Author Topic: What do you think of adding a low% of crypto allocation  (Read 92229 times)

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #1250 on: June 14, 2022, 07:59:02 AM »
To the moon!

ATtiny85

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Re: What do you think of adding a low% of crypto allocation
« Reply #1251 on: June 14, 2022, 08:12:38 AM »
To the moon!

Hmm, and which moon would that be?

I think the crypto sub-market is a fun distraction to watch. I have 0.0% allocated, so it is fully observatory.

ChickenStash

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Re: What do you think of adding a low% of crypto allocation
« Reply #1252 on: June 14, 2022, 08:27:36 AM »
To the moon!

It's just tunneling through the Earth's core to get there - taking the scenic route.

I put a few bucks in a year ago and I'm at -53% so far. Booya!

MustacheAndaHalf

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Re: What do you think of adding a low% of crypto allocation
« Reply #1253 on: June 14, 2022, 10:26:02 AM »
Per the thread title, I agree with having a low negative % of crypto.  The S&P 500 is down 20% from its peak, while bond yields are 5% below the rate of inflation.  The markets are very likely to fall further and take crypto down further with it.

Last week I bought BITO put options and cashed most of those in for a nice return today.  I'm still holding a short position on GBTC and a couple crypto stocks.

ChpBstrd

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Re: What do you think of adding a low% of crypto allocation
« Reply #1254 on: June 14, 2022, 12:23:50 PM »
Per the thread title, I agree with having a low negative % of crypto.  The S&P 500 is down 20% from its peak, while bond yields are 5% below the rate of inflation.  The markets are very likely to fall further and take crypto down further with it.

Last week I bought BITO put options and cashed most of those in for a nice return today.  I'm still holding a short position on GBTC and a couple crypto stocks.

LOL, I purchased your BITO puts.

MustacheAndaHalf

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Re: What do you think of adding a low% of crypto allocation
« Reply #1255 on: June 14, 2022, 12:59:52 PM »
Per the thread title, I agree with having a low negative % of crypto.  The S&P 500 is down 20% from its peak, while bond yields are 5% below the rate of inflation.  The markets are very likely to fall further and take crypto down further with it.

Last week I bought BITO put options and cashed most of those in for a nice return today.  I'm still holding a short position on GBTC and a couple crypto stocks.
LOL, I purchased your BITO puts.
Haha!  That's perfect - because I actually screwed up (with a nice profit) by selling today.  I mixed up two expiration dates (this week and July), and sold both.  This is a rare occurance where I agree with someone who bought when I sold.

Yesterday there was contagion fear as Celsius halted withdrawals and for apparently unrelated reasons so did the largest crypto exchange (Binance).  I think today crypto is recovering from overshooting yesterday's fears... but when the FOMC meeting ends tomorrow (after the market close Wed), I expect that will do more damage to stocks and crypto.

ChpBstrd

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Re: What do you think of adding a low% of crypto allocation
« Reply #1256 on: June 14, 2022, 02:38:57 PM »
Per the thread title, I agree with having a low negative % of crypto.  The S&P 500 is down 20% from its peak, while bond yields are 5% below the rate of inflation.  The markets are very likely to fall further and take crypto down further with it.

Last week I bought BITO put options and cashed most of those in for a nice return today.  I'm still holding a short position on GBTC and a couple crypto stocks.
LOL, I purchased your BITO puts.
Haha!  That's perfect - because I actually screwed up (with a nice profit) by selling today.  I mixed up two expiration dates (this week and July), and sold both.  This is a rare occurance where I agree with someone who bought when I sold.

Yesterday there was contagion fear as Celsius halted withdrawals and for apparently unrelated reasons so did the largest crypto exchange (Binance).  I think today crypto is recovering from overshooting yesterday's fears... but when the FOMC meeting ends tomorrow (after the market close Wed), I expect that will do more damage to stocks and crypto.
Yea when the tide goes out on crypto, as it is now, we're going to see things we'll never forget.

