Author Topic: What do you think of adding a low% of crypto allocation  (Read 73085 times)

whywork

  • Stubble
  • **
  • Posts: 208
What do you think of adding a low% of crypto allocation
« on: September 06, 2021, 07:29:43 PM »
Running a few backtests on portfolio visualizer, here are the stats using SPY and GBTC from year 2016 to now

100% SPY has 17% yearly returns and 19.4% maximum drawdown
98% SPY and 2% GBTC has 23% yearly returns and 19.8% max drawdown (note: portfolio is rebalanced annually)
95% SPY and 5% GBTC has 30% returns and 20.4% max drawdown

Wow, just 5% of the GBTC and we can see wonders with our returns (75% higher) and only 1% more drawdown

Having a huge allocation to Crypto can be dicey but just adding a small percent and annually rebalancing seems a great strategy to enhance returns. What are your thoughts on this?

maizefolk

  • Walrus Stache
  • *******
  • Posts: 6625
Re: What do you think of adding a low% of crypto allocation
« Reply #1 on: September 06, 2021, 07:35:51 PM »
What are your thoughts on this?

It's six years of data where bitcoin has increased in price ~88x (also as I write this it is back up above $50,000, nice!). If bitcoin continues to grow that that rate, we'd be fools not to be 100% invested in it. If it does not continue to grow that that rate, backtesting on those six years isn't a good predictor of future returns.

The trick, as usual, is knowing which.

aceyou

  • Handlebar Stache
  • *****
  • Posts: 1672
  • Age: 39
    • Life is Good - Aceyou's Journal
Re: What do you think of adding a low% of crypto allocation
« Reply #2 on: September 06, 2021, 07:37:40 PM »
I'm currently 80% vtsax, 11% Ethereum, 9% Bitcoin.  I'll likely shift another 20% into crypto by the end of the year. 

So yeah, I'd endorcse a 95/5 split as not being too crazy:)

whywork

  • Stubble
  • **
  • Posts: 208
Re: What do you think of adding a low% of crypto allocation
« Reply #3 on: September 06, 2021, 07:52:58 PM »
I'm currently 80% vtsax, 11% Ethereum, 9% Bitcoin.  I'll likely shift another 20% into crypto by the end of the year. 

So yeah, I'd endorcse a 95/5 split as not being too crazy:)

I am also 20% Crypto. Just don't see downside adding in a small percent for anyone.

Juan Ponce de León

  • Stubble
  • **
  • Posts: 225
Re: What do you think of adding a low% of crypto allocation
« Reply #4 on: September 06, 2021, 08:10:15 PM »
Tulip bulb / greater fool posters in 3,2,1...

FLBiker

  • Handlebar Stache
  • *****
  • Posts: 1535
  • Age: 45
  • Location: Canada
    • Chop Wood Carry FIRE
Re: What do you think of adding a low% of crypto allocation
« Reply #5 on: September 07, 2021, 06:54:38 AM »
A small percent seems perfectly reasonable.  I don't have any, but that's because one of the rules on my IPS is not to invest in things I don't understand.  I understand crypto from a technical POV, I just don't understand why it has any inherent value, so I don't invest in it (just like I don't invest in gold or collectibles).  I realize that gold has been a store of value for humans for a very long time, but I still don't get it, so it isn't for me.

At the same time, I'm pretty much at my FI number so simplicity is even more important to me now than it was when I was focused on accumulation, so that's part of it too.  I think 5-10% is fine (as a random internet opinion).  I did that for a while with peer to peer lending (for example) years ago and did quite well.

Malcat

  • Walrus Stache
  • *******
  • Posts: 9856
Re: What do you think of adding a low% of crypto allocation
« Reply #6 on: September 07, 2021, 07:04:28 AM »
Tulip bulb / greater fool posters in 3,2,1...

Actually, most people here are fine with a small allocation going towards stock picking/speculation.

If OP was switching to 50% crypto, that would be a different story.

However, my question for OP is if they mean that they're putting 5% of their current 'stache into crypto, or if they plan to maintain a 5% allocation with regular rebalancing?

Malcat

  • Walrus Stache
  • *******
  • Posts: 9856
Re: What do you think of adding a low% of crypto allocation
« Reply #7 on: September 08, 2021, 06:30:15 AM »
Tulip bulb / greater fool posters in 3,2,1...

Actually, most people here are fine with a small allocation going towards stock picking/speculation.

If OP was switching to 50% crypto, that would be a different story.

However, my question for OP is if they mean that they're putting 5% of their current 'stache into crypto, or if they plan to maintain a 5% allocation with regular rebalancing?

OP is already 20% crypto so they are just trying to justify it by starting this thread

Oops, another case of me barely skimming a post before replying. I just saw the 5% part and focused more on the replies.

My point though was just to the pp that I quoted that although the vast majority of us here are suspicious of crypto, that doesn't mean that we're dogmatically against people allocating a small portion of their assets to it, or any other higher risk/volatile venture.

The poster I quoted has been quite active in some crypto threads, so I understand why they think that someone wanting to get into crypto at all would be criticized, but that's simply not true.

waltworks

  • Walrus Stache
  • *******
  • Posts: 5268
Re: What do you think of adding a low% of crypto allocation
« Reply #8 on: September 08, 2021, 07:04:28 AM »
OP posts wacky/risky investing ideas regularly, this (while also almost certainly a bad idea) is actually not one of the weirder ones.

-W

ender

  • Walrus Stache
  • *******
  • Posts: 6880
Re: What do you think of adding a low% of crypto allocation
« Reply #9 on: September 08, 2021, 07:22:05 AM »
I don't really understand this thread.

You have 20% crypto yourself, this reads like crypto shilling.

I sometimes wonder what % of the growth in crypto is the investors ponzi scheme where you get in then have to shill it so others buy in so that it continues to go up.

whywork

  • Stubble
  • **
  • Posts: 208
Re: What do you think of adding a low% of crypto allocation
« Reply #10 on: September 08, 2021, 07:54:20 AM »
Yes I have 20%. @Malcat  I plan to rebalance my portfolio annually to keep it at 20% crypto.

My question on this thread though is to understand what's the downside of adding a low% and rebalancing. Crypto has better risk vs reward than leveraged ETFs and a 2-5% seem to do wonders to the returns.

@waltworks Thank you for the recognition :)

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 19791
  • Age: 40
  • Location: Toronto, Ontario, Canada
Re: What do you think of adding a low% of crypto allocation
« Reply #11 on: September 08, 2021, 08:26:03 AM »
My question on this thread though is to understand what's the downside of adding a low% and rebalancing.

It's the same downside as adding any wildly volatile thing to your portfolio as a low percentage and rebalancing.  It could drop precipitously, or could go up higher than your safer investments.  It's not different in any way than putting a small portion of your portfolio on black at the casino and then rebalancing after the ball stops.



