Re: DCA, the most convenient way to increase your bitcoin as an investor.
⭐ Merited by tiCeR (2)
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From what I am reading within your response, so far, is that there are not ONLY objective limitations involved in our assessments about "what we can afford to lose" but also several objective limitations too that even involve how convinced we are about the investment thesis of the asset (in this case bitcoin) as compared with other places that we might be able to put our money (investments or otherwise).Surely there are levels of complications of anyone's financial life that become more complicated if a person has to support a family or even if they have a business with uncertain cashflows. The more complicated our financial life and our obligations, the less that we are able to set aside cash for investing 4-10 years or longer.
Yes exactly. I get that to be as objective as possible is the least you can do to provide some guidelines so to say, but we still have to cope with different circumstances that we might again evaluate differently. Now over-individualization (neologism?
) is not the way here and I think you are giving more than just subjectively given guidelines. You are giving actual examples, pure maths, which is convincing and then people can decide whether they think, say DCA, is a model to follow. But indeed risk perception and risk reality can be in discrepancy and I believe that those more educated - on average of course - suffer from a smaller gap between perception and reality.
Bitcoin is an incredibly hard to understand asset if you are not somewhat into a wide multidisciniplary spectrum of theoretical and applied scienes. I am not saying you have to be a geek, but if you are someone without critical thinking abilities, or the general interest in understanding the world, ask questions about systems, read the news in more than one newspaper, etc. etc. Bitcoin is tough for those people and they are more into a casino when they go for it and this is still fine for as long as they do at least have a strategy in place. But what's the chance that people can follow strategies, judge risks properly, assess the gap between perception and reality, distinguish between subjective and objective, etc.
Personally, I consider that the so many hesitancies that newbies might have about bitcoin or their uncertainties about the strength of bitcoin's investment thesis can be tempered through their choice of position size, which means that if they are hesitant in a variety of ways, they go through various means to take a smaller position size while they are attempting to learn more about the asset beyond merely having a number go up thesis. Don't get me wrong. Having a number go up perception of bitcoin can be enough to invest into it, and surely some folks do not even get beyond understanding bitcoin in any kind of deeper way, yet if number go up is their only idea of bitcoin, then they may want to retain even more of a limited investment allocation based on such a seemingly superficial assessment - including acknowledging that number surely does not always go up, especially in the short-term, and it is not even guaranteed to go up in the long term, even though several aspects of bitcoin's fundamentals would suggest that it has decently good odds of continuing to go up in the future, just as it has gone up in the past (likely not as high on a percentage basis, but still a lot of upside potential, so seems worthy of investing into bitcoin based just upon that in terms of the most you can lose is 100%, but there are also quite a few scenarios that you can gain decently well on whatever amount you end up choosing to put into it).
Another good thing about DCA is the ability to just choose the amount or the level of aggressiveness based on your own budgetary considerations, so a person who has an income of $3k per month and expenses of $2k per month has a discretionary income of $1k per month.. He could choose to be super aggressive and invest $250 per week or he could be whimpy and ONLY invest $10 per week. Either way is acceptable, yet the most aggressive side will take some planning to make sure that he is not over doing it in terms of making sure that he has various back up funds in place and that he is not failing to leave enough space in his budget to have some flexibility for some of his expenses, needs and/or wants... so even the most aggressive might want to leave some space and to invest $150 to $200 per week and then surely if there is still money left over at the end of the month he can make some additional buys at that time, but to have some extra cash on hand can still be nice and convenient and comfortable, even if a person is wanting to try to be as aggressive as he can be with his investment of time, energy and value into bitcoin.
It is, but sometimes a very unique door opens in front of your eyes while you are not set up to put serious money into it. Now I know that DCA from the very early days on would have generated a fortune even with small amounts on a weekly or actually monthly basis.