Entire exchanges that were scams all along, stable coins without the collateral they claimed to have, pump and dumps, fake trading volumes, ponzi schemes layered on ponzi schemes, "major" coins with zero volume days, a wave of tech bro suicides, etc. For a while there, everyone was repeating the line about how all the thousands of minor coins were going nowhere but Bitcoin and Ethereum would continue to become major world currencies. Things have gotten quiet since we entered the "anxiety" phase:



But in this case IDK if there will be a recovery phase.

bacchi

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Re: What do you think of adding a low% of crypto allocation
« Reply #1257 on: June 14, 2022, 04:42:56 PM »
Coinbase got hit by the Super Bowl ad curse.

ToTheMoon

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« Last Edit: June 14, 2022, 06:13:43 PM by ToTheMoon »

GuitarStv

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BicycleB

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talltexan

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Re: What do you think of adding a low% of crypto allocation
« Reply #1261 on: June 15, 2022, 07:40:47 AM »
This is definitely a moment when those of us who've gone heavily into Crypto area grateful that it was only a LOW percentage, yes.

maizefolk

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Re: What do you think of adding a low% of crypto allocation
« Reply #1262 on: June 15, 2022, 12:45:47 PM »
This is definitely a moment when those of us who've gone heavily into Crypto area grateful that it was only a LOW percentage, yes.

And/or to have an extremely low cost basis. I figure bitcoin could fall another 99.7% before my "forget I have them for years at a time" holdings are in the red.


ATtiny85

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Re: What do you think of adding a low% of crypto allocation
« Reply #1263 on: June 15, 2022, 01:44:41 PM »
To the moon!
Yes?

Well played sir, well played.

My thoughts keep orbiting this exchange

It came to me in stages,  but finally I understood the gravity of the exchange. It took some time since it is not really my field.

the_gastropod

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Re: What do you think of adding a low% of crypto allocation
« Reply #1264 on: June 15, 2022, 04:49:18 PM »
Yes I have 20%. @Malcat  I plan to rebalance my portfolio annually to keep it at 20% crypto.

Genuinely curious: you stickin' to this plan?

v8rx7guy

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Re: What do you think of adding a low% of crypto allocation
« Reply #1265 on: June 15, 2022, 04:50:53 PM »
Yes I have 20%. @Malcat  I plan to rebalance my portfolio annually to keep it at 20% crypto.

Genuinely curious: you stickin' to this plan?

@whywork

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Re: What do you think of adding a low% of crypto allocation
« Reply #1266 on: June 15, 2022, 04:54:25 PM »
This is definitely a moment when those of us who've gone heavily into Crypto area grateful that it was only a LOW percentage, yes.

And/or to have an extremely low cost basis. I figure bitcoin could fall another 99.7% before my "forget I have them for years at a time" holdings are in the red.

Yes, my BTC cost basis was $450, but I sold it to buy a house.*

* - not the whole thing

onecoolcat

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Re: What do you think of adding a low% of crypto allocation
« Reply #1267 on: June 15, 2022, 07:35:59 PM »
I haven't bought any crypto since 2019 but I will be buying again soon.  Buying in early-2017 and again late-2018-19 was the best financial decision I ever made.  I have no reason to think late-2022-23 will be any different so I'm sticking to my playbook!
« Last Edit: June 15, 2022, 07:40:01 PM by onecoolcat »

clarkfan1979

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Re: What do you think of adding a low% of crypto allocation
« Reply #1268 on: June 16, 2022, 12:15:50 AM »
Why is the previous 4 years the timeline of choice? Why not the last 6 months? Over the past 6 months, Bitcoin is down 17%.

I don't mind Bitcoin itself. However, the strong advocates for this type of "investment" has a tendency to bug the shit out of me. The very strong vocal advocates tend to have very little money to invest and want to get rich quick.

