this post was submitted on 05 Mar 2024
-25 points (41.3% liked)
Technology
59589 readers
2946 users here now
This is a most excellent place for technology news and articles.
Our Rules
- Follow the lemmy.world rules.
- Only tech related content.
- Be excellent to each another!
- Mod approved content bots can post up to 10 articles per day.
- Threads asking for personal tech support may be deleted.
- Politics threads may be removed.
- No memes allowed as posts, OK to post as comments.
- Only approved bots from the list below, to ask if your bot can be added please contact us.
- Check for duplicates before posting, duplicates may be removed
Approved Bots
founded 1 year ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
From here, it's just as likely to go to $420,069 as $420.69 .
Then you should obviously buy it
0.5 * 420069 = 210034.5
0.5 * 420.69 = 210.0345
At an expected value of around $210K you'd be getting triple value on your investment if your post were true
I don't see the sense in your calculations
If it has a 50% chance to increase by 10,000% or a 50% to decrease by 90%, the average expected price is an increase of about 5,000%. It's a finance thing, but I doubt the commenter was serious.
It's not the expected price per se, but the expected payoff of the investment
We may never sell at 5000% because we're looking for 10000% so we might ignore that price until it either hits our sell point on either side. Either 10000% gain or 90% loss
The value of the investment is then our expected value, but also decreased by risk-free rate for every year we expect to hold to make 10000% profit and divided by half for the probability of 50%
So if we expect to hold for 100 years on average to achieve that price, it's not a good investment because you can just buy bonds that yield 5% to achieve that return (131.5x after 100 years)
But if we expect to hold it for ten years, it becomes attractive
That makes perfect sense, thank you for the thorough explanation!
It's called expected value
50% you expect a certain payoff, so the EV of this situation is 0.5 * payoff
Thanks, nice perspective on investing you've made overall in this thread. 👍
If you make bets like that, not just once but repeatedly in a broad portfolio, you will get filthy rich.
But that's based on the false assumption "it's just as likely". The price of bitcoin is not random, and to really get filthy rich you want to use a decision process that better understands market pricing patterns.
A wonderful video on that was posted a week ago: https://www.youtube.com/watch?v=A5w-dEgIU1M
Here is an alternative Piped link(s):
https://www.piped.video/watch?v=A5w-dEgIU1M
Piped is a privacy-respecting open-source alternative frontend to YouTube.
I'm open-source; check me out at GitHub.