Crypto has better risk vs reward than leveraged ETFs and a 2-5% seem to do wonders to the returns.

There are currently more than 4,000 cryptocurrencies and 186 leveraged ETFs being traded.  Not all meet your claim.  That makes this a completely meaningless (if not outright fraudulent) statement, doesn't it?

bacchi

  • Walrus Stache
  • *******
  • Posts: 6148
Re: What do you think of adding a low% of crypto allocation
« Reply #12 on: September 08, 2021, 08:30:04 AM »
My question on this thread though is to understand what's the downside of adding a low% and rebalancing. Crypto has better risk vs reward than leveraged ETFs and a 2-5% seem to do wonders to the returns.

The risk is that your particular flavor gets put in the dustbin of history. If it's 5%, that loss is easy to recover. If it's 20%, that's a loss that will take years and years to recover.

FINate

  • Handlebar Stache
  • *****
  • Posts: 2405
Re: What do you think of adding a low% of crypto allocation
« Reply #13 on: September 08, 2021, 08:46:51 AM »
I'm currently 80% vtsax, 11% Ethereum, 9% Bitcoin.  I'll likely shift another 20% into crypto by the end of the year. 

So yeah, I'd endorcse a 95/5 split as not being too crazy:)

I am also 20% Crypto. Just don't see downside adding in a small percent for anyone.

You do you. But the above is where I start to disagree with the crypto evangelists.

20% is not a "small percentage." Sure, for a portfolio less than $100k, 20% is relatively small to one's lifetime earning potential. As one gets closer to FIRE, however, that allocation becomes a rather large chunk of money in an extremely volatile asset with an uncertain regulatory and tax future. Speaking for myself here, I wouldn't want my FIRE plans to depend on Uncle Sam continuing to play nice with crypto.

Owning crypto requires a certain amount of user responsibility somewhat analogous to holding physical gold. If you hold it yourself, you better be tech savvy and have consistently good backup and security hygiene. The vast majority of people fail in this area and struggle with losing family photos and other important documents when something as simple as a HDD/SSD fails. This is a recipe for disaster. The alternative is to have someone else hold your crypto, but such sites have a pretty bad track record on security and outright theft because they don't have the same level of regulatory oversight as banks/brokerages and, by design, crypto has little recourse if something goes wrong. No one should ever invest in anything they don't fully understand and are prepared to manage properly.

On a philosophical note, I will likely never get into crypto because I disagree with the overall premise. I won't derail this thread with all my objections (and they are manifold). Let's just leave it at there are downsides for lots of people once they think through all the implications of crypto.

So, by all means, you invest in what is right for you. I genuinely wish you the best. But it's not for everyone. I would even argue that it's not appropriate for most people.

 
« Last Edit: September 08, 2021, 08:58:56 AM by FINate »

MustacheAndaHalf

  • Walrus Stache
  • *******
  • Posts: 5009
Re: What do you think of adding a low% of crypto allocation
« Reply #14 on: September 08, 2021, 08:56:58 AM »
Bitcoin and Ethereum seem most likely to stay around for years, while smaller coins could disappear at any time.  And yet we're talking about Bitcoin, that lost 99% of it's value when Mt Gox was hacked.  Looking at the past 7 crashes, the most common drops are 50% and 83%, losing half or 5/6th of it's value.
https://finance.yahoo.com/news/7-biggest-bitcoin-crashes-history-180038282.html

OP - have you recalculated returns if you rebalance whenever GBTC reaches 10% of your portfolio?  It might have lower returns if you limit the risk.  And also, GBTC charges a 2% expense ratio, so buying on a crypto exchange might be cheaper.

aceyou

  • Handlebar Stache
  • *****
  • Posts: 1672
  • Age: 39
    • Life is Good - Aceyou's Journal
Re: What do you think of adding a low% of crypto allocation
« Reply #15 on: September 09, 2021, 11:04:21 AM »
I'm currently 80% vtsax, 11% Ethereum, 9% Bitcoin.  I'll likely shift another 20% into crypto by the end of the year. 

So yeah, I'd endorcse a 95/5 split as not being too crazy:)

I am also 20% Crypto. Just don't see downside adding in a small percent for anyone.

You do you. But the above is where I start to disagree with the crypto evangelists.

20% is not a "small percentage." Sure, for a portfolio less than $100k, 20% is relatively small to one's lifetime earning potential. As one gets closer to FIRE, however, that allocation becomes a rather large chunk of money in an extremely volatile asset with an uncertain regulatory and tax future. Speaking for myself here, I wouldn't want my FIRE plans to depend on Uncle Sam continuing to play nice with crypto.

Owning crypto requires a certain amount of user responsibility somewhat analogous to holding physical gold. If you hold it yourself, you better be tech savvy and have consistently good backup and security hygiene. The vast majority of people fail in this area and struggle with losing family photos and other important documents when something as simple as a HDD/SSD fails. This is a recipe for disaster. The alternative is to have someone else hold your crypto, but such sites have a pretty bad track record on security and outright theft because they don't have the same level of regulatory oversight as banks/brokerages and, by design, crypto has little recourse if something goes wrong. No one should ever invest in anything they don't fully understand and are prepared to manage properly.

On a philosophical note, I will likely never get into crypto because I disagree with the overall premise. I won't derail this thread with all my objections (and they are manifold). Let's just leave it at there are downsides for lots of people once they think through all the implications of crypto.

So, by all means, you invest in what is right for you. I genuinely wish you the best. But it's not for everyone. I would even argue that it's not appropriate for most people.

Lot's of solid stuff here that I agree with.  I definitely consider my 20% allocation a SIGNIFICANT amount. 

I also share your concerns about security.  As such, I guess I somewhat misspoke when I said I bought bitcoin and ether.  Technically, I invested into Grayscales Bitcoin and Ethereum trusts, because I don't trust myself yet to hold a large amount on either hot or cold storage, for all the reasons you mentioned. 

Also, I'm in a weird spot financially where I think taking a bigger investment risk doesn't have much of a downside.  I have about 750k in the stache, but my wife and I both will receive medium sized pensions in ten years, so we'll have a combined income of about 100k, along with a paid off house, at age 48 even without any stache.  My rationale is that if I lose the 150k or so I have in cyrpto, my retirement will essentially unchanged, both in terms of the date and the lifestyle.  However, if crypto really catches fire, which is completely possible, then it could have the upside of choosing to forego most of pension and retire in 5 years or so (we are 38/37 now).  And as an aside, my training is in math/stats, so I am able to understand the crypto stuff better than the general person saving for retirement. 

So, finally, I also agree that crypto is probably not for everyone.  Hopefully it works out for me, but if not, I'll still be retiring in June 2031 with an amazing wife and more than enough resources to live a full life after employment. 