It is my belief that the MMM crowd probably has a small amount in their portfolio. However, the MMM crowd is smart enough not to be spewing Bitcoin FOMO all over the place. It looks and smells like barf.


Thank you to whoever brought back this thread. I just wanted to re-post my first comment on this thread from September 25, 2021, when bitcoin was trading at $42,705.

FLBiker

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Re: What do you think of adding a low% of crypto allocation
« Reply #1269 on: June 16, 2022, 06:39:45 AM »
The past few weeks is probably the closest I've followed crypto.  I thought about getting into it in 2011 (had $2000 at Dwolla, intending to buy BTC via Mt. Gox) but I decided not to at the last minute.  Perhaps I'd be rich, perhaps I'd be bitter at having my account hacked and my coins stolen, who knows?  Anyways, after that, I kind of tangentially paid attention, but I never really considered investing because the price was always so much higher than when I first considered it.

Fundamentally, though, I just don't get it.  As I say, I've paid a lot more attention over these past few weeks, and I still don't get it.  Clearly, the vast majority of the alt coins are just pump and dump scams being promoted via social media to enrich the creators and early adopters.  The ability of exchanges to just lock down withdrawals is very problematic, and I don't trust the "dollar pegged" coins at all.  Blockchain absolutely has lots of utility, but I don't understand why one particular flavor of it is inherently valuable.  I mean, a given coin could be "scarce" in the sense that there might be a finite limit, but they can keep cutting those coins up smaller and smaller, plus someone can always make another coin that utilizes blockchain.  I can't get past cryptocurrency seeming more like a collectible than either a currency or an investment, and the tremendous overlap between crypto enthusiasts and NFT enthusiasts doesn't diminish this perception for me.  Lots of people make money on collectibles, but I'm not interested in them.

And so much of the "investment advice" I've been seeing is all charting and technical analysis which, based on my admittedly limited understanding, is all hooey.  It's like fortune telling based on tea leaves or animal bones -- you're looking at things, trying to discern patterns that will hold true in the future, and you will be right some of the time.  And there's all this knocking of "fiat" currency -- but I don't get it.  1) I don't invest in "fiat" currency.  I invest in companies (via low cost index funds), and I use fiat currency to buy things because that's what the stores accept.  If some blockchain-based currency became the standard denomination of things, I'd use that.  2) Why would I have more faith in some group of developers than I would in a government?  Both are potentially flawed, and neither are based on a "real" commodity.  3) All this fear that "the government can just seize your assets" seems overblown (as I don't plan to be sanctioned any time soon for my association with war criminals), and we're absolutely seeing exchanges seize assets from folks with absolutely no justification (other than that the exchanges needed the money).

Full disclosure -- I feel the same way about gold, despite it's having been a "store of value" for much of human history.  I just don't get it.  Who cares about yellow shiny metal?  Investing in companies makes sense to me -- they have a value because they create a good or perform a service, and as they grow and accumulate profits, it makes sense to me that those values would gradually increase.

Fundamentally, I'm a firm believer in only investing in things I understand.  Cryptocurrency continues to fail that test for me.  People will undoubtedly make (and lose) lots of money in it, as they do in lots of other things I don't understand (baseball cards, gold, options, etc.).  I can live with that.
« Last Edit: June 16, 2022, 07:05:09 AM by FLBiker »

BicycleB

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Re: What do you think of adding a low% of crypto allocation
« Reply #1270 on: June 16, 2022, 02:45:10 PM »
I've flirted with buying a little crypto before. Today, finally the bit the bullet in one of the most cautious ways possible - buying a tidbit of BITW.

My intent is to buy more if crypto keeps dropping but I don't have a super-concrete plan. I intend to buy larger amounts if it keeps dropping, with the hope that after the drop it rebounds a lot faster than stocks. In my mind it's vaguely similar to some sort of long option on equity markets, in that it could go zero more easily than stocks but have greater gains during upturns.




GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #1271 on: June 16, 2022, 03:01:11 PM »
I've flirted with buying a little crypto before. Today, finally the bit the bullet in one of the most cautious ways possible - buying a tidbit of BITW.

My intent is to buy more if crypto keeps dropping but I don't have a super-concrete plan. I intend to buy larger amounts if it keeps dropping, with the hope that after the drop it rebounds a lot faster than stocks. In my mind it's vaguely similar to some sort of long option on equity markets, in that it could go zero more easily than stocks but have greater gains during upturns.

So all the benefits of timing the market coupled with speculating?  :P

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Re: What do you think of adding a low% of crypto allocation
« Reply #1272 on: June 16, 2022, 03:55:30 PM »
I've flirted with buying a little crypto before. Today, finally the bit the bullet in one of the most cautious ways possible - buying a tidbit of BITW.

My intent is to buy more if crypto keeps dropping but I don't have a super-concrete plan. I intend to buy larger amounts if it keeps dropping, with the hope that after the drop it rebounds a lot faster than stocks. In my mind it's vaguely similar to some sort of long option on equity markets, in that it could go zero more easily than stocks but have greater gains during upturns.

So all the benefits of timing the market coupled with speculating?  :P

Exactly!!!!!

ChpBstrd

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Re: What do you think of adding a low% of crypto allocation
« Reply #1273 on: June 16, 2022, 08:32:23 PM »
I haven't bought any crypto since 2019 but I will be buying again soon.  Buying in early-2017 and again late-2018-19 was the best financial decision I ever made.  I have no reason to think late-2022-23 will be any different so I'm sticking to my playbook!
Were there also some failure-to-sell financial decisions since 2017 that count among the worst?

clarkfan1979

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Re: What do you think of adding a low% of crypto allocation
« Reply #1274 on: June 16, 2022, 09:30:00 PM »
I haven't bought any crypto since 2019 but I will be buying again soon.  Buying in early-2017 and again late-2018-19 was the best financial decision I ever made.  I have no reason to think late-2022-23 will be any different so I'm sticking to my playbook!
Were there also some failure-to-sell financial decisions since 2017 that count among the worst?

There is always someone who bought into something early. Good for them. However, that is not representative of this thread. The thread was started on September 6, 2021. The idea that was proposed was that maybe the average investor should have a small allocation to crypto for a small boost in overall returns, especially considering the recent run-up in prices.

Many posters responded with "no thanks" The crypto crowd responded with, "You just don't understand. It's a new world. You are going to regret it" The other side responded with, "I understand enough to not like it. I like index funds and real estate more. I will not regret it. I don't buy investments based on speculation and FOMO"

On September 6, 2021, Bitcoin was at $52,686 and now on June 16, 2022 it's around $20,500.

On September 30, 2021, I posted on this thread (bolded below) that Bitcoin was going to crash 50-90% within 6 months of the first U.S. government regulation of crypto. I think Biden passed an executive order on March 16, 2022 to regulate crypto. It didn't do much immediately, but it was the first step in establishing future regulation, which was kind of my point from the original post.     

I don't really follow crypto that much because I think it's stupid, but when asked of my opinion, my opinion is below. Looking back, it's not a bad guess. On March 16, 2022 Bitcoin was trading at $41,133. It's now down 50%. I'm 3 months into my 6 month prediction. I have another 3 months for it to drop more. If it ends up in the 50% to 90% decrease range, I guess I was correct.

We will see what happens. Only time will tell. Maybe it rebounds?


Here is another opinion. It might not be worth much, but here it is.

1. People are making money on appreciating Bitcoin. However, they are not paying income taxes.

2. The US government wants to collect on the capital gains of Bitcoin.

3. The US government will start to put restrictions on buying/selling/trading bitcoin in an effort to collect capital gains.

