Quote from: Grinder on April 28, 2013, 05:54:31 PM

Quote from: Schrankwand on April 28, 2013, 01:21:59 PM

You could use rebalancing, which means you always have 50:50 in Bitcoin and USD. It isn't a very useful method for generating money, but makes risk aversity an option.

Basically: Bitcoins rise, you sell, Bitcoins go to valley, you buy. Trying to keep the ratio right.

Just for kicks I analyzed what would happen if you started with $100 2 years ago and rebalanced daily. The price was $3.5 then, which would give you 15.344 btc after 0.5% fees. Today you would have $478.80 and 3.546 BTC, for a total value of $957.60. If you kept the $50 and equivalent BTCs the total value would be $2121, which includes about $40 in saved fees.

Thanks, good to know. As I thought in a backtest it would eat up a ton of profits for felt security. But this is exactly what i mean. It isn't really a very good money to maximize returns, it only lightens your returns and risk if the asset you invest in blows up. Like lets say a crash from 130 to 3 dollars...

It works particularly well with a fixed combination of Exchange traded funds and governments bonds, where you never sell before you retire. You just rebalance the ratio of index funds to government bonds to keep it steady, buying low what lost in value.