Quote from: deisik on June 18, 2015, 09:26:56 AM

Quote from: johnyj on June 18, 2015, 03:59:25 AM

Quote from: deisik on June 17, 2015, 11:22:36 AM

Quote from: johnyj on June 17, 2015, 10:25:58 AM

Volatility must be compared at a risk adjusted basis. After adjust the risk to same 5% per year level using lower leverage, the bitcoin outperforms every single investment in the world

I think you can't do that without losing touch with reality. While you can safely throw away the probability of the gold price going to zero, but how are going to adjust the risk of the Bitcoin price hitting zero to 5% per year? I guess you could do that mathematically (thus obtaining astronomical annual profits), but would it make any sense economically?

When you comparing the financial performance of any assets, you only compare the historical performance, never the future. No one can tell the future, even for gold, it might drop to cents if some central banks decided to cash out their reserves. I can give you many reasons that bitcoin price will never hit zero but that is just subjective opinion like your opinion on gold, no use for evaluating the risk/reward ratio of certain assets

I'm curious if you understand that by saying this (namely, "you only compare the historical performance, never the future"), you actually shoot yourself in the foot? It was you, after all, who suggested to "adjust the risk". How on Earth are you going to obtain the risk estimation (and volatility) if not from the past performance?

Quote from: johnyj on June 18, 2015, 03:59:25 AM

No one can tell the future, even for gold, it might drop to cents if some central banks decided to cash out their reserves

I think you may want to learn how much gold all central banks actually have in their stash (in respect to total gold out there, plus paper gold)

Risk Adjusted Return is a standard way of comparing return for securities with different risks
http://www.investopedia.com/terms/r/raroc.asp

If a government bond have 2% risk (volatility) but 4% return per year, the risk/reward ratio is 1:2, however bitcoin have 90% risk while have 4500% return, the risk/reward ratio is 1:50, 25 times higher than government bond

You can always reduce the risk of bitcoin investment to 2% by investing only 1/45 of the capital, achieving the same risk level as government bond, but much higher return at 100% per year. Even if bitcoin's value goes to zero, you lose maximum 1/45 of your capital