4. The market of holders in bitcoin will interpret this as a threat to the growth and ceiling of Bitcoin.

5. Because Bitcoin is mostly based on speculation, trust and price will fall 50%-90% within 6 months of the first US government restriction. Yes, I understand the technology make sense. However, when people are scared, it really doesn't matter.

I don't really care either way.

I appreciate the few willing to allocate 40% to crypto when they have a near or above 1 million portfolio. It allows the opportunity for an apples to apples conversation.

Juan Ponce de León

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Re: What do you think of adding a low% of crypto allocation
« Reply #1275 on: June 16, 2022, 10:16:30 PM »
^^ Thanks for typing all of that in bold so that I can more clearly understand it!

talltexan

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Re: What do you think of adding a low% of crypto allocation
« Reply #1276 on: June 17, 2022, 08:55:25 AM »
I think people have been pretty open that the supposition of the thread is nowhere near a 40% allocation to crypto.

Since we're mustachians, many of us can have $10,000 in crypto and have that represent a small fraction of our worlds.

MustacheAndaHalf

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Re: What do you think of adding a low% of crypto allocation
« Reply #1277 on: June 17, 2022, 11:51:13 AM »
On September 30, 2021, I posted on this thread (bolded below) that Bitcoin was going to crash 50-90% within 6 months of the first U.S. government regulation of crypto. I think Biden passed an executive order on March 16, 2022 to regulate crypto. It didn't do much immediately, but it was the first step in establishing future regulation, which was kind of my point from the original post.     
...
3. The US government will start to put restrictions on buying/selling/trading bitcoin in an effort to collect capital gains.

4. The market of holders in bitcoin will interpret this as a threat to the growth and ceiling of Bitcoin.

5. Because Bitcoin is mostly based on speculation, trust and price will fall 50%-90% within 6 months of the first US government restriction. Yes, I understand the technology make sense. However, when people are scared, it really doesn't matter.

Elsewhere I predicted CPI-U above 8.5%, which was correct for the wrong reasons.  Incorrect assumptions on my part canceled out, and CPI-U was 8.6% last Friday.  So even when the direction is correct, I think it's important to understand what went right and wrong with a prediction.  And hopefully you view it that way, too.

Your point (3) mentions "restrictions on buying/selling/trading bitcoin", and your recent post claims a March executive order on crypto fulfills that criteria.  But what I see is an executive order to study crypto, not to do anything.  In my view, the executive order does not place "restrictions on buying/selling/trading bitcoin".

https://www.natlawreview.com/article/president-biden-issues-executive-order-cryptocurrencies-taking-steps-toward
Quote
On March 9, 2022 President Joe Biden issued the “Executive Order on Ensuring Responsible Development of Digital Assets” (the Executive Order), in which he called for a broad review of digital assets, including cryptocurrencies, citing the $3 trillion digital asset market cap as of November 2021 and a survey suggesting that upwards of 16 percent of American adults have invested in, traded, or used cryptocurrencies.

On point (4), US crypto companies widely take the exact opposite view.  They want mainstream acceptance, and view government regulation as a pathway to mainstream acceptance - they welcome regulation.  From the time of your Sept 30 2021 prediction to the week after Biden's executive order, BTC-USD fell 6%.

2021 Sep 30: 43,790.89

2022 Mar  2:  43,924.12
2022 Mar  9:  41,982.93
2022 Mar 16: 41,143.93
2022 Mar 31: 45,538.68

The Fed started raising its Fed funds rate in March, and provided more guidance on future rate hikes.  Near the end of March a 0.50% was hinted at, and this is what followed after the Fed's actions:

2022 Apr 30:  37,714.88
2022 May 31: 31,792.31
today: 20,575.67

I'm not a passive observer in this, either - last week I predicted CPI-U with incorrect assumptions, and invested in a drop in crypto.  Last week I invested roughly 0.33% of my portfolio in BITO puts expiring this week, and the returns on those were insane.  The reason I made that "bet"/"speculation"/"investment" was to take advantage of how CPI-U would drive stock market drops, and that would translate into drops in the price of BTC.

