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  • BTC investing strategy

    Posted by Jeff on September 16, 2022 at 13:21

    To my mind, bitcoin’s adoption will be similar to how a new piece of land with lots of natural resources is discovered and would have been settled one or two centures ago – try to imagine that people in this world are truly free and don’t need permission or incentives from a government to immigrate; thus it is a free market. The population of this land will be very volatile in it’s beginning. This is because a new community will need to try sustain itself with many people with diverse skills. Specialization and trade are how they survive. So if the settlement doesn’t have enough doctors, builders etc. than people will leave. Stricter still, if the doctors, builders etc. don’t show an intention to stay for long, people will leave.

    Some of these migrants will just be chasing fantasies, try to get rich quick – and will leave the land as soon as their inflated expectations are corrected. Others will endure it, believing in the vision. Regardless of their incentives and devotion, the overall population will be volatile in its early stages. Past a certain point, it will stabilize sharply.

    Another analogy that sort of works is when food is served on the table, people only want to start eating when everyone else has started eating.

    Just like this, bitcoin will be reliably volatile. The phrase “reliably volatile” seems almost oxymoronic but it really isn’t, as I will show.

    Now the strategy,

    Imagine you have a portfolio with two assets. Eg. Stocks and bonds.
    Stocks go up 100% in year 1 and down 50% in year 2. Bonds, down 50% in year one and up 100% in year 2. If you maintain a 50/50 split between them in your portfolio – making sure to rebalance every year – you make 25% each year; even though either individual asset alone would net you zero return.
    Source: https://youtu.be/8TJQhQ2GZ0Y?t=3137

    In reality, all negative correlations b/w them will go away as soon as the market learns of it. The correlation b/w the assets will then be close to zero. Even still, the above will work. This is the closest thing to a free lunch in investing.

    So one asset is obviously BTC, what is the other? Stablecoins (if they’re stable, they’re obviously uncorrelated)? Gold?

    I would say the best answer is passive index funds. Passive index allow you to invest in companies that succeeded under the fiat system. What really makes them valuable is not talent, or brand but their assets. Which ofc, you become part owner of as you own equity.
    If the financial world is going to be shaken up Bitcoin, what you’ll really want to own is assets.

    Jeff replied 2 months, 3 weeks ago 1 Member · 1 Reply
  • 1 Reply
  • Jeff

    Member
    September 17, 2022 at 11:11

    These forums are a little problematic. When I type the output is very staggered. Posting and replying also takes far too long. Rational reminder forums works much better.