DaMa

  • Pencil Stache
  • ****
  • Posts: 907
Re: What do you think of adding a low% of crypto allocation
« Reply #16 on: September 09, 2021, 11:54:23 AM »
Is there a way to have crypto in a Fidelity IRA?

(Yes, I could research this myself, but I want to follow this thread anyway.  TIA!)

mntnmn117

  • 5 O'Clock Shadow
  • *
  • Posts: 89
Re: What do you think of adding a low% of crypto allocation
« Reply #17 on: September 09, 2021, 12:54:06 PM »
Crypto is starting to feel like really dirty money. From the environmental aspects of mining it, to it's primary use of buying/selling black market stuff. I can't buy into it without thinking I'm helping some human trafficker get filthy rich.

Malcat

  • Walrus Stache
  • *******
  • Posts: 9856
Re: What do you think of adding a low% of crypto allocation
« Reply #18 on: September 09, 2021, 03:33:35 PM »
I'm currently 80% vtsax, 11% Ethereum, 9% Bitcoin.  I'll likely shift another 20% into crypto by the end of the year. 

So yeah, I'd endorcse a 95/5 split as not being too crazy:)

I am also 20% Crypto. Just don't see downside adding in a small percent for anyone.

You do you. But the above is where I start to disagree with the crypto evangelists.

20% is not a "small percentage." Sure, for a portfolio less than $100k, 20% is relatively small to one's lifetime earning potential. As one gets closer to FIRE, however, that allocation becomes a rather large chunk of money in an extremely volatile asset with an uncertain regulatory and tax future. Speaking for myself here, I wouldn't want my FIRE plans to depend on Uncle Sam continuing to play nice with crypto.

Owning crypto requires a certain amount of user responsibility somewhat analogous to holding physical gold. If you hold it yourself, you better be tech savvy and have consistently good backup and security hygiene. The vast majority of people fail in this area and struggle with losing family photos and other important documents when something as simple as a HDD/SSD fails. This is a recipe for disaster. The alternative is to have someone else hold your crypto, but such sites have a pretty bad track record on security and outright theft because they don't have the same level of regulatory oversight as banks/brokerages and, by design, crypto has little recourse if something goes wrong. No one should ever invest in anything they don't fully understand and are prepared to manage properly.

On a philosophical note, I will likely never get into crypto because I disagree with the overall premise. I won't derail this thread with all my objections (and they are manifold). Let's just leave it at there are downsides for lots of people once they think through all the implications of crypto.

So, by all means, you invest in what is right for you. I genuinely wish you the best. But it's not for everyone. I would even argue that it's not appropriate for most people.

Lot's of solid stuff here that I agree with.  I definitely consider my 20% allocation a SIGNIFICANT amount. 

I also share your concerns about security.  As such, I guess I somewhat misspoke when I said I bought bitcoin and ether.  Technically, I invested into Grayscales Bitcoin and Ethereum trusts, because I don't trust myself yet to hold a large amount on either hot or cold storage, for all the reasons you mentioned. 

Also, I'm in a weird spot financially where I think taking a bigger investment risk doesn't have much of a downside.  I have about 750k in the stache, but my wife and I both will receive medium sized pensions in ten years, so we'll have a combined income of about 100k, along with a paid off house, at age 48 even without any stache.  My rationale is that if I lose the 150k or so I have in cyrpto, my retirement will essentially unchanged, both in terms of the date and the lifestyle.  However, if crypto really catches fire, which is completely possible, then it could have the upside of choosing to forego most of pension and retire in 5 years or so (we are 38/37 now).  And as an aside, my training is in math/stats, so I am able to understand the crypto stuff better than the general person saving for retirement. 

So, finally, I also agree that crypto is probably not for everyone.  Hopefully it works out for me, but if not, I'll still be retiring in June 2031 with an amazing wife and more than enough resources to live a full life after employment.

So the 20% of your stashed isn't anywhere near 20% of your retirement assets because of the pensions.

That's kind of important.

waltworks

  • Walrus Stache
  • *******
  • Posts: 5268
Re: What do you think of adding a low% of crypto allocation
« Reply #19 on: September 09, 2021, 10:34:14 PM »
Yeah, if you have $100k/year in pensions coming (roughly equivalent to $2.5 million in index funds in 10 years time, or maybe ~$1.25 million right now if you assume roughly historical returns) then you've really only got ~5-7% of your NW in crypto.

Really, if you wanted to roll the dice and didn't mind waiting 10 years to retire, why not go all in on speculative/high risk stuff? If your $750k has no value to you in this scenario as you've argued, it makes no sense to be even slightly conservative with it.

On the other hand if that $750k is enough to let you RE 5 years earlier with some amount of hit to your pension, then the risk/reward tradeoff gets more complex and the expected utility of a low probability/large reward investment drops considerably, since you're right back in the same boat as everyone else where a failed investment will lead to more work/later RE.

-W

aceyou

  • Handlebar Stache
  • *****
  • Posts: 1672
  • Age: 39
    • Life is Good - Aceyou's Journal
Re: What do you think of adding a low% of crypto allocation
« Reply #20 on: September 11, 2021, 08:34:46 AM »
Yeah, if you have $100k/year in pensions coming (roughly equivalent to $2.5 million in index funds in 10 years time, or maybe ~$1.25 million right now if you assume roughly historical returns) then you've really only got ~5-7% of your NW in crypto.

Really, if you wanted to roll the dice and didn't mind waiting 10 years to retire, why not go all in on speculative/high risk stuff? If your $750k has no value to you in this scenario as you've argued, it makes no sense to be even slightly conservative with it.

On the other hand if that $750k is enough to let you RE 5 years earlier with some amount of hit to your pension, then the risk/reward tradeoff gets more complex and the expected utility of a low probability/large reward investment drops considerably, since you're right back in the same boat as everyone else where a failed investment will lead to more work/later RE.

-W

To Waltworks and Malcat...

Ok, you are both bringing up really valid points, I suppose it isn't near 20% of our actual stache.  I've just chosen to frame it that way in my mind over the years, but that isn't really accurate is it. 

And to Waltworks, I actually am planning to make an even bigger play into crypto, but the rest of stache is locked up in employer IRA's with no access to crypto investments.  However, we have 180k that is locked up in my wife's retirement account through work, but because she just switched employers, we are in the process of moving it to an institution that can access the grayscale trusts to buy more Bitcoin and Ethereum.  That will put us at about 350k.  If it does a 10x or something stupid like that, we could be instantly done with work.  If it doesn't, we are totally fine. 

Crypto is starting to feel like really dirty money. From the environmental aspects of mining it, to it's primary use of buying/selling black market stuff. I can't buy into it without thinking I'm helping some human trafficker get filthy rich.

