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Comment by koonsolo | Hacker News Reader

I agree with you on the El Salvador part, but not on the investment part.

> Investments are sound based on probability and risk beforehand.

Investing in bitcoin had a limited downside (lose 100%), but a very high upside (reaches it's initial goals). For me, the potential gains outweighed the low probability.

I consider myself very lucky that I made some money (wasn't crazy to put all my money in there). But for me, when it would have gone to 0, I still feel it was worth the risk.

But of course, with such a high risk high reward investment, only invest a small % of your total money.

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What you've stated here is your experience, now if you try to extrapolate the thinking/investment model you've used to large number of people - there is very limited upside and very high downside.

No it stays the same if you have an investment portfolio and only invest max 5% in high risk assets.

Assume you invest 1% of your portfolio in Bitcoin. What is your downside? 1%. Not that high, is it?

What is your upside? Maybe x100, so double your entire portfolio.

Right now, you came late to the game, so don't expect a x100. The risk is probably still the same, but the upside way lower. But when Bitcoin was still young, the upside was definitely worth the risk. And it didn't even live up to its original intent. Imagine the price if it did!

If we think like this why wouldn't I invest 1% of my portfolio in lottery tickets? At worst lose 1%, at best x1,000,000 upside?

You could consider lottery tickets as an OTM option expiring in a week with those payoffs, I suppose. If you spread 1% of your portfolio over a year and buy lottery tickets every week, you're effectively losing 1% per year with a very small chance of becoming very rich.

There are probably better places to put your 1% on. ;-)

> There are probably better places to put your 1% on. ;-)

I totally agree, but the argument being made is that "the potential upsides outweigh the low probability". That's not investing, that's gambling.

Your argument is that once it's high risk, it's gambling. Sorry but that is just not the case. It's a ratio. If you don't understand this, then I agree that you should stay away from anything that involves risk management.

Let's say we play a game where you throw a coin 3 times in the air. If it's not 3 times head, I'll pay you $1. If it's 3 times head, you pay me $10.

Your chance of winning is pretty high, while my chance is low. Yet, I would love to play this game.

> Your argument is that once it's high risk, it's gambling.

No, my argument is that once it's a matter of "you could lose everything or make it big!" is gambling.

> It's a ratio.

With totally unknown values.

> Yet, I would love to play this game.

This is exactly what the people who currently hold bitcoin are suggesting to those who don't.

> This is exactly what the people who currently hold bitcoin are suggesting to those who don't.

I never suggested this, as you could see a few replies up:

> Right now, you came late to the game, so don't expect a x100. The risk is probably still the same, but the upside way lower. But when Bitcoin was still young, the upside was definitely worth the risk.

Nevermind, this conversation is clearly going nowhere.

The reward/risk ratio of lottery tickets is very well known. And it's obviously not in your favor. So it's basically a no brainer not to invest in them.

Things like startups for example also have a very high risk rate, but also potential high payouts. There it actually makes sense since the ratio is way better.

> And it's obviously not in your favor.

Yeah, but that payout ratio - millions to one! Bitcoin will never pay out at that level - I don't know if it ever did.

I find it interesting you're arguing that an unknown ratio is preferable to a known one. Bitcoin has a known current cost, but entirely unknown chances and payouts over an unknown duration. There's little reason to assume that Bitcoin will make another massive jump other than optimism that there will be a new wave of true believer bag holders. I know the lottery is going to be drawn each week and I know the cost and the odds, as well as the minimum payout, and the current payout is updated as we get closer to the drawing.

So don't invest it in that lottery. Invest it in my lottery! I'll sell you as many tickets as you want, I pay out a trillion to one if you win, and I'll keep the risk rate totally unknown to you.

Boy do I have the investment for you! Give me your life savings, and I'll give you 50% equity in my Evil Empire. I plan on taking over the planet by 2028. What an upside! Only risk is losing 100%—that's practically nothing in comparison!

Or I guess you could buy lottery tickets. Probably a slightly less insane way to "invest" your money.

Both seems like a bad idea. Bitcoin on the other hand, made me a shitton of money :D

Have a nice day.

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