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Holy hell, this is some crazy advice.

If you have a sizable savings that you have been building for 5 or more years then the vast majority of your savings shouldn't be invested in any single asset.

It's only optimizing for happiness, based on expected outcomes. The only thing that might be crazy are the numeric expectations.

> It's only optimizing for happiness, based on expected outcomes. The only thing that might be crazy are the numeric expectations

The craziness is doing it with one asset and trying to maximize happiness based on assumptions about that asset and not with all possible alternative assets and trying to maximize overall happiness.

Well, one part of the craziness.

Really, what you should be doing is considering (1) overall returns of competing investments, (2) overall risk of competing investments, and (3) the degree to which those risks are independent, and (4) your own sensitivity to risk, and then combine assets and allocate investment funds among them so as to, achieve the maximum expected return possible with enough diversification to acheive a risk profile you are willing to accept.

Oh, I agree. The difference is no other asset class that a non-accredited investor can put their money in has even remotely close to the same growth possibility as Bitcoin. IRAs, 401ks, stock indexes, and other asset classes don't do much other than protect you from inflation. You can pick specific funds or companies, but their value is more or less correctly priced and you're just gambling if you try to pick and choose, because you don't have inside knowledge.

Bitcoin (cryptocurrency) is different, because it hasn't been priced yet by investors who truly understand the technology or its implications. It's like the stock market for web companies in 1995. As an analogy, we're maybe in 1996 or 1997.

It's like that yes except that you don't know whether bitcoins are like Amazon or Pets.com. Investing in anything as volatile as bitcoins is straight up gambling

Tell that to house ownerser.

> It turns out that for those of us who believe there's a reasonable likelihood (25% or greater) that bitcoins will be very high ($1 million or higher) over its lifetime

If you're gambling on the hope that all of M1 in the world will be replaced by Bitcoin and actually have come up with any sort of likelihood of that happening then you should reevaluate your ability to have ideas. In your case you think the likelihood is "25% or greater" which is to say you've got some probability distribution of probabilities -- that's not how reasoning about probability works in any high-functioning investing mind. Why can't you just collapse that to an actual percentage? Because it's all just made-up numbers.

Back in 2007, you'd be a fool if you didn't pour your life savings into real estate, since prices could only go up, right?

Does anyone have HN archive? Back then most nerds thought the latest and greatest forever-bubble was New Century Financial.

Try hnsearch.com (made by the YC company Octopart to show off their ThriftDB datastore).

You are vastly overestimating how happy millions of dollars will make you. Google around a little and you might actually put a negative number on it.

If you get the numbers right, you will arrive at the same advice any financial advisor would give you: in something as novel and hard to price as bitcoin, only invest risk capital, defined as money you could lose in its entirety and still have a sound financial plan.

I'd wholeheartedly agree with you. As someone that speculatively bought (or should I rather say, bartered) for Bitcoin on IRC before the big crash in 2009, it's the absolute wild-wild west. The saddest thing is seeing newcomers invest some money, they see the price go up, they dump in _everything_ and then there's some mini-crash and they panic sell everything.

Fear and greed are emotions that Bitcoin will teach you about. Don't risk what you can't afford and are not willing to lose.

Maybe I should suffix this and say that I don't think Bitcoin is a bad investment. It has an enormous potential and I still fervently have "faith" that it's going to turn out being something extremely useful long-term, which is why I haven't "cashed out" yet. I'd also gladly trade my BTC for goods as and when stores come online that accept them (e.g. I would gladly trade BTC for second hand books)

Here's a better plan. If you believe that there is a reasonable chance (e.g. 10%) that Bitcoin will raise in value 100-fold again in the next few years, do the following: think about how much wealth you'd need to live your dream life (i.e. spend all your time on your pet projects). Say that's 3 million. Then try to put 30k into Bitcoin. If you win, it will change your life. Otherwise, you continue as you did before. Also: do not diversify. If you put 15k into two altcoins each, and only one of them is successful, you are still stuck with your old life.

This plan is based on the idea that there is an amount of money X that allows you to significantly change your life, while amounts below X merely give you incremental improvements. If that's not the case, the plan is obviously not for you. :)

You shouldn't invest nearly all of your savings in anything; the most basic of investing advice is diversify and don't invest what you can't afford to lose.

You do realize your same logic applies to looking at a roulette wheel?

You can see that it hit a black number 20 times in and feel remorse for not letting 10 dollars ride all of the way up to 10 million for that run. -25 happiness.

You are making the same mistake gamblers and amateur stock pickers make all of the time. It's really sad and it destroys lives and relationships depending on how many people you also convince this is a good deal.

Yes, it applies to a roulette wheel in the same way.

But even if you played a special roulette wheel where your odds are fair (100% return), a loss of $X more than offsets a gain of $X because the more money you have, the less happy you feel from gaining a specific amount. Conversely, the less money you have, the worse you will feel about losing a flat amount. So playing a fair (50/50) roulette game is still a losing game, in terms of happiness.

By my estimates (I may be wrong about the estimates, but they're what I'm going by) - Bitcoin is completely different from roulette. It's more like you get to take one chance on a coin flip. Heads, you win some huge multiple (suppose 100x?) of your bet; tails you lose your bet. How much would you bet on this coin?

The only point to argue is what the odds of that coin flip are, and what you'll win if it lands favorably. You may think it's 2x. Others might think it's 10x or 1000x. I believe it will replace the speculation value of gold, so that puts it at a minimum of 350 times its current value. I also believe that it will do way more than replace gold, because of how convenient it is.

I also believe that it takes a long time (months to years) for people to understand how it works, and they won't invest until they understand it, so the current market value is far below these estimates.

Try to understand my logic here, and tell me if you still think it's totally unreasonable. I can't be convinced of different values. I am putting it at a 50% chance of getting to $500k/BTC in 15 years.

So I have a chance to flip this coin; 15 years from now it's 500x my bet or zero. How much should I bet on this coin if I really believe this is accurate?