To mntnmn117, I thought this way for a while.  The more I learned about it, the less I take on that viewpoint.  The Crypto sphere in general is moving away from proof of work to proof of stake, and it takes so much less energy.  That process is accelerating.  With regards to illegal activity, that's already a very minor use of the blockchain, and if that was a reason for me boycotting it, then I'd be a hypocrite for not boycotting cash.  It's my understanding (but I'm not an expert) that 50 and 100 dollar bills are a much bigger cause of illegal activity, and no one has ever batted an eye at them. 

https://slate.com/business/2010/12/hundred-dollar-bills-are-for-criminals-and-sociopaths-why-do-we-still-print-them.html

Alright, time to enjoy the weekend and see if Novak Djokavic can complete the tennis grand slam.  Take care! 

MustacheAndaHalf

  • Walrus Stache
  • *******
  • Posts: 5009
Re: What do you think of adding a low% of crypto allocation
« Reply #21 on: September 11, 2021, 09:06:08 AM »
Crypto is starting to feel like really dirty money. From the environmental aspects of mining it, to it's primary use of buying/selling black market stuff. I can't buy into it without thinking I'm helping some human trafficker get filthy rich.
What if those environmental aspects could be offset?

"This equaled about 0.92 pounds of CO2 emissions per kWh."
https://www.eia.gov/tools/faqs/faq.php?id=74&t=11

"Single Bitcoin Transaction Footprints ... 1724.62 kWh"
https://digiconomist.net/bitcoin-energy-consumption

"The price of carbon offsets varies widely from <$1 per ton to >$50 per ton."
https://secondnature.org/climate-action-guidance/purchasing-carbon-offsets-faqs/#cost

So it takes 2000/.92 = 2173kwh to equal one ton of CO2, and each Bitcoin transaction uses 1724.62kwh / 2173kwh per ton = 0.7933 tons of CO2.  That means a cost of $1 to $40 in carbon offsets covers the cost of one BTC transaction.

That might be one way to invest in Bitcoin, while offsetting the damage involved in your purchase.  Although buying BTC directly from someplace like Coinbase probably doesn't even involve a transaction: they buy large quantities, and then sell from their inventory.

It would be really interesting to start a "carbon neutral Bitcoin ETF".  Every purchase would be paired with carbon offsets.

Rosy

  • Magnum Stache
  • ******
  • Posts: 2645
  • Location: Florida
Re: What do you think of adding a low% of crypto allocation
« Reply #22 on: September 11, 2021, 12:59:18 PM »
Crypto is starting to feel like really dirty money. From the environmental aspects of mining it, to it's primary use of buying/selling black market stuff. I can't buy into it without thinking I'm helping some human trafficker get filthy rich.

Stop The Bitcoin FUD: Criminal Cryptocurrency Transactions Are Falling
https://www.nasdaq.com/articles/stop-the-bitcoin-fud%3A-criminal-cryptocurrency-transactions-are-falling-2021-01-20

From the Nasdaq article:
Cryptocurrency Is Leaving Criminals Behind
According to a summary of blockchain analysis firm Chainalysis’ “2021 Crypto Crime Report,” the proportion of cryptocurrency-related crime fell significantly last year.

“In 2019, criminal activity represented 2.1 percent of all cryptocurrency transaction volume, or roughly $21.4 billion worth of transfers,” the firm found. “In 2020, the criminal share of all cryptocurrency activity fell to just 0.34 percent, or $10.0 billion in transaction volume.”


mjr

  • Bristles
  • ***
  • Posts: 483
  • Age: 56
  • Location: Brisbane, Qld
  • Retired at 52
Re: What do you think of adding a low% of crypto allocation
« Reply #23 on: September 11, 2021, 01:29:40 PM »
Now provide the proportion of criminal BTC transactions after excluding transactions of one speculator selling to another.

Rosy

  • Magnum Stache
  • ******
  • Posts: 2645
  • Location: Florida
Re: What do you think of adding a low% of crypto allocation
« Reply #24 on: September 11, 2021, 05:49:24 PM »
Stop The Bitcoin FUD: Criminal Cryptocurrency Transactions Are Falling
https://www.nasdaq.com/articles/stop-the-bitcoin-fud%3A-criminal-cryptocurrency-transactions-are-falling-2021-01-20

...

“In 2019, criminal activity represented 2.1 percent of all cryptocurrency transaction volume, or roughly $21.4 billion worth of transfers,” the firm found. “In 2020, the criminal share of all cryptocurrency activity fell to just 0.34 percent, or $10.0 billion in transaction volume.”
[/i]

The report that article refers to admits that they're almost certainly underestimating criminal activity in 2020. Their estimate for 2019 was off by nearly a factor of 2 (assuming it doesn't get revised up any further), a revision that would erase any alleged decrease (in dollar terms, not percent of transactions) from 2019 to 2020.

https://blog.chainalysis.com/reports/2021-crypto-crime-report-intro-ransomware-scams-darknet-markets

Quote
In 2019, criminal activity represented 2.1% of all cryptocurrency transaction volume, or roughly $21.4 billion worth of transfers ... We should note that at the time of writing last year’s report, we reported 2019’s criminal share of cryptocurrency activity to be 1.1%. The reason for the change is the identification of more addresses associated with criminal activity that were active in 2019. Most of those addresses were related to scams that had yet to be identified as such, primarily related to the PlusToken scam. Some are related to previously unreported ransomware attacks. For that reason, we should expect 2020’s reported criminal activity numbers to rise over time as well.

It seems that an expected 1% or 2% up or down is not surprising in any report that is continually readjusted to reflect true impact.
What I really objected to was the sweeping statement by mtnmn117 (without stats) that crypto is used 'primarily' for criminal activities because that is simply not true.

I don't consider 2% to be 'primary' criminal use, especially given the exponential growth that crypto has recently undergone.

Interesting points made in this link ...
https://blog.coinbase.com/fact-check-crypto-is-increasingly-being-used-for-criminal-activity-and-is-a-haven-for-illicit-856a71dfb399

I don't think that crypto will ever be free of scams no more than the banks will ever be free of illegal cash transactions, fraud and ID theft.

Civex

  • Stubble
  • **
  • Posts: 192
Re: What do you think of adding a low% of crypto allocation
« Reply #25 on: September 14, 2021, 08:31:36 PM »
I try not to invest anything that doesn't have inherent value, though I have ~2% of our portfolio in derivatives.

Firmly agree with Bogleheads that crypto is a pump and dump scheme.

Juan Ponce de León

  • Stubble
  • **
  • Posts: 225
Re: What do you think of adding a low% of crypto allocation
« Reply #26 on: September 14, 2021, 08:46:49 PM »
I'm glad all the real crypto experts are here to let us know the facts.  I appreciate the insight.