That's how I think BTC's price should be viewed - as currently driven by the stock market.  I don't think regulations have the impact you expect, and I pointed to the executive order where I don't see restrictions on trading crypto.  I point to the past week as an example of my theory that stock market drops drive BTC price drops.

clarkfan1979

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Re: What do you think of adding a low% of crypto allocation
« Reply #1278 on: June 19, 2022, 08:52:19 AM »
I read "Atomic Habits" on audio last summer. The basic idea is that making many small changes can lead to large outcomes. I feel like this applies to financial decisions and my personal life.

I think my story is very similar to many others on this forum. Many small changes over 5-10 years, lead to large outcomes.

Learning to say "no" to a very small allocation to "X"... makes a big difference because those offers are not just one. I got the same pitch from my brother to buy silver. Five years before that, he told me to buy Iraqi Dinar.

The person doing to pitch often says, "But, it's only a small allocation, so what's the downside?" The downside is if you repeatedly make poor financial decisions over long periods of time, even if they are small, they lead to big consequences.

I'm 42 and my brother is 40. My brother sold his wife's house in Jan 2020 and they bought a 5th wheel and silver. However, they don't have enough money to buy a truck to tow it. They bought silver at $25 and are waiting for it to hit $50 before they can buy a truck. They have been staying with different family members for the past two years, mostly rent free. They bounce from house to house.

So I guess the downside is being homeless. However, my brother's allocation to silver is not small. He is all in. To the moon!

 




JAYSLOL

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Re: What do you think of adding a low% of crypto allocation
« Reply #1279 on: June 19, 2022, 10:12:35 AM »
I read "Atomic Habits" on audio last summer. The basic idea is that making many small changes can lead to large outcomes. I feel like this applies to financial decisions and my personal life.

I think my story is very similar to many others on this forum. Many small changes over 5-10 years, lead to large outcomes.

Learning to say "no" to a very small allocation to "X"... makes a big difference because those offers are not just one. I got the same pitch from my brother to buy silver. Five years before that, he told me to buy Iraqi Dinar.

The person doing to pitch often says, "But, it's only a small allocation, so what's the downside?" The downside is if you repeatedly make poor financial decisions over long periods of time, even if they are small, they lead to big consequences.

I'm 42 and my brother is 40. My brother sold his wife's house in Jan 2020 and they bought a 5th wheel and silver. However, they don't have enough money to buy a truck to tow it. They bought silver at $25 and are waiting for it to hit $50 before they can buy a truck. They have been staying with different family members for the past two years, mostly rent free. They bounce from house to house.

So I guess the downside is being homeless. However, my brother's allocation to silver is not small. He is all in. To the moon!

The other problem of “it’s only a small percentage of my AA” is that, if you are actually following your AA and are rebalancing, if you have say $500k NW and 5% in crypto ($25k), and it falls to half, you need to buy another $12k to rebalance to 5%.  And then it drops by half again in the next 6 months so you need to buy another $11k and now your low percentage has cost you around 10% to own.  I’m not saying crypto isn’t here to stay, but there’s no guarantee it is, and if you have even a small percentage and the hype dies off and you keep buying lower and lower do you just keep going or abandon your AA?

BicycleB

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Re: What do you think of adding a low% of crypto allocation
« Reply #1280 on: June 19, 2022, 11:09:26 AM »

The other problem of “it’s only a small percentage of my AA” is that, if you are actually following your AA and are rebalancing, if you have say $500k NW and 5% in crypto ($25k), and it falls to half, you need to buy another $12k to rebalance to 5%.  And then it drops by half again in the next 6 months so you need to buy another $11k and now your low percentage has cost you around 10% to own.  I’m not saying crypto isn’t here to stay, but there’s no guarantee it is, and if you have even a small percentage and the hype dies off and you keep buying lower and lower do you just keep going or abandon your AA?

