Do You Know Your Magic Number for Investing?

in #bitcoin6 years ago

Bitcoin and other cryptocurrencies have had a bad couple of days recently and as a result, many people have significant losses in their portfolio. One lesson I will always share for every crash is to LIMIT YOUR POSITION SIZES to amounts that are suitable for your level of risk tolerance. Believe it or not, I'd argue one of the biggest reasons financial advisors even have jobs is because people suck so much at identifying their own levels of risk tolerance and abiding by it.

If you are glued to the screen all the time watching the charts, or if you're losing sleep over Bitcoin's / altcoins' fall, then it's time to trim your position sizes to a level where you can make healthy decisions and continue to live comfortably. For some investors / traders, it takes more crashes than others to finally learn this lesson. However, you don't get too many chances in a volatile market in this one so try and figure it out as soon as you can.

In terms of trading, I've decided to pick up some Vechain (VEN) at close to 39k Satoshi flat. This is a short-term trade: I am looking to exit March 16th (or so - depends on if it pumps) before the pre-deadline selloff for the X series nodes.

These nodes encourage investors to hold more VEN, so I am hoping for a pump prior to the deadline to sell into. This is a risky trade as it is possible this is already priced in and that VEN sells off even sooner before than the deadline than I plan to sell. I am not going "big" on this trade, just want to test the waters with catalyst based trading (akin to earnings trading in stocks).

Some updates: I haven't bought Monero yet and don't plan to unless it goes below 2.5m Satoshi (perhaps it will sell off after the hard fork). I still continue to hold Cardano, but won't buy anymore for a long time (lower 1k Satoshi range). Bitcoin is trading close to its 200-day moving average, so should be interesting to see if that holds up as support. I won't be adding any more since I fully allocated at $8.3k during the last crash.

Hope you all enjoyed as usual - Thank you for watching / reading!


Thanks for the post. Those who invest in bitcoin have to deal with a very difficult asset to valuate. What is it worth? When it starts to drop, where will it stop? Is it all just investing into narrative? With stocks at least you have metrics such as pe, ps, book value etc that are used to at give some idea of the fundamental value, a floor, once a stock start to drop. But the fact that so much energy, resources are used to mine a bitcoin and it's just going to get harder is in a way builds the value in itself for bitcoin even hype is no longer there. Seems like bitcoin can't just one day be considered worthless after all this effort (and the effort is huge). So it seems to me we know at least there's some floor on the price. I want to ask the community if anyone came across a chart that shows the price of bitcoin vs. the energy usage to mine a single bitcoin. Actually per cost of energy is even better metric since means of electricity production is also a vary such as coal, renewable etc..(although this will vary greatly from country to country unless we do weighted average off all countries based on amount of bitcoins mined)

I spent a little bit of time and ploted this data manually on monthly time frame. First chart shows the bitcoin PE (price per energy) ratio for the past year. The second chart is price projection based on average PE ratio of 184 and energy usage estimates from link below. I've deleted the two highest PE points on dec 10 2017 and jan 10 2018 that were way outside of cluster . I'm not sure really if there's any meaning in this chart however i'll keep track of this statistic in future to see how close or off it'll be. Source for energy usage and energy usage projection:


Somehow I spent a lot of effort telling people to sell and take profits in December, but I didn't follow my own advice closely enough, and I realised that I was in over my head according to my risk tolerance. So definitely, it's a lesson worth repeating over and over as you said.

It's cool to have investments in other markets, where 1% is considered a big move. Even a stockmarket crash of 20% seems pretty tame in comparison to what we stomach in crypto.

Thanks for posting.

I think your strategy in the case of VeChain is ill-advised, and here's why: if there is a pump prior to the March 20 snapshot, it is because of people trying to achieve (X) Node status. However, as the VeChain rules state, if afterwards your balance dips below the required amount, you lose this status immediately (and, in the case of an X Node, forever). Therefore, it makes no sense to buy more VeChain only to sell it right after you have achieved the Node status. Especially since this is a one time opportunity in the case of the X nodes.

There might be some people like you, trading on this thesis, that make this scenario play out anyway though. But in my opinion so far the VeChain team have been VERY professional, and I am convinced they deliberately structured this program this way as to avoid a pump and dump happening.

Thanks for great videos....Can you also make a video on Why Bitcoin Cash & Ethereum Classic are real Bitcoin & Ethereum?

I don't see that as true for Bitcoin Cash for a number of reasons that I've discussed numerous times, but will likely make a video on separately in the future. I understand preferring it, but think it will ultimately cost you every penny you have in it so do at your own risk. For Ethereum Classic, I think the argument is much stronger for it being the "real" Ethereum given immutability is often cited as an all-powerful feature of utilizing blockchain technology, so the current Ethereum made a very real sacrifice. However, I have concerns over its longer-term adoption so I wouldn't personally invest in it.

Personally I've been liquidating my ETH into BTC and 3rd/4th gen blockchains. I like ETH and Vitalik but it just doesn't make sense that ETH has a market cap that dwarfs that of the 3rd/4th gen blockchains.

Many of these other blockchains (NEO, EOS) allow more flexible programming languages than Solidity. Plus some of these next-gen chains have raised huge warchests to incentive devs to build on their platform.

@cryptovestor Thanks for the feedback...I recently started a thorough investigation on BTC vs BCH...Still, can't say for sure which one is "real". There are several references that I found them interesting so I'm sharing at the bottom.

Regarding ETH vs ETC I think what the Ethereum Foundation (EF) did was what every centralized government does.

In Ethereum website it says:

Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference....

[UNTIL something goes wrong that impacts the interest of EF] I would add this to their site.