Telecaster

  • Magnum Stache
  • ******
  • Posts: 2888
  • Location: Seattle, WA
Re: What do you think of adding a low% of crypto allocation
« Reply #27 on: September 19, 2021, 07:37:19 PM »
Tulip bulb / greater fool posters in 3,2,1...

If you want to buy crypto, buy crypto.  But please, please, please.  Basing your asset allocation on a four year backtest is just so silly it defies words.  Most of us have investing horizons of 30, 40, and 50 years.  Assuming the last four years of returns is representative of the next 40 is just barking madness.

Again, if you want to buy crypto, buy crypto.  But don't assume that we're so incredibly fucking stupid that we think the last four years is representative of any future time frame.  But crypto if you like, but don't come here and insult us. 

MustacheAndaHalf

  • Walrus Stache
  • *******
  • Posts: 5009
Re: What do you think of adding a low% of crypto allocation
« Reply #28 on: September 22, 2021, 10:59:21 AM »
Bitcoin used to be a new frontier that law enforcement hadn't discovered.  But now the FBI tracks blockchain transactions.  Long term, I'd guess criminals won't like putting the exact amount and time of their illegal activity on the public blockchain.

I'm viewing Bitcoin as an experiment where people are trying to figure out it's use.  Being of the non-criminal type, I didn't find much to buy with BTC when I tried years ago.  Visa and Mastercard are more widely accepted with lower fees - yet earlier this year, the sum total of all BTC exceeded the market caps of both of those credit card companies.  But there's experimentation, like El Salvador adopting it as legal currency or an ETF tracking it's price (GBTC, Grayscale Bitcoin Trust... expense ratio 2%).

Today I discovered I can buy "GBTC" in my Vanguard account.  It's an OTC (over the counter) stock, not traded on Nasdaq or NYSE.  For me, that means I can buy and sell in my Roth account, and not deal with tax issues (I hope).
https://finance.yahoo.com/quote/GBTC/

Crypto is a fraction of 1% of my assets.  I'm not sure what I'll do if it rises to 2% or more of my assets... I'm very uncomfortable with a 5% allocation, so I'll rebalance somewhere between 2-5%, if that happens.

Yahoo shows 7 years of BTC-USD market prices, and investing.com goes back to 2012 prices.  Others might want to use that if they are only seeing 4 years of data elsewhere.
https://finance.yahoo.com/quote/BTC-USD/
https://www.statista.com/statistics/326707/bitcoin-price-index/
https://www.investing.com/crypto/bitcoin/btc-usd

Keep in mind there was another great experiment to figure out the internet, which resulted in the dot-com crash.  Many of those companies went to zero, taking all the money put into them and going bankrupt.  Keep that in mind when putting money into crypto currencies.

talltexan

  • Magnum Stache
  • ******
  • Posts: 4990
Re: What do you think of adding a low% of crypto allocation
« Reply #29 on: September 24, 2021, 07:12:54 AM »
For a while $GBTC was trading at a discount to Net Asset Value, it may be a nice vehicle. If you're committed to crypto for the long haul, dollar-value-averaging into it may be wise. With something as volatile as Bitcoin, I'd set a goal of rebalancing each month such that 1% at a time was going into it. So--on the 15th of the month--you rebalance such that 1% of account is in it. Then, the next month, rebalance to 2% (committing to repeating this process for ten months will get you to a 10% stake in Bitcoin). This means that a massive surge will result in you putting less in when prices are high, and more when it's down.

The key is committing to a program like this, and then not looking at it in between rebalance days.

joe189man

  • Pencil Stache
  • ****
  • Posts: 658
Re: What do you think of adding a low% of crypto allocation
« Reply #30 on: September 24, 2021, 09:21:48 AM »
I'm glad all the real crypto experts are here to let us know the facts.  I appreciate the insight.

Can you point us in the right direction to learn about crypto?

LateStarter

  • 5 O'Clock Shadow
  • *
  • Posts: 91
  • Location: UK
Re: What do you think of adding a low% of crypto allocation
« Reply #31 on: September 24, 2021, 09:51:15 AM »
I see a pretty good case for holding some crypto, especially if you're young and can afford to take bigger risks.

I'm not young but I've bought some BTC and a little ETH and I intend to hold for some years. I see greater prospects for significant price increases than for zero over the next 5-10 years. I've put in enough to make a nice difference if it goes very well but not enough to do meaningful damage if it all goes belly up.

I might be participating in the next great revolution or I might have stumbled into the biggest ever 'greater fool' scheme, or maybe something in between. The world of crypto is undeniably novel/groundbreaking and it will be interesting to see how things develop - and I'm happy to have a bit of skin in the game.

The only thing I'm very confident about is that the future is unknown, and it will probably surprise us all.

clarkfan1979

  • Magnum Stache
  • ******
  • Posts: 2744
  • Age: 42
  • Location: Pueblo West, CO
Re: What do you think of adding a low% of crypto allocation
« Reply #32 on: September 25, 2021, 07:44:58 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.




MustacheAndaHalf

  • Walrus Stache
  • *******
  • Posts: 5009
Re: What do you think of adding a low% of crypto allocation
« Reply #33 on: September 26, 2021, 06:31:47 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%.
There's been multiple times where Bitcoin lost more than that in a day.

"Price lost one third of its value in 24 hours, dropping below $14,000."
"Price briefly dipped below $3,300, a 76% drop from the previous year and a 15-month low."
"... losing 25% in 24 hours early in the COVID-19 pandemic."
https://en.wikipedia.org/wiki/History_of_bitcoin#Prices_and_value_history

That list also mentions the price of Bitcoin in mid Dec 2017 and 2018, where Bitcoin sank from $17.9k to $3.3k over 12 months.  That's a loss of 81.6%, just a few years ago.

There should also be several more crashes before 2017 that were even worse than 81%.  Those buying it should do so knowing it is very, very risky.

HamsterStache

  • Stubble
  • **
  • Posts: 102
Re: What do you think of adding a low% of crypto allocation
« Reply #34 on: September 26, 2021, 08:33:10 AM »
I think a lot of people are going to lose a lot of money eventually by leaving assets tied up on crypto. I’ve been tempted to dabble, given the wild ride BTC has taken, but it’s just not worth it to me because I really don’t think any of it will last - especially now with China 100% outlawing it. It’s the type of investment that can evaporate overnight.

