[ggddv]

I bought bitcoin, I hate it, I think conceptually it’s really dumb, but the first rule of investment is to diversify. I just can’t ignore the fact that it’s a store of value like gold it is very bizarre why it is prioritized, but it is.

[andsoitis]

> first rule of investment is to diversify

That does not mean buy anything. Intentionality matters. Diversification is a risk mitigation strategy, but holding bitcoin increases a portfolio’s risk. So if you want to diversify to reduce risk, purchasing bitcoin is the exact opposite of what you want to do.

[dnamlin]

https://www.blackrock.com/institutions/en-zz/literature/whit...

[ascorbic]

As the article points out, bitcoin is so volatile that having it as even 5% of your portfolio will "drastically raise its risk profile".

[cedws]

Unless you’re playing around with derivatives, crypto is actually fairly safe. There are price swings but the supply doesn’t magically increase because someone was ordered to print more. Therefore there is always a reasonable expectation that its value will increase over time.

[crazygringo]

The price swings with crypto are on the demand side. It is completely unsafe because there's no rhyme or reason to its demand, people just following whichever way the crowd goes, in whichever direction, and variously hoping it continues or reverses.

It's not even like gambling on an external event like whether a horse wins -- it's betting on how other people are betting.

There is absolutely no reasonable expectation that its value will increase over time. There's no reasonable expectation of anything because it has no demand-side fundamentals whatsoever.

[cedws]

>It is completely unsafe because there's no rhyme or reason to its demand, people just following whichever way the crowd goes, in whichever direction, and variously hoping it continues or reverses.

How is this any different to any other security? There's speculation in all markets.

[crazygringo]

It's different because other securities have a fundamental present value of future cash flows. You expect corporations you buy stocks in will pay dividends and/or be purchased by another corporation that does.

If stocks get too expensive or too cheap from what people's estimation of that present value is, we know a correction will come at some point. It always does.

But with crypto, there's utterly on sense of "too expensive" or "too cheap" or "correction". It's just betting on betting.

Regular securities are fundamental value plus limited speculation. Crypto is purely speculation that is unbounded. Two totally different things.

[grajaganDev]

No, there is always a reasonable expectation that crypto will crash to near zero.

Crypto valuation is based on the greater fool theory and one day you will run out of fools.

[erikpukinskis]

If you’ve got a lot of working years left (and therefore can survive losing a large % of assets any given year) it’s generally a good thing to drastically raise your risk profile. Assuming you’re also raising your expected returns.

[dnamlin]

That was so funny they left out "and returns"

Like, it's valid to point to its historical volatility, but it struck me as intellectually dishonest to say it's been (historically) risky without also acknowledging that holders have (historically) been well-rewarded for their risk appetite. High Sharpe ratio, etc.

[rsynnott]

I mean, diversify, sure, but not into _everything_. Like, there are plenty of old fax machines around, but you probably shouldn’t add any to your portfolio. You have to consider whether the diversification is into something sensible.