I think my dislike of Bitcoin and the poor arguments I've heard on behalf of its value has clouded my judgement on this topic. I still don't understand the actual value argument for Bitcoin. It doesn't work as money both due to its volatility and the transaction rate limit. It's basically digital gold.
But why is that valuable? I don't want to hold gold unless the financial system is collapsing and inflation is spiraling out of control or something like that.
My current theory for what happened is that everyone bought into this delusion about the value of bitcoin, but that unlike other bubbles it didn't burst because Bitcoin has a limited supply and there is literally nothing to anchor its value. So there's no point where investors give up and sell because there is literally no point at which it's overpriced.
Am I still missing something? I just have no idea how to apply lessons from Bitcoin to anything else. What lesson is there to draw from this other than "buy into things with fixed supplies and no intrinsic worth that are going up in price"?
Another of my biases that caused me to miss the train was my belief that Bitcoin is fundamentally bad for the world. The only way the price goes up is if everyone buys into the delusion that it has value. And once you're bought in you have the incentive to pressure other people to buy into the same delusion. And what is the end-result? The only thing Bitcoin ever facilitated was Silk Road and other black market exchanges. And even for those use-cases it has been superseded by other crypto designed to actually function as money.
The end-result of Bitcoin getting more valuable is that a ton of talented people spend time building exchanges and building mining rigs and thinking about Bitcoin and consuming a shit ton of power to mine more Bitcoin. On net it's just a huge loss for world productivity.
Furtheremore, everyone I talked to or whose work I read on this subject made these really poor-sounding arguments as to why I should buy bitcoin that just set off all my epistemic alarm bells. I disliked these arguments so much that it made me start to actively dislike the idea of cryptocurrency.
What is your advice now? Do I just buy in anyway and give the proceeds (if there any) to some effective charity? It seems like the only limit on the price of Bitcoin is the liquidity of the entire world economy. How do I think about when to sell?
My current theory for what happened is that everyone bought into this delusion about the value of bitcoin, but that unlike other bubbles it didn't burst because Bitcoin has a limited supply and there is literally nothing to anchor its value. So there's no point where investors give up and sell because there is literally no point at which it's overpriced.
This actually sounds pretty close to what you might call the "bubble theory of money": that money is a bubble that doesn't pop, that certain (relatively) useless commodities can become money if enough people think of them that way, and when that happens their price is inflated, relative to their use value.
This isn't something that will happen to every commodity. Whether it happens depends both on the properties of the commodity, and also on things like memes and Schelling points.
Bitcoin has enough useful properties (it's like gold, but digital), and, because of its first-mover advantage, is the Schelling point for digital store-of-value (not that it couldn't be replaced, but it's a very up-hill battle), so it has become money, in this sense.
(On the memes-and-Schelling-points thing, see also: The Most Important Scarce Resource is Legitimacy, by Vitalik Buterin.)
Portfolio construction theory says optimal allocation to gold is generally not zero. Gold you can email seems clearly valuable. As for the heuristic that leads to thinking bitcoin is a good idea in general it was 'if you see a new mathematical result that enables a new/different kind of payment layer invest some time and money to understand it.'
What is your advice now?
How about looking at the posts that he writes? https://www.lesswrong.com/posts/MSpfFBCQYw3YA8kMC/violating-the-emh-prediction-markets and https://www.lesswrong.com/posts/ybQdaN3RGvC685DZX/the-emh-is-false-specific-strong-evidence are posts that advocate concrete trades.
Looking at the other posts it seems he shares some other advice at some EA groups.
I believe the advice would be:
Same thing as usual. If the cost is low, return potentially quite high, and there is good reason for you to expect the indication not to be well known, then it's worth giving a try. If it only works one in ten advice, you still make huge
My advice is to accept that 'haters are gonna hate' and just take the hit. Make your arguments as clear and your advice as easy to follow as possible. But understand that no matter what you do, if you tell people to buy bitcoin at $230, the top comment might be critical. Some people will listen and benefit.