ChpBstrd

  • Magnum Stache
  • ******
  • Posts: 4086
Re: What do you think of adding a low% of crypto allocation
« Reply #35 on: September 26, 2021, 01:39:55 PM »
Hamster Trades Cryptocurrencies, Outperforms Warren Buffett:
https://futurism.com/hamster-trades-cryptocurrencies/amp

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 19791
  • Age: 40
  • Location: Toronto, Ontario, Canada
Re: What do you think of adding a low% of crypto allocation
« Reply #36 on: September 27, 2021, 08:02:24 AM »
Hamster Trades Cryptocurrencies, Outperforms Warren Buffett:
https://futurism.com/hamster-trades-cryptocurrencies/amp

The hampster is clearly a shrewd investor.  If you can't see that, you probably aren't smart enough to understand crypto.  :P

talltexan

  • Magnum Stache
  • ******
  • Posts: 4990
Re: What do you think of adding a low% of crypto allocation
« Reply #37 on: September 27, 2021, 08:21:29 AM »
I can't wait for someone to shout "Have fun staying poor, Warren!"

FINate

  • Handlebar Stache
  • *****
  • Posts: 2405
Re: What do you think of adding a low% of crypto allocation
« Reply #38 on: September 27, 2021, 09:28:20 AM »
Whoever created Mr Goxx certainly did their homework, I love it! The little trading desk with three monitors with city skyline view, Goxx Capital sign on the wall next to the quintessential office clock, the cold office swing-chair, Wheel of Intention, gratuitous stats like the speed of the wheel, and the animations for buy/sell events. Nailed it.

Car Jack

  • Handlebar Stache
  • *****
  • Posts: 1999
Re: What do you think of adding a low% of crypto allocation
« Reply #39 on: September 27, 2021, 12:22:30 PM »
If I wanted to add currency to my portfolio, I'd add either the Canadian dollar or British pound.  What's that got to do with crypto?  Well, they're all currency, right?  Less risk that say China outlaws the pound, where they just outlawed all crypto.

aceyou

  • Handlebar Stache
  • *****
  • Posts: 1672
  • Age: 39
    • Life is Good - Aceyou's Journal
Re: What do you think of adding a low% of crypto allocation
« Reply #40 on: September 27, 2021, 12:33:45 PM »

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.

I hope my assumptions are not barf, but I will soon be an example of a person with a medium portfolio (700k) who will be making a significant Crypto investment.  I'm at 20% now and will be moving to about 40% within the month.  I'll have about 320k in crypto (Ether and Bitcoin) and 400k in VTSAX at that point. 

I'm not doing it because I think the market is about to rise short term...I am not a short term investor and don't claim to know what any market will do short term.  I am doing this on the assumption that cyrpto is going to be the main financial instrument for the world by the middle of this century.  The only way I plan to exit this strategy is if it becomes crystal clear that this assumption has failed.    I have put spent about 200 hours studying crypto over the past few months trying to poke holes and look for reasons it will fail, but it just leaves me convinced that it will succeed.

I am not posting this to try to change your mind or disagree with you, but rather to add myself as a public data point so we can all see together whether I succeed or fail.   If correct, I plan to celebrate and hopefully even retire sooner than expected.  If false, then I plan to laugh at myself along with the rest of the forum! 

Cheers! 

FLBiker

  • Handlebar Stache
  • *****
  • Posts: 1535
  • Age: 45
  • Location: Canada
    • Chop Wood Carry FIRE
Re: What do you think of adding a low% of crypto allocation
« Reply #41 on: September 27, 2021, 01:31:13 PM »
I certainly do not claim to be an expert on crypto, but I've recently been struck by analogies between the development of blockchain technology and the development of the internet, in the sense that both had / have tremendous potential to transform business (and our lives) in ways that are hard to imagine in advance.  Even if I buy that argument for blockchain (which I think I do), that still doesn't give me any confidence that any of the current coins or platforms are necessarily the way forward.  Lots of people went broke in the dot com bubble, even though they were absolutely right in betting that the internet would change the world.

ChpBstrd

  • Magnum Stache
  • ******
  • Posts: 4086
Re: What do you think of adding a low% of crypto allocation
« Reply #42 on: September 27, 2021, 04:11:26 PM »
Quote
I am doing this on the assumption that cyrpto is going to be the main financial instrument for the world by the middle of this century. The only way I plan to exit this strategy is if it becomes crystal clear that this assumption has failed. 

Quote
I've recently been struck by analogies between the development of blockchain technology and the development of the internet, in the sense that both had / have tremendous potential to transform business (and our lives) in ways that are hard to imagine in advance. Even if I buy that argument for blockchain (which I think I do), that still doesn't give me any confidence that any of the current coins or platforms are necessarily the way forward.  Lots of people went broke in the dot com bubble, even though they were absolutely right in betting that the internet would change the world.


I hear a lot of talk about how we don't yet know how or if we will use specific cryptocurrencies in the future, and there may be a fair argument that we should own a few wild speculations or hedges to cover us in the event of unexpected technological change. In the domain of cryptocurrencies, if they become "the main financial instrument for the world by the middle of this century" our portfolios would experience the following consequences:

*Much of the banking sector would be destroyed, and replaced by crypto finance startups that would be un-investable for years after they've wiped out the companies we were invested in.
*If the dominant cryptocurrency had deflationary characteristics, like bitcoin, the world would sink into an economic depression. Deflation is really bad for economic growth.
*If central banks could no longer control the money supply, severe recessions and inflationary/deflationary episodes would rock economies, as occurred in the late 1800s. 
*A huge transfer of wealth would have to occur from people using national currencies to people holding and not spending fiat cryptocurrencies. This would be the biggest transfer since the Russian or Chinese Revolutions and nobody would take it sitting down. First, established interests would try to ban crypto. If that failed, war would be the result. I.e. few people would accept lifelong serfdom by shrugging their shoulders and saying "wish I bought Bitcoin when it was only $100,000."
*Wars might also be fought over cryptocurrency specific issues, like forks or other changes in the rules. A deflationary crypto would eventually have to change its rules to be inflationary if the economy is to grow, but existing wealthy people would be against such changes (as they are generally against QE now).
*An energy crisis and chronic microprocessor shortages would crimp economic growth and drive inflation. Things like air conditioning and electronics not dedicated to payment processing would become much more expensive, if not luxuries.
*A worst-case climate scenario would occur, as a mad dash for fossil fuels occurs in an attempt to keep up with growth in the use of crypto. Coastal cities worldwide face the fate Jakarta is facing now, and desertification occurs worldwide. Places like Arizona and Pakistan become as uninhabitable as the Sahara Desert around mid-century.
*Hackers become a secret nobility, wiping out entire national reserves of cryptocurrency and millions of investors at a time, and influencing politicians and law enforcement to look the other way. Again, wars ensue.
*Authoritarian nations that are able to ban crypto (e.g. China) will outperform nations where domestic interest groups prevent legislative action. Big cryptocurrency holders in democracies will soon lobby to prevent any legislation from limiting use of crypto. Energy companies may help them. Thus, the influence of authoritarianism expands.

Overall, it's a bleak picture for those of us retiring on the proceeds of investments and expecting to live in free, wealthy societies like we did in the past. I have no idea how to hedge for such a future, much less exploit it.

