So say there are two investors. Investor A has invested 100 BTC. Investor B has invested 100 BTC also.
Right now the max profit is set to 0.5%.
If someone bets 0.1btc at 49.5%
Then they both are able to gain 0.05 btc. (or lose)
Now you implement your method. Investor B decides to risk 1% instead.
So now if someone bets 0.1 btc,
Investor A can win ±.33 and investor B can win ±.67.
This doesn't seem fair. Investor A is still okay with betting at this risk level. Why does investor B take some of his bet?
Here's another analogy:
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A and B both invest 100 BTC. Someone wants to bet 0.1 BTC. Both investors stand to gain 0.05 BTC.
Now investor B decides to double his risk by investing another 100 BTC.
So now if someone bets 0.1 btc,
Investor A can win ±.33 and investor B can win ±.67.
This doesn't seem fair. Investor A is still okay with betting at this risk level. Why does investor B take some of his bet?
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In both cases investor B has doubled his risk, and as a result 'takes' some of investor A's action. In both cases he has diluted the other investor's share by risking more. In your analogy he did it by doubling his Kelly factor, and in mine he did it by doubling his investment. In both cases he's doubling his exposure, and so doubles his reward.