Cryptocurrencies

[Jamo]

How many people here have bought cryptocurrencies? Which ones are you buying/thinking of buying?

I signed up for bitFlyer and have purchased Bitcoin and Ethereum. I'm considering allocating around 10% of my investments to it.

[RetireJapan]

It's in my 'too hard/don't understand' box.

Especially now that the mass media has noticed it and rappers are doing ICOs...

[adamu]

I'll confess. This is my Apple share story.

Back in 2011 (I think) I bought around 50 Bitcoin. Then the price rose from $2 to $10 so I sold most of them. Now the price is around $5700. If I had held onto them, I'd have $285,000 now from my initial investment of about $150.

So... yeah.

That being said, I decided to get back into it last year. I thought I'd purchase a little every month. At that time the price in yen was 40,000. Now it is 640,000. Should have gone all in . Once the price reached 100,000 yen I stopped buying because it was over my asset allocation already. Even a couple of months ago, the price was 300,000 yen, it's doubled in a few months.

Now it's come to the point where I'm considering selling some. Like you I thought an asset allocation of about 10% is reasonable. I'm currently about 17% of net worth in Bitcoin due to the recent exponential rises. But I'm really struggling with it. It could be a bubble, in which case standard rebalancing is the sensible thing to do. But it could be that Bitcoin is representing a genuinely new asset type, and given that there is a fixed quantity that will ever exist, it could still be looking cheap. It's impossible to judge... argh. On the other hand I have a friend who trades crypto for a living. He messaged me to say he'd made $100k over the weekend. But he's a full-time trader. That's something I have neither the desire nor risk-tolerance for.

Besides Bitcoin, I dabbled a little in Litecoin. I managed to double my investment there, but that was pure luck. Could have easily gone the other way. I watched it lose money for months and sold it when it recovered and went further (but could have made more if I'd held out for longer). I'm back into 100% Bitcoin now. One cryptocurrency is enough for me to worry about.

[Jamo]

Thanks for sharing adamu! I'm sure there's many people who could have been much richer if they held on.

Like you say, it's so hard to decide what to do. I guess it's important to remember that it's just money

[N00bster]

Being a nerd, I have mined a bit (about 1 bitcoin) when it was still doable for individuals. Keeping it just in case it goes over 1 million, but not hoping too much.

The technology behind bitcoin is extremely promising because of its potential to make secure transactions that are verifiable by anyone (like stocks or e-money, but also voting systems, etc).

By itself, bitcoin just has the value people give it. Like anything else, you will say, and I agree. But even though the ride has been impressive so far, it still looks more like gambling than investing to me.

[adamu]

Being a need, I had mined a bit (about 1 bitcoin) when it was still doable for individuals. Keeping it just in case it goes over 1 million, but not hoping too much.

If I gave you 700,000 yen now, and you had no bitcoin, would you buy bitcoin with it? Probably not. Therefore you should probably sell the one that you have now, or at least part of it, because you're not willing to take the risk.

This is the most rational way of thinking about it, I believe. Although I'm struggling to act on it myself.

[RetireJapan]

The thing is, I have no Bitcoin, but I have to keep reminding myself that this is not something I understand or want to get involved with. Even so I have a desire to get in on the action. FOMO is growing, fueled by the endless stories in the news about Bitcoin and it's new heights...

[N00bster]

Being a need, I had mined a bit (about 1 bitcoin) when it was still doable for individuals. Keeping it just in case it goes over 1 million, but not hoping too much.

If I gave you 700,000 yen now, and you had no bitcoin, would you buy bitcoin with it? Probably not. Therefore you should probably sell the one that you have now, or at least part of it, because you're not willing to take the risk.

This is the most rational way of thinking about it, I believe. Although I'm struggling to act on it myself.

Not sure about that. That was my reasoning when I sold my company equity, and that led me to realize only a fraction of the gain I could have made. I don't know what the "rational" approach would be, and I suppose everyone has their own version of it?

My thinking here is that this is an asset that cost me almost nothing to acquire and is gaining value very quickly. There is no scenario where this could result in a loss.

On the other hand, buying this asset for 700,000JPY would make me enter a scenario where the loss could be this very sum.

Maybe this is just a manifestation of loss aversion? In any case, I am not selling for less than a million USD.

[adamu]

My thinking here is that this is an asset that cost me almost nothing to acquire and is gaining value very quickly. There is no scenario where this could result in a loss.

On the other hand, buying this asset for 700,000JPY would make me enter a scenario where the loss could be this very sum.

By holding, you are risking opportunity of spending that money elsewhere. If the price drops, you've lost the money you would have otherwise had. That is exactly the same as if you got a windfall and decided to spend it on bitcoin. The only difference in our case is that we bought the bitcoin, and the rise in price provided the windfall.

That was my reasoning when I sold my company equity, and that led me to realize only a fraction of the gain I could have made.

Yes this is the same reason I'm having an internal debtate. But it doesn't mean the logic was wrong. If you really want to take a punt on the price rising further, you have to increase your asset allocation to that asset. Are you comfortable with 50%+ of net worth being in bitcoin / your company's stock? This is why the "would I buy this if I got a windfall" thought experiment is useful, because it helps us see our poor reasoning caused by our vested interest (and a small consolation if we sell and the price continues to rise...).

By the way, are you aware of the Bitcoin Cash and Bitcoin Gold forks? Bitcoin was forked into Bitcoin Cash a few weeks ago, so your bitcoin is also worth 1 Bitcoin Cash. And on the 25 October it will fork again into Bitcoin Gold. This means if you haven't touched your bitcoin since the forks, you'll have 1 Bitcoin, 1 Bitcoin Cash, and 1 Bitcoin Gold.

[N00bster]

By the way, are you aware of the Bitcoin Cash and Bitcoin Gold forks? Bitcoin was forked into Bitcoin Cash a few weeks ago, so your bitcoin is also worth 1 Bitcoin Cash. And on the 25 October it will fork again into Bitcoin Gold. This means if you haven't touched your bitcoin since the forks, you'll have 1 Bitcoin, 1 Bitcoin Cash, and 1 Bitcoin Gold.

Ah, yes. I am thinking about converting these to regular bitcoin. Looking at how the bitcoin cash lost value shortly after being introduced, it seems wise to do that for bitcoin gold ASAP. I hope I can put my hands on a working client fast enough to get a good change rate.