DCA involves whatever amount that you have available, and so what are we talking about when we are talking about early days? You want to do two cycles or more? Two full cycles would put us at September 2016. And, maybe a reasonably small amount could be $50 per week? If you invested $50 per week over the last 8 years, you would have had invested ONLY about $21k, yet you would have nearly 3.8 BTC, so yeah, it might not exactly be fuck you status levels of money, yet that is partly a choice in regards to how aggressively a person might want or be able to be in the event that they could have had higher levels of investment based on their discretionary income or not... Of course, you can keep those dates the same, and adjust the numbers up or down in order to figure out what a reasonable budget for you might have had been... so doubling the weekly DCA amount to $100 would double the amount invested to $42k and the amount of BTC to 7.6, and surely those are not bad places to be.Of course, if we go back to your own forum registration date of July 2011, we could lower our investment amount to a mere $10 per week and be rich as fuck from that kind of a timeline and those kinds of relatively modest DCA amounts. That would be well more than 142 BTC for only $4,700 invested.**
**The calculator only allowed me to calculate 9 years at a time, yet most of the performance of the investment comes from getting into the investment early.
Even though I might attempt to personalize my responses to some extent, there is no need to take my comments in any kind of a personal way, especially since we are interacting in a public thread, so sometimes it might not even be necessary that we get any personal facts correct, even though sometimes if we might be working with some personal facts or hypotheticals, changes in the facts or hypotheticals can sometimes make it more difficult to understand certain comparisons that might be made between different kinds of BTC accumulation approaches that any of us could have had taken on a historical basis, whether we are talking about 1 or 2 cycles of history or perhaps some longer period. Frequently, i like to use January 2012 for the earliest of my hypothetical investors, but still we can choose whatever timeline that we like in terms of trying to tailor some of the comparisons of what was done to what could have had been done.. and even I claim to have beaten a regular DCA approach even though I made a few pretty BIG mistakes along the way, too. Yet, whether I beat the DCA approach or not surely partially depends upon how the facts are framed.
My point was that "don't invest more than you can afford to lose". What do you do when a door like bitcoin opens in front of your eyes and you have a clear mind and are 90%, 93%, 95.5%, 97% .... convinced that this is it. This is revolutionary, but you only have 20 bucks in the bank. Would it be irrational to take a risk that rationally you can't afford to lose? When at the same time you know this is unique, this is not Samsung or Apple, black or white, this is new. And it can't be stopped (as far as you entrust yourself to be able to tell because it is still pioneer tech to say the least).
So to say, I am looking back because I would like to know your answer how you would have proceeded with too few pennies in the bank when actually you know this thing within one arm's length is going to be huge. What's the right call to make then?
So to say, I am looking back because I would like to know your answer how you would have proceeded with too few pennies in the bank when actually you know this thing within one arm's length is going to be huge. What's the right call to make then?
I always attempt to suggest that guys try to invest in bitcoin as aggressively as they are able to do without over doing it, which I know is quite a vague answer, since there are so many differences in terms of individual circumstances that each person has to account for, and their view on the investment as compared with other places that they can put their value is only one of the 9 factors that each of us should be considering when we invest into something like bitcoin.
But the truth is that bitcoin was such a different thing from all other investment opportunities that hardly anyone could be fully rational about it. It was quite an adventure back then because it was literally impossible for the average Joe to see and understand whether there are bugs or backdoors or what the weaknesses are of such a network. I would argue that the chances for bitcoin to go from 60k to 600k today is at least as high as bitcoin going from 600 USD to 6,000 USD back then because it stood the test of time.