What they did in 2016 was basically "bailing out" DAO project/investors!! This is antithesis of what the whole Bitcoin /blockchain was invented.....Are they gonna "fork" it again next time some attacks happen? Just for this simple ideological reason for me the whole thing is voided.

the whole reason of crypto is that it subsidizes itself INDEPENDENT from any outside sources, the moment a company or VC or special interests grants some funding to a crypto its OVER as a decentralized cooperative ecosystem....also the only thing you hear in ETH is Vitalik this or Vitalik that...what if he goes under the bus tomorrow?! EF is like a new central banking!

Yeah, I held 1 bitcoin and 40 eth and bailed after the DAO hack at a 20% profit in a week. Obviously wish I had held on but it really shook my confidence. Also that was my 2nd time dealing with crypto-assets (I saw it back in 2013 and called it a scam. Also got a 1000 XRP airdrop that I promptly cashed out for a bottle of Laguvulin 16 which I don't regret).

Still think BTC will go up but that ETH is overvalued at $70 bln as the 3rd/4th gen blockchains overtake it. There's just no good reason with the SEC hammer coming down on ICO's (mostly ETH) to have it valued at 10x the nearest blockchain.

NEO will evade this because it's not based in the U.S. EOS gets around this by bankrolling devs with their $1 billion warchest and distributing airdrops rather than ICO's.

Welcome to crypto-land and happy hunting.

My real concern for BCH is once regulation comes into the space I fear BCH will get shutdown or at the very least lose a lot of value. Roger Ver has gone on CNBC saying he has no problem with insider trading when questioned about the Coinbase mess. There were suspicious pump and dumps of BCH a few months back that just didn't make any sense etc. Regardless of where you stand in the debate, the reality will be very real if these things are proven true. It's downfall will surely not be about the technology, but more likely a result of business practices.

Roger Ver is not BCH!

Exactly. I've personally found the oft spouted advice of "only invest in what you're comfortable losing" key. Everyone's freaking out so far this year, but I've only put x% towards crypto and if it's gone, it's gone. I treat it like a trip to Vegas or a family outing to Disneyland. Do I believe the whole cryptospace will crash to zero? Not at all, but it definitely helps psychologically in these dip times to assume total (or near total) loss. Treat it as a hobby or some super expensive frustrating toy you picked up and leave it at that. What good are eventual gains if you can't enjoy them in the end because you've given yourself a coronary along the way?

When I see people on here or YouTube promoting allocating 100% of investing into crypto, I want to scream. I find that advice highly irresponsible. Nothing against crypto, I'd be screaming against 100% allocation in anything. But as soon as you mention any kind of temperance with crypto, you're spreading FUD...

Most people are fairly clueless of the risk they're taking on, so it's kind of disappointing to see - The volatility should teach people very quickly though, at least the ones who are capable of learning.

That’s great until the amount you risk turned into an amount you’re unwilling to risk. If I invested 5k and was willing to see it go to zero but it turned into 50k, yeah I would be freaking out if it turned back down to 25k.

And like grant card one says go big or go home. I want life changing amounts of not investing just to get by more. I’m investing so my kids and I are thriving. If I have to sweat it out a bit for them so be it. But that is just me. Not everyone should do the same.

Haha I think most people have the same thought pattern though


Care to do a brief post on your portfolio? I'm guessing it changes frequently, but maybe the main players you are interested in. I like your VET idea

I'll be revealing some of the few altcoins I've bullish on for the relatively long-term soon, so will basically reveal the largest positions in my portfolio at that point. I've already revealed Bitcoin & Monero to be the largest positions, and Bitcoin is a very significant portion given my preparation for a Bitcoin cycle.

A problem that some people have is that they think they have put in as much money as they are willing to lose into the market, then when things like this happen they freak out and take out their positions at the lows.

Markets are scary and when it goes against you that fear is realized.

Have rules, know yourself, and take profits where you can. As you have said in previous videos, losses hurt twice as much as wins.

Indeed - which is part of why most people don't learn until the market crashes. You just have to hope for them to be quick learners.

Cryptovestor, don't know how many bubbles you've lived though.

I caught the tail end of the first dot-com bubble, the minor solar bubble (small profits but w/ small position size), China bubble (gained a lot, lost a lot, and ended up slightly up in the end), and finally saw the insane speculation around the housing bubble (made money shorting on the way down with my 10% short portfolio position although I was 50% net long and slowly laddering in during the downturn).

I've thought that bitcoin was down for the count 2 times previously. Any good bubble will inflate 6 or 7 times before completely collapsing.

Everyone needs to sell on the way down so that they can buy at a higher price as it blasts higher. Eventually people get taught to buy every single dip.

Which, naturally, will be when the bottom falls out.

I know that your longest time predition for Bitcoin is that IT IS A BUBBLE!

So, even thought we might get some fresh blood, the interest of the general public HAS gone down.
What I'm trying to say is: now and even more into the future, the market will have less and less dummies and more people that either:

  • Know the fundamentals
  • Know how to trade

OF COUSE there will always be people who lose money and give up (that's the only way that anyone can Make money) but the market will get more mature and cautious and less driven by Twits and Hype.
That, I think, will lead to a slower market, and in for the next couple of days and weeks I think that the efects of less 'get rich quick' people are going to start to impact the markets down to (BTC) 7k or maybe even 6k

(If you have a different opinion, I would be glad if you shared it!)

I HODL “and” trade. My trading amount is about 10k. My HODL amount is bloody massive (got into this in 2015).
I’m not touching this chart. Lost 2k listening to TA people. Lots of excitement and fun but some guy just dumping bitcoin right now.
If we drop below 6k I might buy some but maybe not.
I believe in the fundamentals. Cryptocurrency is the future.

Hey Rudy, I’ll swap yer 1 Monero for equivalent Cardano. Let me know.

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