How much should I invest in cryptocurrencies?

Credits : Photo by Aidan Howe on Unsplash

I want to present here an idea of ​​how much you should invest in something of high risk like crypts.

But first we need to remember the concept of expected value in probability:

Without going into boring formulas, we can say that the expected value is the probability of the event happening multiplied by the value of that event.

With cryptocurrencies, I think it's reasonable to establish the hypothesis that your capital will multiply by 10x after a while (uhulll) or go to zero if something bad happens :(

So let me ask you a question:

I’m going to propose a game, I’ll flip a coin and depending on which side you win or lose.

The game: I'll give you two options, one you win 1 dollar and you don't even need to flip the coin, the other you can try your luck and if you get it right, you win 10 dollars, if you lose, you don't take anything.

The expected mathematical value for this game:
Chance of the event happening x value of the event. Using the values ​​we have:

E(x) = 50% x 10$ = 5$

This means that the expected value if we played this game several times is that we would win approximately $ 5 per game. And it also clarifies to us that this option would be better than the option of staying with only 1 dollar, that is, it is better that we play this game.

And I suppose you really chose this option, because the value of 1 dollar is too small and is worth the risk of betting it.

But what if we changed the value of the game to 10 dollars, with a chance of winning 100? Would you bet?

What if the numbers are $ 1 million, with a chance of winning $ 10 million? I would particularly choose the safest option and keep 1 million, and I bet you do too.

However, according to mathematics, I should always choose the first option, since it gives me the highest expected value.

What the equation does not take into account are other risks that cannot be easily accounted for and are specific to each one.

With that in mind I propose that you bet in cryptocurrencies the same amount that you would put in that game.

That value will change a lot from person to person, depending a lot on what you already have and your psychological.

Comment there so I know what your bet limit? In my case I would bet 1000 dollars approximately. Good luck in the crypto world.

I hope that I have helped in something.