Well? Now you seem to be talking about late 2016 when you are referring to starting from $600. I personally consider that there were more and more onramp options available with the passage of time, and depending on your location would affect which kinds of options were available and the extent to which they might be cumbersome to set up.Yeah, you can ONLY do so much in terms of interacting with others in terms of suggesting what they should do, and I frequently say that everyone should be in bitcoin, and I used to say that everyone should be 1% to 10% in bitcoin, yet since 2020, I have mostly been saying everyone should be 5% to 25% in bitcoin, and my change in posture was meant to communicate how seriously I believe the topic happens to be, but my change in number has not really seemed to have had gotten me any further in terms of my witnessing any inspiration from others to actually start to act upon their finding out about bitcoin in order to start buying it. So, I am not sure what to do. Either people are interested or they are not. There is only so much that I can attempt to talk positively about bitcoin or to inject bitcoin into any conversation, and frequently people will say that they agree with me in regard to some of my implied assertions that "bitcoin fixes this," but they do not do anything to act such acknowledgement.
Let me ask you: did you learn your lessons at some point with shit coins or have you been a pretty much maximalist from day one you found out?
I have never really been any kind of enthusiast or pursuer of shitcoins, yet when I first got into bitcoin, there were something like 7 shitcoins listed on BTCE, and I bought like $100 of each of those 7 shitcoins just to be able to monitor them.. which was probably a dumb idea.. and then currently I have a few shitcoins (not counting the USDT that I hold which seems to largely just a substitute for the dollar, which I don't consider to be a shitcoin in the traditional sense of the term), but all of my shitcoins (6 of them, I believe) are less than 0.5% of the total value of my bitcoin portfolio... I don't pay too much attention to any of the shitcoins that I hold, but sometimes i might have to move one or the other of them or something like that, so they can sometimes be a bit inconvenient to continue to hold... I sometimes think that that I am holding some of them because sometimes there might be needs to have options in terms of transacting in some other way besides over bitcoin rails.
With all due respect, while experience led me to my today's thinking, I'd be surprised if anyone knew bitcoin is the truest and authentic version of this "new movement". Not sure what the best words would be here, but you get the point.
When I first got into bitcoin, I invested as a kind of hedge against the dollar, so even my thinking in late 2013 was that I wanted to search for and get some value into a gold-like hedge against the dollar, and I did not like various aspects of gold including various fees, and then the paper gold aspects and even the burden of trying to hold and/or verify physical gold. So I considered bitcoin to be better than gold and also I considered that as long as I am making on average around 6% per year on my bitcoin, then my bitcoin would not be performing any worse than the rest of my investment portfolio.. so in that sense, bitcoin has outperformed my hope for at least a 6% per annum return, and so any of the returns higher than 6% largely amount to icing on the cake. I think that my first 3-ish years in bitcoin, i was not really profitable very much, but I still ended up being o.k. with that, yet it still seems that if I look at my total bitcoin portfolio performance (even including the various mistakes that I made), I probably have around 75%-ish returns on an annual basis.
I had never considered that bitcoin has to become world reserve currency or anything outrageous like that in order to be sufficiently and adequately investable for me. My main goal was hoping to at least outperform the other aspects of my investment portfolio, yet I was also willing to live with the consequences if bitcoin were not to outperform the other parts of my investment portfolio, including that I invested aggressively, yet still I was ready, willing and able to tolerate if bitcoin were to have had gone to zero instead of what it ended up doing, which is outperforming everything else in my investment portfolio with vary disproportionate results to the upside.
I am not claiming to have had really known much of anything, yet still just deciding position size based on various ideas, including that my current consideration is that bitcoin remains a great place to put value, and everyone should try to own some, yet if they don't that is their choice, and they have to live with the consequences, just like each of us has to live with the consequences of whatever position size we have chosen to build and maintain.
The network accumulated so much value that most likely the best hackers in the world already tried their luck and attacked the network from whatever angle they might have seen an opportunity. That is something nobody really has to be afraid about today.
The attack vectors have changed over time, and surely some threats now are less relevant as compared to some of the older threats, but threats still exist, especially Sim swaps and social engineering.. and maybe even the various kinds of attacks from regulators regarding restricting on/off ramps, self-custody and threatening KYC creates other kinds of attacks that could still undermine aspects of the strength of bitcoin's investment thesis, yet from differing angles. For sure, even though institutions are getting more involved, Bitcoin is not free from attacks and/or risks...including poor people sometimes needing to be concerned about how to manage their UTXOs if they might be wanting to employ a lot of lower cost transactions on the blockchain that might become unspendable at certain points in the future.Or even the ways that mining pools are currently operating contributes to a certain amount of centralization risks in bitcoin.