That's a huge issue for rebalancing, and the more often you rebalance, the bigger an issue it becomes. Also, it seems like rebalancing is only guaranteed to be useful if the assets balanced have similar long term performances, or one goes up when the other goes down. There's no guarantee crypto will ever bounce back at all.

Still, if crypto survives at all, logically it will have ups as well as downs. If you buy more when it's down and less when it's up, you might come out ahead. Its high volatility suggests that a strategy that distinguishes well between the low periods and high ones could be effective. Rebalancing is a strategy that seeks to automate the buy low sell high process, so maybe it is relevant.

I think that a logical approach might be rebalance, but rebalance rarely. That would minimize the total loss in the event that crypto dies, but still produce gains if it bounces back. Maybe:
1. do once a year, not once a quarter?
2. assume 3 or 4 down years max, never investing more than a quarter of expected max allocation?
3. So if your target was 8%, invest 2% / year under "low" conditions, nothing in non-low ones
4. Don't sell unless allocation is over 8%

This still has all sorts of uncertainties, like "what is low" and whether to sell all of the amount over 8% or only some. Or since it's certainly not guaranteed, whether to try it at all. :)

For myself, the tiny bit I bought is an opening attempt to buy low. Not suggesting anyone repeat my example, just offering info as a contribution to group entertainment/education, in appreciation of others' contributions across the forum. For now I can buy more at each ratchet downwards if prices keep falling, for several ratchets down (another 20%, another 40%, perhaps) and still be within 2%.* But if it bounces back 3x to prior levels, or perhaps 5x, might be good.

Is this how a formerly sensible person squanders their minimal FIRE nest egg? Stay tuned/keep following, I guess.

*To be clear, I'm not planning to limit myself to 2%/year. Just discussing the idea in this thread, because it fits this thread's title.
« Last Edit: June 19, 2022, 11:14:34 AM by BicycleB »

StashingAway

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Re: What do you think of adding a low% of crypto allocation
« Reply #1281 on: June 19, 2022, 12:55:15 PM »
Is this how a formerly sensible person squanders their minimal FIRE nest egg? Stay tuned/keep following, I guess.

I think it's how you can curb FOMO without causing danger to your portfolio. Like playing Powerball after it reaches a certain $$ level.

I bought BTC several years ago primarily as an interest in actually attempting to use it as a currency as it was promoted. I'm no computer scientist, but I did attempt to learn and do it properly; host the wallet on my own device rather than an exchange, store the key in a physically hidden location; pay taxes on the gains when purchasing items with it.

I even bought a couple of (legal!) items with it when digital companies were all jumping on board a couple of years ago. But after what has to be over 100 hours of learning for a very clunky process, the BTC are gathering dust. I have no desire to jump back in and learn lightning network or hosing nodes or any of that nonsense; I can't be bothered and I know that if I can't as a quick learner and smart adapter to these things, then the general population has no hope to become fluent in the process in a safe and trustworthy manner. I heard a breakdown recently that described it as everyone having to become professional money launderers to keep their information safe on a public ledger. Just not going to happen with any of the current setups.

JAYSLOL

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Re: What do you think of adding a low% of crypto allocation
« Reply #1282 on: June 19, 2022, 08:06:24 PM »

The other problem of “it’s only a small percentage of my AA” is that, if you are actually following your AA and are rebalancing, if you have say $500k NW and 5% in crypto ($25k), and it falls to half, you need to buy another $12k to rebalance to 5%.  And then it drops by half again in the next 6 months so you need to buy another $11k and now your low percentage has cost you around 10% to own.  I’m not saying crypto isn’t here to stay, but there’s no guarantee it is, and if you have even a small percentage and the hype dies off and you keep buying lower and lower do you just keep going or abandon your AA?

