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Author Topic: How big a share of bitcoins should a person keep for hedging purposes?  (Read 1384 times)
roos
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January 02, 2012, 09:33:49 AM
 #1

I think that sooner or later we will start seeing an influx of fiat into the bitcoin community from people whom wants to protect the value of their savings/fortune/investments by hedging. How big a share invested in bitcoins is fair to keep from that point of view?

For now, i would consider bitcoin both volatile and speculative. Keeping only a small share of the high risk/high profit part, which usually is rather small in itself, as BTC would make sense. There is also another part of a complex hedge ment to protect the fortune from total fiat/finacial/stock collapse. Would it make sense keeping BTC in that part too?

If you will, please make a suggestion of how big a share of bitcoins one should hold and make an argument for it. Please dont  spam this thread with suggestions without reasoning.
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January 02, 2012, 11:09:56 PM
 #2

I think that sooner or later we will start seeing an influx of fiat into the bitcoin community from people whom wants to protect the value of their savings/fortune/investments by hedging. How big a share invested in bitcoins is fair to keep from that point of view?

For now, i would consider bitcoin both volatile and speculative. Keeping only a small share of the high risk/high profit part, which usually is rather small in itself, as BTC would make sense. There is also another part of a complex hedge ment to protect the fortune from total fiat/finacial/stock collapse. Would it make sense keeping BTC in that part too?

If you will, please make a suggestion of how big a share of bitcoins one should hold and make an argument for it. Please dont  spam this thread with suggestions without reasoning.


i would estimate i have about 10-15% in Bitcoin.  if you poll various gold pundits their recommended % range from 5-40%.  some have everything in gold like Eric Sprott.  that's way to much and his silver holdings have taken a severe beating.

splitting the difference in a speculative asset with great potential like Bitcoin at the % i recommend seems reasonable.  i honestly think its going way beyond $32 to gold parity at least.

as i've made known, i dumped 95% of my gold and silver right at the top of both in May for silver and August for gold.  i honestly don't think they're coming back and i'd rather put those USD's into Bitcoin.
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January 03, 2012, 04:48:00 AM
 #3

as i've made known, i dumped 95% of my gold and silver right at the top of both in May for silver and August for gold.  i honestly don't think they're coming back and i'd rather put those USD's into Bitcoin.

Congrats on dumping at the top, but I do think Gold and Silver will be making a comeback here as people realize Ron Paul won't be winning the presidency, and thus the US gov't is free to print the USD like mad again and start QE3 and QE4.

I would recommend that people have 10% of their net worth in Bitcoin. This means paying down your debt as much as possible, obviously. If you can't do that, then maybe hold only a hundred coin or so (presently about $500 worth).

Keep in mind that Bitcoin is going to have far worse fluctuations than most major commodities, but that the vast majority of Bitcoin miners are making a slight profit at anything greater than $2.50 right now. As the miners move into FPGA, that is going to change, but they are going to expect a return on investment at higher rates.

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January 03, 2012, 04:53:50 AM
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i have 90% of my net worth in bitcoin, although my net worth isn't particularly high at the moment. mostly random bits of furniture and a new pc.
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January 03, 2012, 04:58:01 AM
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Sorry, but what percentage share are you talking about?  Percentage of an investment account?  Are you carving out all retirement, real estate, and emergency savings?  

Also, what do you mean by hedging?  What are you hedging?

So if we're talking about how much of your investments should be focused on bitcoins, I'd recommend 1% for a conservative investor, 5% for an aggressive investor.  

Anything higher is a lot of exposure.  I'm not sure what reasoning can be used other than don't put all of your eggs in one basket.  My recommendation of 1% for conservative investors is obviously slighted by my belief that this is worth the gamble for anyone.

For my personal friends, I am recommending throwing $100 into it just to enjoy the potential upside with the same downside as a day trip to a casino.

I also have only spent about $1,000 so far between mining, electricity & personal investing and would hate to recommend to my friends/co-workers to invest more than 10% of what I've done.

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January 03, 2012, 08:18:50 AM
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I suggest putting between 1 and 100 percent of the money you keep in your "I can afford to lose this" basket into bitcoin.
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January 03, 2012, 09:04:24 AM
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For the long term I suggest at least 1 Bitcoin. It's like a lottery ticket, either Bitcoin will be worth a lot or it will fail. Either way, it's not a big risk.

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January 03, 2012, 12:43:57 PM
 #8

For the long term I suggest at least 1 Bitcoin. It's like a lottery ticket, either Bitcoin will be worth a lot or it will fail. Either way, it's not a big risk.

It's either worth a lot or it's a failure?  No middle ground?  Do you think it's a failure now cause they're not worth a lot?

