what does "don't invest what you can't afford to totally lose" mean?
https://steemit.com/bitcoin/@lordoftruth/bitcoin-trend-is-bitcoin-on-way-to-usd1-million
https://steemit.com/trevonjb/@trevonjb/video-bitcoin-going-to-usd1-million-in-2017
You can easily find more predictions of pricing going to $1 million per BTC.
Some predictions are more honest and also report that there is really no way to make this prediction other than guess.
Some are less honest and report BTC price going to $1 million in 2017.
I don't know what the BTC price might be in ten years. I know for certain it won't be $1 million per BTC in 2017.
In the context of all the predictions of $1 million per BTC at some point in the future, the often accompanying comment "don't invest what you can't afford to totally lose" comes into focus.
Some of the money going into BTC "investments" is money that previously went into buying lottery tickets.
How much can you win with most lotteries? Millions.
What do you have to assume about the money you spend on lottery tickets? You are going to lose all that money.
Buying cryptos has similarities to buying a lottery ticket.
Before you head off to buy your lottery tickets, my observation is crypto prices appear to be in a bubble. Which isn't going to be the best time to be buying more tickets.
Total market cap has run up from $10 billion to $100 billion in the last three months.
There is no underlying rationales that can fully explain this magnitude of run-up in this short time frame, other than speculation and a bubble.
Look at the chart for total market cap on coinmarketcap.com. That is what a bubble looks like.
Do I know how the bubble will end and when it will pop? I don't have the faintest clue.
Cryptos could be another 10X higher in three months. Total market cap could be $1 trillion. And with another 10X jump in the subsequent three months, BTC would be $250K. If you put enough money at risk today, it could almost feel like you won the lottery if you get a 100X return in just six months.
But cryptos could surprise everyone, and be 10X lower in the next three months. In that scenario you just spent a lot of money on buying lottery tickets that didn't pay off.
Moral of the story - the money you are willing to invest into cryptos every month should be approximately the same as you are willing to invest into lottery tickets every month.
Probably reasonable to put a bit more into cryptos than you put into lottery tickets since there are practical uses for cryptos that are developing. This should help avoid a total collapse of an entire basket of cryptos. But maybe not. Who knows if the current cryptos will still be around in 10 years? Or will they be replaced with newer and better crytpos? That is an important difference between Gold and Crytpos. No one is going to invent a better a more functional Gold in ten years. There is a good chance that improved Cryptos will be invented and brought to market.
There are some additional complex explanations of why buying cryptos is logical based on asymmetrical risk-reward curves. But it is all just big words that also explains why people buy lottery tickets.
Few are going to want to read about the potential downside of crypto prices that I just reported.
I'm sure I'll get a few comments explaining why it is impossible for crypto pricing to go down by 10X from current pricing. Ever. FOREVER AND EVER!! Which is a very long investment horizon. LOL.
But at the risk of being unpopular, I wanted to clarify that the phrase "don't invest what you can't afford to totally lose" are code words for "use your lottery money when you are buying cryptos".
Please upvote and follow if the post made you pause and think for a few seconds. That was the goal.
To close, you can still believe that cryptos will have an excellent long term future and you can believe that price will be >10X higher several years in the future. But that doesn't mean that tomorrow is necessarily the best moment to "invest" more money into cryptos, if we are on the verge of bubble collapse before the next run up.
STEEM On !!
I suppose I am a lottery junkie then!
Nothing wrong with that. Recognizing and accepting facts is first step in learning.
-don't trade rent money. maybe don't refinance the house to go all in on btc.
-btc might have a positive expectancy. I would argue that it does. lotto tix have a negative expectancy. basically, this means btc could go to zero tomorrow but it is still a good investment today. the lotto is a bad investment today, tomorrow and anyday.
I agree, those are reasonable positions.
I can definitely see the similarities you're drawing here, Hopefully, I'll be buying my lottery ticket soon!
As long as you understand what you are buying, enjoy your purchase.
STEEM On!!
Dave
One should allways be carefull about how to invest. It seems like nobody really knows how this market works jet. That being said, have been looking into the stock market the last couple of days - trust me - trading crypto is so much cheaper and "easier" to do then to trade stock (barrier to entry) - skill is still a requirement, but if you ever wanted to try and trade stock, spending a little on doing the same thing in crypto could be a great experience I think.
If the first rule of investing is don't lose money, then if nobody understands how the crypto market works it is hard to characterize that as investing.
You mention trading crypto is easier than trading the stock market. Not sure I agree. Getting an online account open at a broker is as easy, and more predictable for timing than getting a coin exchange account open.
But the real question- why reference trading? Trading and investing are two different topics.
I actually think your analogy is applicable to the dollar and the other fiat currencies and not bitcoin and the crypto-currencies. The fiat bankers are just a few more years away from another collapse and this time there won't be anymore bailouts. Just look at all of the speculation and printed money being injected into the stock market just to keep up the value! Don't forget about the US national debt, it will continue to grow until we are no longer able to pay the interest. When that happens, and its not a question of if, but when, bitcoin and the crypto market will be skyrocketing!
I agree. Fiat currencies are going to have issues in near-term. How cryptos respond is an open question since we have never been through a major financial crash while cryptos have been available. Might b a big pay-off. Or maybe not. There is a degree of gamble on how cryptos will respond. If you want a certain result, then precious metals would be the better investment.
You are right about never going through a financial crash with cryptos on the scene. However, I would say that it was because of the 2008 crash and all of the losses that went with it that gave bitcoin the relevance to emerge. Bitcoin is the answer to the corruption of the banks and their manipulation.
Just look at the price of gold, it should be much higher than it is, but is being manipulated to keep its price down.
How long before you can fast often enough to invest everything into crypto.
@davebrewer Invest only in btc after 4 or 5 years u can't imagine how much you get intrest upon your principal!!
Comparing investments to gambling doesn't make any sense. I don't consider spending hours reading into a project and putting a value on the product anything close to gambling. Also, the total market cap wasn't 10 billion dollars three months ago, that's just not true (it was 25 bil Apr 01 according to coinmarketcap.) Don't spend what you can't lose of course, but also don't misguide people to scare them with fake numbers
I agree investing and gambling are totally different.
My point was putting money into cryptos at this moment is more similar to gambling and less similar to investing. I'm not saying putting money into cryptos is wrong. I'm just telling you what it is most like.