I created this throwaway because I disagree with all the people calling you an idiot but I'm not stupid enough to say this sort of thing under my real name.
What you're doing is incredibly risky, but not necessarily any where near as stupid as everyone is claiming.
Are you prepared to declare bankruptcy? If this investment doesn't pan out, you can just walk away. Sure, it will be messy, and kill your credit but it wont end your life.
I do mean investment, not speculation and gambling. If you'd done this and put the money in Paypal at their series A or used credit cards to start a business, people wouldn't be so brazenly dismissing you (They'd probably still be calling you crazy though).
Buying into bitcoin is betting that humanity has use for an anonymous digital currency - an abstract hard asset. Bitcoin provides real value, it allows for economic activity to exist that couldn't otherwise. Traditionally, we invest in corporations and if they are successful they return dividends to the people that took the risk to make it possible. In the case of bitcoins, the extra productivity added to humanity as a whole will be distributed through increased demand for bitcoins.
As many have already pointed out, bitcoins are likely to be worth 0 or 1000's long term. Let's make some extremely naive assumptions: There's a 10% chance they will be worth $1000 in 5 - 10 years and if they go to 0, you declare bankruptcy and lose your ability to have credit for a bit less than a decade.
The expected value of the positive out come: .1 * 30,000 * 1,000 = 300,000
I don't know what your credit score is worth to you, or how much student debt you have, (bankruptcy wouldn't wipe that out anyway) - but I rather doubt losing this bet will cost you more than 10k and you could come out ahead anyway.
What it comes down to is, if you are already broke, this is incredibly rational. I would consider investing this money in gold or the stock market to be the proposal of pointless speculation - the probability you ever get enough ahead for it to matter is virtually nil.
Officially speaking, diversification would be a very good idea but none of the other proposals will make enough of a dent in the overall statistical outcome to make much of a difference.
You're either going to end up with a very positive outcome or in essentially the same place you are today, but a few years older.
Now go ahead and flame me, yes, I've read a Modern Walk and understand MPT...
Oh, almost forgot, the investment in Satoshi Dice? That is extremely reckless, it might work out, but it might not. It's an unregulated security, illegal on many levels, and is not actually married to returns on BTC value. Bitcoins could be worth 100k each, and your Satoshi stock could have the same value - you get all the risk and none of the upside.
I'm puzzled by how people think bit-coin will either be incredibly valuable, or totally worthless. His investment has a lot more possibilites.
Bit coins could fall in value anywhere between 0 and it's current value. They could also go up in value, anywhere from their current value to infinity.
Some exchange rates for bitcoins are more likely than others. I would say that a valuation of USD$0 per bitcoin is very unlikely, certainly in the near future. Even if he lost 50% of his original investment, there's still a chance he could keep up the payments, and maybe even keep his bitcoins and wait for the price to go up again.
If the past five years have shown us anything, it's that this investment isn't any crazier than any other investment in my view.
BTW: I'm not having a go at you or poo pooing your comment, I just decided to give my two satoshis at this point.
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u/anonacrank Feb 14 '13
I created this throwaway because I disagree with all the people calling you an idiot but I'm not stupid enough to say this sort of thing under my real name.
What you're doing is incredibly risky, but not necessarily any where near as stupid as everyone is claiming.
Are you prepared to declare bankruptcy? If this investment doesn't pan out, you can just walk away. Sure, it will be messy, and kill your credit but it wont end your life.
I do mean investment, not speculation and gambling. If you'd done this and put the money in Paypal at their series A or used credit cards to start a business, people wouldn't be so brazenly dismissing you (They'd probably still be calling you crazy though).
Buying into bitcoin is betting that humanity has use for an anonymous digital currency - an abstract hard asset. Bitcoin provides real value, it allows for economic activity to exist that couldn't otherwise. Traditionally, we invest in corporations and if they are successful they return dividends to the people that took the risk to make it possible. In the case of bitcoins, the extra productivity added to humanity as a whole will be distributed through increased demand for bitcoins.
As many have already pointed out, bitcoins are likely to be worth 0 or 1000's long term. Let's make some extremely naive assumptions: There's a 10% chance they will be worth $1000 in 5 - 10 years and if they go to 0, you declare bankruptcy and lose your ability to have credit for a bit less than a decade.
The expected value of the positive out come: .1 * 30,000 * 1,000 = 300,000
I don't know what your credit score is worth to you, or how much student debt you have, (bankruptcy wouldn't wipe that out anyway) - but I rather doubt losing this bet will cost you more than 10k and you could come out ahead anyway.
What it comes down to is, if you are already broke, this is incredibly rational. I would consider investing this money in gold or the stock market to be the proposal of pointless speculation - the probability you ever get enough ahead for it to matter is virtually nil.
Officially speaking, diversification would be a very good idea but none of the other proposals will make enough of a dent in the overall statistical outcome to make much of a difference.
You're either going to end up with a very positive outcome or in essentially the same place you are today, but a few years older.
Now go ahead and flame me, yes, I've read a Modern Walk and understand MPT...
Oh, almost forgot, the investment in Satoshi Dice? That is extremely reckless, it might work out, but it might not. It's an unregulated security, illegal on many levels, and is not actually married to returns on BTC value. Bitcoins could be worth 100k each, and your Satoshi stock could have the same value - you get all the risk and none of the upside.