Picking which cryptocurrency will attain dominance 20 years from now is at least as hard as picking stocks. Bitcoin, Ethereum, Litecoin, Dogecoin, etc. could ALL easily fade into obsolescence just like hundreds of once-massive technology brands such as DEC, IBM, GE, Atari, Netscape, MySpace, Blackberry, Nokia, etc. In a future where one or maybe two cryptocurrencies become dominant, and hundreds (thousands?) of others fail, a diversification strategy may not be helpful. You'd actually have to pick the winner and have so much invested in it that you wouldn't get to pick very many others. This is a decidedly narrower path for retirement success than the old indexing and diversification advice. Even worse, there's no particular difference or reason why one cryptocurrency is more likely to succeed than another. It's literally a wild guess among hundreds of current and future contenders, and there is no way to be good at it or apply reason to it. Perhaps the winning strategy would be to place some kind of long-term bet against cryptocurrencies in the hope that the eventually successful currency hasn't been invented yet. Still, that's crazy risky.

Quite frankly, if we even started going down the road described above, there would be considerable backlash and probably some kind of reversal before it got too far. It's entirely possible though, that this backlash is misdirected. E.g. people might attribute their economic decline to the usual suspects: minorities, other countries, conspiracy theories, religious causes, political opponents, etc. rather than blaming the new currency. If crypto investors emerge as a political force, they could reshape politics by cultivating a blame game while they consolidate wealth.

Good luck hedging all of that! I figure I might as well bet everything that the whole cryptocurrency thing collapses or is banished by governments. That's probably the only direction which could lead to a prosperous and happy retirement. Given that a lot of other people have this interest, it's likely this side will gain support in the coming years.   

Telecaster

  • Magnum Stache
  • ******
  • Posts: 2888
  • Location: Seattle, WA
Re: What do you think of adding a low% of crypto allocation
« Reply #43 on: September 27, 2021, 04:48:41 PM »
^ I don't think it will get to that point.  At least not very soon. 

Here are the main advantages of crypto:

1)  Does not require a trusted third-party to complete the transaction

2)  Cannot be inflated away by central government manipulation.

There are other advantages, but most are subsets of/related to those. 

But with Bitcoin in particular the transactions are so slow and so expensive that in order to use it as currency you actually do need a trusted third party application running on top of it.  So that advantage goes away.

And while Bitcoin can't be inflated away, it also can't be stabilized so you don't know what prices will be in the future.  That is a major liability, which essentially disqualifies it from having any real utility as a currency. 

So we're kind of left with Bitcoin as a store of value.  Which it might be.  As long as people in the future value it as much as people value it today. 

habanero

  • Handlebar Stache
  • *****
  • Posts: 1065
Re: What do you think of adding a low% of crypto allocation
« Reply #44 on: September 27, 2021, 04:59:46 PM »
With the aid of 8(?) mainframes VISA can do 50.000 transactions per second.

Store of value? Maybe, as long as enough folks believe in it. As a general means of payment? No way for Bitcoin.

There is also no way the US or any other semi-functioning country is gonna accept some new "currency" as legal tender,

Crypto might collapse or go through the roof, but I still stick with the tried and tested slow and steady to build wealth.

If the US is ever gonna accept digital money it will be digital USD in some form, not some crypto.

clarkfan1979

  • Magnum Stache
  • ******
  • Posts: 2744
  • Age: 42
  • Location: Pueblo West, CO
Re: What do you think of adding a low% of crypto allocation
« Reply #45 on: September 27, 2021, 11:00:28 PM »

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.

I hope my assumptions are not barf, but I will soon be an example of a person with a medium portfolio (700k) who will be making a significant Crypto investment.  I'm at 20% now and will be moving to about 40% within the month.  I'll have about 320k in crypto (Ether and Bitcoin) and 400k in VTSAX at that point. 

I'm not doing it because I think the market is about to rise short term...I am not a short term investor and don't claim to know what any market will do short term.  I am doing this on the assumption that cyrpto is going to be the main financial instrument for the world by the middle of this century.  The only way I plan to exit this strategy is if it becomes crystal clear that this assumption has failed.    I have put spent about 200 hours studying crypto over the past few months trying to poke holes and look for reasons it will fail, but it just leaves me convinced that it will succeed.

I am not posting this to try to change your mind or disagree with you, but rather to add myself as a public data point so we can all see together whether I succeed or fail.   If correct, I plan to celebrate and hopefully even retire sooner than expected.  If false, then I plan to laugh at myself along with the rest of the forum! 

Cheers!

It's possible to make money in anything. Some play and win the lottery. This discussion is more about what makes a good strategic investment. Not fear of missing out of potential future returns.

Good luck to you. You seem more reasonable than most. However, in order for this to work, your co-investors need to have the same level of confidence and determination. If trust weakens and people start to flee, it doesn't matter how well the technology performs.

If the technology performs well, it becomes a threat to the currency of the United States. It would be in the best interest of the United States to make it illegal or put restrictions on it. As others have said, due to special interest, we would have to engage in war for Bitcoin to become the dominant currency. It could happen. Anything is possible.

In a similar thread, (not too long ago), someone was advocating that rental real estate was just as risky as Bitcoin and cited the 2008-2012 housing recession. It's true that from Q1 2007 to Q1 2009, real estate decreased nationally about 19%.

https://fred.stlouisfed.org/series/MSPUS

Within the last 6 months, it looks like the biggest drop for Bitcoin was May 9 to 19. The drop was 36% over 11 days.

You said that if Bitcoin goes 10X, you will quit your job. You also said that you are in it for the long haul.

What is your withdrawal strategy for the next 30-40 years with Bitcoin?

FLBiker

  • Handlebar Stache
  • *****
  • Posts: 1535
  • Age: 45
  • Location: Canada
    • Chop Wood Carry FIRE
Re: What do you think of adding a low% of crypto allocation
« Reply #46 on: September 28, 2021, 05:58:07 AM »
Here are the main advantages of crypto:

1)  Does not require a trusted third-party to complete the transaction

2)  Cannot be inflated away by central government manipulation.

There are other advantages, but most are subsets of/related to those. 

But with Bitcoin in particular the transactions are so slow and so expensive that in order to use it as currency you actually do need a trusted third party application running on top of it.  So that advantage goes away.

And while Bitcoin can't be inflated away, it also can't be stabilized so you don't know what prices will be in the future.  That is a major liability, which essentially disqualifies it from having any real utility as a currency. 

So we're kind of left with Bitcoin as a store of value.  Which it might be.  As long as people in the future value it as much as people value it today.