I've just been thinking about this with respect to two posts I recently authored. First I wrote "Forcing yourself to keep your identity small is self-harm" and this got a bunch of negative response (e.g. currently a score of 17 with 24 votes; my guess based on watching things come in is that it's close to 50% downvotes). In response I wrote "Forcing Yourself is Self Harm, or Don't Goodhart Yourself" and so far it's doing "better" by some measures (score of 25 right now, but with only 11 votes, all positive as best I can tell).
The thing is both posts say exactly the same thing other than that the first post is vary concretely about a particular case while the latter is a general article that covers the original article as a special case. I basically wrote the second version by taking the original text and modifying it to be explicitly generalized rather than just about one case.
Now if I ask myself which one I think is better, I actually think it's the first one even though the latter is better received in terms of karma. The second one lacks teeth and I think it's too easy to read it and not really get what it's saying in a concrete way. The reader might nod along saying "ah, yes, sage advice, I will follow it" and then promptly fail to integrate it into even a single place where it matters, whereas the former is very in your face about a single place where it matters and confronts the reader to consider that they may have been screwing up at doing a thing they value.
I like this kind of stuff that confronts readers because, although it may draw greater controversy, it also seems more likely to land for the person who will benefit from reading it, and managing criticism/downvotes only matters insofar as I draw too much negative attention and negatively impact the visibility of the post to people who would have benefitted from having seen it in a world where it was less criticized and less downvoted.
Of course in this isolated case of two articles there are confounding factors. For example, maybe people "came around" on my arguments by the time the second post came out since they saw the first one, or maybe more people just ignored the second post since it looked so much like the first one. But I've noticed this sort of trend over and over in my own writing and the writing of others: saying something direct that challenges the reader will draw the ire of readers who dislike having been challenged on something they hold dear, and saying the same thing in a less direct way that avoids triggering their displeasure also is actually worse because it less well lands for anyone and the people who were going to criticise it now don't but without that meaning anything.
Karma, the amount of people reached by a post and the impact it has on people correlate with each other but neither determines the others.
This post addresses none of the valid criticisms in comments on your recent posts, especially challenges to the accuracy of your assessment of counterparty risk. These were all different ways of saying, "Your posts do not contain enough information to allow me to determine the likelihood that you are a genius versus a crank."
You can't just keep invoking Scott Alexander's Bitcoin regrets. Those opportunities are gone.
This post, in which you instead conclude that "haters gonna hate," does not advance your cause. I am just irritated that you keep posting without seeming to absorb the community's epistemic values.
Which epistemic values? I am posting these trades in public (not always on lesswrong itself but in adjacent spaces which are easy enough to check if needed). If they blow up I will suffer the reputational consequences. The inverse should occur if they work out well. Do you want to bet on whether FTX.com losses a substantial amount of user funds in the next year? What odds do you give?
The opportunities don't seem gone to me. Though I doubt we see anything as good as 2011 bitcoin. Many rationalists bought Solana around January 7th when it unlocks. I posted about this on the EA investing group in early January (before the unlock). It is up more than 10x. That's not 250x but it's something. The arbitrage opportunities I discuss are live right now.
You claim there are these huge counterparty risks but you have no presented any data substantiating your claims. I would estimate the expected loss rate in decentralized finance is probably between 1.6%-2.75% yearly. This is based on actual empirical data. The loss on a centralized is dramatically lower. Probably a tenth of that. Exchanges do not commonly lose user funds. They have been safe for many years. You should be more concerned with getting hacked than with counterparty risk from a Cefi exchange. As I said before the risks would have to be quite large not just present to compensate for the returns. I see no evidence that they are.
I believe scholarship is one of the twelve virtues. Please teach me this value. Please show me some kind of credible analysis that counterparty risks are extremely high (as in 10%+ a year)? Many people I know will be very interested if you can. I will share your findings with many interested parties.
