Bitcoin is an asymmetrical bet

I've heard it many times and I'm sure you have too, bitcoin is too risky to invest in.

Your parents probably said that, maybe your grandparents, or your neighbor down the street.

On some levels they are right, but those levels have nothing to do with math.

Since bitcoin was created it has an annualized return of more than 200%.

It doesn't go up by 200% every year, but over time, that has been the average. While history isn't a predictor of future outcomes, it often gives some pretty good clues.

What's your max loss with bitcoin?

I think most would agree it could theoretically be 100%.

Taking those two numbers into account, you are looking at a 200% annualized return while risking 100%.

That is the very definition of an asymmetrical bet.

(Source: https://twitter.com/100trillionUSD/status/1378267714314240001/photo/1)

What's really interesting about this line of thinking is that stocks pretty much work the opposite of this.

When you buy a stock, your theoretical downside is 100% should the company go bankrupt or be got up some kind of fraud etc, while the yearly average returns are usually in the range of 10% or something like that.

The historical average for the S&P is roughly 7% over the last century.

Perhaps the risk of a stock on the S&P going to zero is tremendously less than the odds of bitcoin going to zero, but so is the expected upside.

The next time someone tells you bitcoin is too risky to invest in, remind them of these simple numbers above and see if that changes their perspective a bit.

No one is required to invest in bitcoin, but with currencies being devalued, not investing in bitcoin is pretty much the same as being short bitcoin.

Which means they have skin in the bitcoin game whether they realize it or not.

Something to think about...