Also, re: #1, even if the need for a third party app were eliminated, I feel like this "advantage" cuts both ways.  After all, it's due to this "advantage" that people have lost coins, or have coins they can't access, etc.  Personally (and maybe this makes me a sheep or whatever), I like the fact that third parties (ie banks, investment firms) are responsible for keeping track of my money and investments.  They are insured professionals, and I'm comfortable with the minimal fees I pay for that service.  I agree that in some sort of catastrophic future, these entities could fail and I could lose access to everything, but I don't believe that in this same catastrophic future folks would accept a digital currency for loaves of bread.

aceyou

  • Handlebar Stache
  • *****
  • Posts: 1672
  • Age: 39
    • Life is Good - Aceyou's Journal
Re: What do you think of adding a low% of crypto allocation
« Reply #47 on: September 28, 2021, 06:13:45 AM »

Store of value? Maybe, as long as enough folks believe in it. As a general means of payment? No way for Bitcoin.

There is also no way the US or any other semi-functioning country is gonna accept some new "currency" as legal tender,

If the US is ever gonna accept digital money it will be digital USD in some form, not some crypto.


The governments of the US and other so-called semi-functioning countries may or may not choose to not accept bitcoin, but how often do you make a payment to a nation-state's governing body anyway? 

99.9% of the time, we make payments to corporations in the world, not the government institutions themselves.  And yes, those corporations will be accepting non government issued crypto. 

Twitter just announced that they will accept peer-to-peer bitcoin transfers as a general means of payment through a layer 2 solution called the lightning network.  Currently they have over 200 million daily users, most of whom are younger than 35 years old. 

https://www.theverge.com/2021/9/23/22689806/twitter-bitcoin-lightning-tipping-nft-authentication


So now there exists whole countries (El Salvador currently, with Panama, Cuba, and Ukraine making strides) who accept bitcoin, and we have one of the biggest social networks in the world accepting it.  Keep in mind that bitcoin was created only 12 years ago.  To me, the take-away isn't "the US government doesn't even accept it yet".  The real take-away is "wow, in only 12 years, small countries and the some of the world's biggest corporations are already accepting it as legal tender.  This is pretty mind blowing!" 



aceyou

  • Handlebar Stache
  • *****
  • Posts: 1672
  • Age: 39
    • Life is Good - Aceyou's Journal
Re: What do you think of adding a low% of crypto allocation
« Reply #48 on: September 28, 2021, 06:40:09 AM »

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.

I hope my assumptions are not barf, but I will soon be an example of a person with a medium portfolio (700k) who will be making a significant Crypto investment.  I'm at 20% now and will be moving to about 40% within the month.  I'll have about 320k in crypto (Ether and Bitcoin) and 400k in VTSAX at that point. 

I'm not doing it because I think the market is about to rise short term...I am not a short term investor and don't claim to know what any market will do short term.  I am doing this on the assumption that cyrpto is going to be the main financial instrument for the world by the middle of this century.  The only way I plan to exit this strategy is if it becomes crystal clear that this assumption has failed.    I have put spent about 200 hours studying crypto over the past few months trying to poke holes and look for reasons it will fail, but it just leaves me convinced that it will succeed.

I am not posting this to try to change your mind or disagree with you, but rather to add myself as a public data point so we can all see together whether I succeed or fail.   If correct, I plan to celebrate and hopefully even retire sooner than expected.  If false, then I plan to laugh at myself along with the rest of the forum! 

Cheers!

It's possible to make money in anything. Some play and win the lottery. This discussion is more about what makes a good strategic investment. Not fear of missing out of potential future returns.

Good luck to you. You seem more reasonable than most. However, in order for this to work, your co-investors need to have the same level of confidence and determination. If trust weakens and people start to flee, it doesn't matter how well the technology performs.

If the technology performs well, it becomes a threat to the currency of the United States. It would be in the best interest of the United States to make it illegal or put restrictions on it. As others have said, due to special interest, we would have to engage in war for Bitcoin to become the dominant currency. It could happen. Anything is possible.

In a similar thread, (not too long ago), someone was advocating that rental real estate was just as risky as Bitcoin and cited the 2008-2012 housing recession. It's true that from Q1 2007 to Q1 2009, real estate decreased nationally about 19%.

https://fred.stlouisfed.org/series/MSPUS

Within the last 6 months, it looks like the biggest drop for Bitcoin was May 9 to 19. The drop was 36% over 11 days.

You said that if Bitcoin goes 10X, you will quit your job. You also said that you are in it for the long haul.

What is your withdrawal strategy for the next 30-40 years with Bitcoin?

Thanks for being willing to have an open discussion, despite having a different viewpoint. 

First, to be clear, I plan to be more invested in Ethereum than Bitcoin, but to hold both.  Bitcoin has like the most pure currency that coders could dream of, which entices me.  Ethereum has a MUCH more robust network of coders and corporations building on it's platform, which entices me. 

Here's my current withdrawal strategy:

If Ether and Bitcoin do establish themselves, then a withdrawal strategy for them is probably much more graceful and simple than in today's environment.  Ether and Bitcoin currently have a combined market cap of about 1.1 trillion dollars.  Enough money to already be legit entities, but very small compared to the ~95 trillion market cap of the corporations that make up VTSAX.  This is what creates the possibility for variance where the coin can drop 36% over 11 days as you mentioned.

However, if my assumptions are correct, then 20 years from now corporations and even several countries will be accepting these currencies as acceptable form of payment, and the market cap will be far higher than 1.1 trillion.  This is key.  If there is let's say 25 trillion held worldwide in Bitcoin/Ether (which I don't think is unreasonable, and possibly an underestimate), the variance of the currency will drop significantly.  This will have the downside of creating lower growth potential, but the huge upside of taking away much of the risk of waking up to 25% of your wealth evaporating. 

So, over time, I predict that Bitcoin/Ethereum will likely become worse from a standpoint of wealth creation, but will become much more stable as a way to store value.  My guess is that in 20 years, I won't be getting out of my Ether/Bitcoin positions to decrease volatility, rather I'll be doing it because volatility is low enough that VTSAX is once again a higher level of volatility, and therefore once again a better way to grow wealth. 

I'm not asking you to agree with my opinion, but did I explain my thoughts well enough that you are able to understand my opinion?  I've been working really hard to clarify all this in my own mind, and I know I'm not amazing at clarifying my thoughts to others yet:) 

TheAnonOne

  • Handlebar Stache
  • *****
  • Posts: 1691
Re: What do you think of adding a low% of crypto allocation
« Reply #49 on: September 28, 2021, 07:23:06 AM »
For what it's worth I am something like 20% crypto.

I don't include it on my NW sheets and I really didn't spend THAT much on it(maybe 1% NW or less). It just grew to that. I dumped most of that into some newer projects (alts) earlier this year and reset the growth curve.

If it does a 5X, I can FIRE. It's worth the gamble to me. It's somewhat like holding a perpetual lottery ticket.