So update as of November 23rd, 2022...
FTX is bankrupt, with at least an $8 billion hole on their balance sheet. Customer funds gone, many people lost 6 and even 7 figure balances.
So... what were those odds on "FTX.com losses a substantial amount of user funds" again?
The more info that comes out, the more it looks like the entire thing was fraudulent from the beginning. They even have a software back-door that allows them to transfer funds without alerting auditors, which it looks like they used many times with FTX customer deposits.
Additionally...
Celsius: bankrupt.
BlockFi: bankrupt.
Voyager: bankrupt.
3 arrows capital: bankrupt.
Terra Luna: worthless.
Genesis: likely bankrupt.
Digital currency group: ???
Obviously this is hindsight, but you should STRONGLY update, because it looks like the counter-party risks were well over 10%. In fact, many were even calling SBF and FTX fraudulent well before it came to light and blew up, but people didn't really listen.
We all need to strongly update on this. I know I have.
I'd also encourage you to consider what happens if/when the SEC decides to finally label every "crypto" except Bitcoin a security, and force them to file S1 disclosures. This process will likely be greatly accelerated by the FTX debacle. I suspect MANY of these "projects" will completely fall out of favor, being out competed by better securities like Google and Apple. Their current price merely reflects their regulatory arbitrage, which will end.
Why do you expect Bitcoin to be excepted from being labelled a security along with the rest?
(Apologies if the answer is obvious to those who know more about the subject than me, am just genuinely curious)
No, it's not obvious; it's a perfectly legitimate question. Here's the Howie test, the criteria established by the Supreme Court for security classification:
Bitcoin's biggest difference from other Crypto securities are #2 and #4. Bitcoin is common, but it's not exactly an "enterprise." There's no organization or group working on it in an attempt to increase it's value, the way, for example, the Ethereum foundation attempts to increase the economic value of ETH. There are the core devs, but the authority they have to actually change the software is much, much lower, requiring massive agreement across the board from miners and nodes.
And for #4, while it is the miners efforts that create security for the network, it's not as direct as the members of other crypto projects actively working, for profit, on the software. The profit comes from Bitcoin's increasing network of users who decide to store their economic value in it, not because it's becoming a more and more useful piece of software as people improve it (like, say, what happens in a traditional equity like google or microsoft).
Even still, it's certainly murky.
Gary Gensler has stated Bitcoin alone is a commodity a few times: https://www.coindesk.com/layer2/2022/06/28/secs-gensler-reiterates-bitcoin-alone-is-a-commodity-is-he-right/
The main thing... Who exactly would be required to register Bitcoin with the SEC? Who would file the S1 disclosure with Bitcoin? Who would the SEC sue if "Bitcoin" was an unregistered security? There was no IPO (well, ICO I guess). There's no foundation. There are no stakeholders; since Bitcoin is PoW.
I know I'm kind of late to the party here, but here is the best argument against the future value of Bitcoin I've yet read
This is specifically about Bitcoin, and does not apply to other coins that don't have a fixed supply, or those that use a different consensus mechanism.
For anyone who stumbles across this comment in the future, the argument is basically that there is no market mechanism to ensure transaction fees stay high enough to maintain block security. The argument hinges on the assumption that miners need to be rewarded at least 1% of daily transaction volumes for them to be willing to spend money on the ASICs needed to mine blocks.
You can collateralize Bitcoin, and that is really where Bitcoin's future lies, its collateral to recapitalize the financial system. The dynamics of QE operate like an auto-immune disease, its making collateral harder to come by, debt instruments become MORE expensive, because the Fed is effectively bidding up the price. However, this creates a new paradigm where all assets are higher in value than where they should be, if we're operating in a normal interest rate environment (by normal, one that doesn't have massive Central Bank interference to effectively fix the market rates). This is why we have such a monopolized economy as well, it makes borrowing costs cheaper for those with the best ability to access credit. Thus, all assets become too expensive. This leads to extreme inequality because few people under 40 can afford to have normal things people want, and leads to this extractive economy we operate in. This also becomes impossible to reverse too because the Fed raising the interest rate leads to a market crash (as they found out in 2018, nearly collapsing the entire stock market).