The ability to cope with a loss is a function of the ability someone has to dig their ways out of a hole in case of a bad outcome. It is not necessarily the cash someone has in the bank. That's where everyone should be realistic about their own terms. Can I somehow cope with the risk I am taking? I think one very important aspect to consider is whether second or third parties would be affected if someone decides to take a risk. Of course nobody should force themselves into insolvency risk taking behavior, but there might be a few occasions in life where shifting the boundaries at least somewhat can make sense. Maybe EV (= expected value) plays an important role as well.
Yeah, if any of us leave our coins with third parties, they might be risking our coins, yet also the ways that third parties take risk with other people's money can also screw up the price for others or even contribute to changes in the whole bitcoin ecosystem in regards to regulations and supposed ways that regulators may be proclaiming to be wanting to "protect" us.The best that we can do is attempt to be aware and figure out if there might be ways to attempt to protect ourselves as best as we can from various kinds of attacks, and if we believe that there might be some existential threats then we should attempt to figure out our position size, which I doubt would be zero, but we might want to consider modifying or reallocating our position size from time to time if we believe that we might be over or under exposed to bitcoin.
Surely several longer term BTC investors will have more options to shave off some of their bitcoin position, yet earlier investors still may well be in the state of establishing their position, and they can figure out if they want to have on the lower or higher end of my recommended range of 5% to 25% or if they want to choose some allocation outside of that range.
By the way, I believe in getting an initial allocation into bitcoin of 5% to 25% for newbies, yet I don't really believe in reallocating back to your initial position size, so my initial position size was around 13.5% in late 2015 by the time I spent to years getting to that point... even though my target was 10% (in late 2014), so I had around 3.5% overallocation, yet over the years, my bitcoin allocation had gone up into the 90% (currently) and dropped back to 40% (in late 2018 for example) and bounced around at other places such as around 60% in late 2022.
Personally, I have come to the practice of not engaging in any kind of radical reallocations of my bitcoin holdings, and I consider that my philosophy has largely been to just let my winners ride rather than selling large portions of it (bitcoin in this case).. and I think that I pretty much established some variation of that kind of letting your winners ride mindset in the 2017 price run when I largely choose NOT to sell much of my BTC holdings, and maybe I was merely rationalizing that I did the right thing when BTC prices dropped from $19,666 to $3,124 from late 2017 to late 2018.
In any event, I have pretty much stuck with the let your winners ride mentality when it comes to bitcoin, even though surely I am at a point of profits now that I consider to be around 60x (with my average costs per BTC being around $1k), so I can sell BTC anytime I want if the price is $16k (like in late 2022), I would be able to sell at 16x profits and currently I can sell right around 60x profits, and not that I am selling, but I am not really very worried about having the option to sell some if I might need some money, even if the BTC price might be dipping, especially the 200-WMA is currently right around $39.6k which the 200-WMA tends to generally serve largely as a bottom price in bear markets (even though such bottom is not guaranteed), and I consider that currently we are in a bull market, yet the 200-WMA is continuing to move up and the 200-WMA (moving up around $30 per day currently) can continue to be considered as a bottom price for anyone of us who might be worried about BTC prices, even though it is not guaranteed to be a bottom price as we saw between mid-2022 to late 2023, bitcoin spent a whole hell of a lot of time below the 200-WMA as the 200-WMA was continuing to go up through that whole time, even though BTC spot price was spending a lot of time below the 200-WMA during that 16-ish months period, and the BTC spot price reached its peak bottoms below the 200-WMA at around 36% below the 200-WMA in November 2022.
Thanks for the detailed response and looking forward to read more! 
No problem. It doen't hurt to bat around a few ideas.