That's a huge issue for rebalancing, and the more often you rebalance, the bigger an issue it becomes. Also, it seems like rebalancing is only guaranteed to be useful if the assets balanced have similar long term performances, or one goes up when the other goes down. There's no guarantee crypto will ever bounce back at all.

Still, if crypto survives at all, logically it will have ups as well as downs. If you buy more when it's down and less when it's up, you might come out ahead. Its high volatility suggests that a strategy that distinguishes well between the low periods and high ones could be effective. Rebalancing is a strategy that seeks to automate the buy low sell high process, so maybe it is relevant.

I think that a logical approach might be rebalance, but rebalance rarely. That would minimize the total loss in the event that crypto dies, but still produce gains if it bounces back. Maybe:
1. do once a year, not once a quarter?
2. assume 3 or 4 down years max, never investing more than a quarter of expected max allocation?
3. So if your target was 8%, invest 2% / year under "low" conditions, nothing in non-low ones
4. Don't sell unless allocation is over 8%

This still has all sorts of uncertainties, like "what is low" and whether to sell all of the amount over 8% or only some. Or since it's certainly not guaranteed, whether to try it at all. :)

For myself, the tiny bit I bought is an opening attempt to buy low. Not suggesting anyone repeat my example, just offering info as a contribution to group entertainment/education, in appreciation of others' contributions across the forum. For now I can buy more at each ratchet downwards if prices keep falling, for several ratchets down (another 20%, another 40%, perhaps) and still be within 2%.* But if it bounces back 3x to prior levels, or perhaps 5x, might be good.

Is this how a formerly sensible person squanders their minimal FIRE nest egg? Stay tuned/keep following, I guess.

*To be clear, I'm not planning to limit myself to 2%/year. Just discussing the idea in this thread, because it fits this thread's title.

Yeah, those were all the issues I was wrestling with when I decided to throw some money in crypto back in summer of 2017.  The $1k or so I put in, which at the time was like 2% of my NW, rocketed up to almost $3k, a fairly significant amount for me, so I cashed it in out of sheer luck right before the crash.  It did rebound, but if it had kept going down and I kept rebalancing further and further down, I could have potentially lost quite a bit.  I’m all for making a quick buck, but in my mind Asset Allocations should only be used for long term holds, and I don’t feel crypto provides much value to society (the specific coins that is, the tech behind it tbd).  So while there may be huge gains short or even long term, I’m definitely weary of designating an actual portion of my AA to it, even if small.  Perhaps with some of those safeguards like infrequent rebalancing and cutting losses after a certain number of down years etc I’d consider buying some again. 

BicycleB

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Re: What do you think of adding a low% of crypto allocation
« Reply #1283 on: June 29, 2022, 10:13:43 AM »
I've flirted with buying a little crypto before. Today, finally the bit the bullet in one of the most cautious ways possible - buying a tidbit of BITW.

My intent is to buy more if crypto keeps dropping but I don't have a super-concrete plan. I intend to buy larger amounts if it keeps dropping, with the hope that after the drop it rebounds a lot faster than stocks. In my mind it's vaguely similar to some sort of long option on equity markets, in that it could go zero more easily than stocks but have greater gains during upturns.

Bought much bigger tidbit of BITW today, and also some BITQ. Nearly at 2% portfolio. Happy for now; additional musings in investment journal.
« Last Edit: June 29, 2022, 10:15:32 AM by BicycleB »

lutorm

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Re: What do you think of adding a low% of crypto allocation
« Reply #1284 on: June 29, 2022, 06:33:17 PM »
Sometimes I reminisce about mining some bitcoins back in 2011. I sold those immediately and made like a couple hundred $ profit, which I was pretty happy with at the time. (Although I have a note that I paid about $100 for the electricity for mining them, too.) It looks like BTC price was about $30 at that time so I must have had of order 10, so a couple hundred thousand $ now. But would I buy some? No way.

 

Wow, a phone plan for fifteen bucks!