You need a way to unwind this dynamic because like an auto-immune disease, you're attacking healthy cells (small businesses, who can't access credit, or get priced out of competing against would-be monopolists, as well as zombie corporations who just exist in perpetuity rolling over their debt, 20% of US corporations on the stock market are now zombified).
So, Bitcoin operates within the monetary reality of the world today, whereas so many other cryptos are trying to design something new, innovative or fantastical, none of them are obviously better for this absolute contorted situation we find ourselves in. It can become the new version of collateral, so that the Fed can release the pressure valve of perpetual QE, and allow them to unwind without mass bankruptcy of the US economy. However, this is another conundrum, because Bitcoin's deflationary attributes also make for a more appealing settlement layer than what its actually competing against, which is the Fed. This is ultimately what many technologists misunderstand, Bitcoin is more like a first order layer of money, to clear transactions at the highest level. It's more comparable to Fedwire or other various Federal Reserve settlement layers.
Yeah this is worrisome for me as well. It also appears that human beings are more objectively rational with their money under slight inflationary pressure, because that slight pressure offsets the irrational loss aversion we all have hard wired into our brains.
It seems like Bitcoin with a small, permanent, inflation rate would function much better as a long term, stable, secure, monetary system than this deflationary one we have. The inflation is paid out to the miners, as a fee for maintaining the network security, rather than to autocrat grifters like it is now. It's a perfect economic give and take.
The current system is very awkward. I'm holding Bitcoin, but I'm not paying the miners to secure it in any way. I should be paying a small amount of that wealth to the people securing it, because I'm benefiting from its security.
It's difficult, because 80-90% of Bitcoiners are religious zealots, rather than Bayesian. It's a new religion, and it certainly has a lot of good things going for it, so it'd be a shame if the zealotry dooms it in the end.
If you're holding Bitcoin because you believe you can sell it to someone else for the same or more in the future, then I suppose that's reasonable. It still has another 10-20x before it surpasses the total value of all gold, so perhaps there's still some alpha to be had.
But if you're holding Bitcoin because you belive it will actually function as a medium of exchange in the long run, I would re-consider your position. None of the stakeholders developing Bitcoin mining clients have any incentive to increase the functionality of the L1 layer. Most of the funding for such development comes from L2 payment networks like Lightning. They have every incentive to keep the Bitcoin protocol slow and unsuitable for payments (after all, their product is supposed to be the thing that solves that problem).
For that reason, along with the general lack of interest in innovation within the Bitcoin community, I would be extremely surprised if Bitcoin ever became a scalable payment solution.
I'm not really sure I understand your objection. If the L2 improvements are well funded, then the underlying asset would still be at the center of a future payment network.
L2 is the innovation. The idea behind the protocol is that innovation happens on top of L1, because that's a far less risky way to innovate.
There's certainly a question of whether L2 built on top of L1 can actually scale enough to succeed, but that doesn't seem to be what you're saying. Everyone invested in the Bitcoin space has an incentive to increase the functionality of Bitcoin as a whole. I'm not understanding the issue with L1 staying constant.
Sorry, I didn't really explain myself clearly.
I think Bitcoin's network security is unstable in the long run due to the over-reliance on money printing to subsidize it. The existing validators have strong incentives to resist moving away from proof of work due to sunk costs in ASICs. There also just seems to be a lot of misunderstanding about the lack of advantages of proof of work compared to proof of stake or other consensus mechanisms.
So unless the incentive to attack the Bitcoin network exponentially decrease over time, the fundamental protocol must be changed at some point. And maybe Bitcoin survives that anyways. I don't really know.
As for L2 scaling, last time I checked the lightning network had something like 650 transactions completed in its entire history. I really have no idea why that number is so low, but to me it indicates the product just isn't very good. Can it be improved?
