities. I plan on increasing my bitcoin allocation to 75%.

My allocation may seem aggressive to some people but my investment philosophy is to stay in your positions for the long-term and history shows that despite the extreme short term volatility in this asset class, over the long-term, you will come out on top. The key is not wilt under pressure during times of correction due to your full conviction in your investment - this can only be had by understanding what you are holding. If you don't have this, then I suggest you reduce exposure.

[kentrolla]

The biggest risk in BTC I would say investing in large numbers and this could thrive you complete loss of money due to speculations, and yes having knowledge before investing will surely help to avoid Massive loss.

I personally feel risk and reward walk around in hand often but I know the market is unpredictable still we need to be careful while investing because if money is involved risk is involved, reward depends on our patience