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January 03, 2012, 06:53:10 PM
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For the long term I suggest at least 1 Bitcoin. It's like a lottery ticket, either Bitcoin will be worth a lot or it will fail. Either way, it's not a big risk.

It's either worth a lot or it's a failure?  No middle ground?  Do you think it's a failure now cause they're not worth a lot?

I'd agree with cbeast. If something serious happens that kills it, it's worthless. If this mysterious tragedy does not happen, then there seem to be a very few reasons why it wouldn't grow in time. It's useful and speculative and although it (probably) has critical mass right now its still largely unheard of (1% of people?)

If you look at it like you might look at a new product in a market, then you have a serious marketplace, no real competitors and moat of several million dollars, several thousand existing customers (is the block chain also a competitive advantage?). From that view its a dream investment, has plenty of room to grow unchecked.

In this world of extremes, fading to mediocrity seems to be the outlier here!

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January 03, 2012, 07:03:16 PM
 #10

For the long term I suggest at least 1 Bitcoin. It's like a lottery ticket, either Bitcoin will be worth a lot or it will fail. Either way, it's not a big risk.

It's either worth a lot or it's a failure?  No middle ground?  Do you think it's a failure now cause they're not worth a lot?

I'd agree with cbeast. If something serious happens that kills it, it's worthless. If this mysterious tragedy does not happen, then there seem to be a very few reasons why it wouldn't grow in time. It's useful and speculative and although it (probably) has critical mass right now its still largely unheard of (1% of people?)

If you look at it like you might look at a new product in a market, then you have a serious marketplace, no real competitors and moat of several million dollars, several thousand existing customers (is the block chain also a competitive advantage?). From that view its a dream investment, has plenty of room to grow unchecked.

In this world of extremes, fading to mediocrity seems to be the outlier here!

Dying or fading into mediocrity over time definitely isn't what I had in mind.  Some people have unrealistic expectations I think, but I guess thats all perspective.  I'm happy with where it is now and where its going. Just getting bigger by the day and hopefully some better options for consumers will help adoption along as well. Even if it continues to be a niche product in the future. 

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January 03, 2012, 07:29:41 PM
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To become a serious player I think adoption has to increase quite significantly. We've come along way from 10,000 BTC pizza's, a ball park guess would be we have about the same to go again - just to get to 'serious player'. That would still be a huge distance from 'bitcoin replacing USD' scenario.

So assuming it 'merely' becomes a successful player I reckon you might say $1000 a BTC - some way short of the crazy 1 BTC = $250k predictions that have been thrown around. For anyone with a few hundred coins stashed away as a speculative investment that's a pretty cool return. Not to mention that we get at least a little bit of control back over our money.

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January 03, 2012, 07:31:50 PM
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I read an article recently that said you should keep 0.5% of your net worth in bitcoins.  For the average homeowner with a 401K and a good job, I think this is reasonable.

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January 03, 2012, 08:45:54 PM
 #13

Some nine things about storing some of your wealth in Bitcoins:

- Liquidity, if you have access to an exchange like Mt Gox/Dwolla
- Anonymity, move your money in a quiet way
- Non taxable
- Not easily influenced by outside fiat based economy

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January 03, 2012, 09:11:22 PM
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Some nine things about storing some of your wealth in Bitcoins:

...
& easily convertible in to any major fiat currency from & to anywhere in the world, resistant to exchange controls or confiscation
say that you want to stash some cash offshore, well offshores are getting leaned on & outed more & more, but virtual bits are the ultimate global offshore - you could even use them from off planet from your orbiting command station or Virgin voyager WiFi link
also say you need to leave your country in a hurry with only the clothes on your back, no need to stuff gold doubloons down your socks your wealth awaits you where you stashed the coded private keys in the cloud
this being the decade of crumbling dynastic dictatorships & outed Madofs one wonders if some might hedge their loot here too

other nice things...

no counterparty risk, independent of governments, banks, companies, institutions, derivatives, etc...

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January 03, 2012, 09:42:43 PM
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Congrats on dumping at the top, but I do think Gold and Silver will be making a comeback here as people realize Ron Paul won't be winning the presidency, and thus the US gov't is free to print the USD like mad again and start QE3 and QE4.


jim rogers recently said that QE3 has already begun ,
he referenced to the increase in slope of M2 graph in the last months
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January 03, 2012, 09:44:58 PM
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I don't think of it in percentage terms.  Rather, after having 3-6 months worth of expenses in the fiat banking system, accumulating 3-6 months worth of expenses in bitcoins seems reasonable to me.  If anything happens - whether lawsuit, divorce, or revolution -- bitcoin savings can be a cushion to get back on your feet.  But it certainly shouldn't be the first place to save money given that it's still the wild west right now, and it's more likely you'd lose it than use it.

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