Maybe. But with Bitcoin's transaction rate it would take like 1.5 years for everyone in the US to do one single transaction transferring money from Bitcoin to the lightning network. I just don't see how that scales unless you basically NEVER write to the Bitcoin blockchain.
I mean maybe that can work? It's not like people own shares of stock at the depository trust. Intermediaries work well elsewhere in the economy. But why would I want to use the lightning network? Literally the only potential upside I can think of is exposure to Bitcoin prices.
My overall impression is just that there are a dozen obvious things you could do if you wanted Bitcoin to be used as money and basically none of them are being done, so Bitcoin stakeholders must not care that much about facilitating exchange via Bitcoin. And I don't see any reason why that will change.
I agree that the block subsidy is a large economic driver of mining right now. I don't understand why Bitcoiners seem so convinced there will be a smooth transition from block subsidy to voluntary fee as the halvings continue. Is there literally any evidence that the fee market will work? Isn't it pure conjecture? I'd really like an answer on that one.
As for L2 scaling, yeah I don't believe LN in it's current form is all that usable. Lots of smart people believe its getting there, though, so without doing object level analysis for myself I tend to think L2 will ultimately succeed. Again, though, I haven't seen a high quality back and forth about this between two smart, well informed, people, which is definitely concerning.
The one major disagreement we have is that "proof-of-work has no advantages over proof-of-stake." These two consensus mechanisms are entirely different. Proof-of-work requires staking a resource that is external to the network. This is critical, as it means that, were the network to fork, you can only stake your energy on one of the two new chains. In contrast, under proof-of-stake, your stake is duplicated in a fork.
This is critical, as it means that, were the network to fork, you can only stake your energy on one of the two new chains. In contrast, under proof-of-stake, your stake is duplicated in a fork.
I honestly never really thought about this before but I suppose it's worth considering. Maybe it's easier for a community to split after some controversial decision with proof of stake?
Proof of work is not really immune to it though. When the DAO hack happened on Ethereum, the chain split into Ethereum and Ethereum Classic even though the network used proof of work at the time.
Validators will continue to stake on any chain so long as it's profitable. I don't really see how proof of stake vs work changes that.
You mention the EA investing group. Where is that? A cursory search didn’t seem to bring anything up. Also, more generally speaking, what would be your top few recommendations of places to keep up with the latest rationalist investment advice?
There are several groups now because people wanted to keep some topics seperated. Sadly I don't think any of them are open to the public.
I have no idea if this is the answer, but there's a cluster if investing discussion on the EA side around mission hedging. That may be relevant.
I'm interested in two things here:
1 - The historical returns would obviously have been ludicrously high. I assume advice will be worse going forward. There has not been all that much investing advice on lesswrong and some of it was to buy crypto relatively early. If some of your investments 200-2000x you don't need to be right about much else. And it is not like all the other advice would have gone terribly. Tech stocks are doing great. Some of the advice was also boring stuff like 'buy index funds'. Do you think there are hundreds of examples of investment ideas on lesswrong that went to near zero? Which examples are you thinking of? Why do you think the normal investment ideas even underperformed the S&P500 (or whatever your favorite index is).
2 - It does not seem like a 'really hard problem' to me. I don't think I am especially talented. I know many rationalists who are doing much better than I am. The reason you are hearing from me is that I am the one willing to break the norm against posting such threads. Now is an unusually easy time to make money but rationalists are also making good money on things like prediction markets. If someone is a smart rationalist it seems to me they can pretty reliably find a way to 'beat the market'.
It's worth noting that I talk to many people who are actually professionals. They agree the trades I discuss are good. I agree it is a hard problem for most people. But the idea that good rationalists cannot make money trading part-time seems based purely on theory. Experience, over quite some time in many cases, begs to differ.
I also disagree with the framing. In many cases the community agreed the advice was good but just failed to act!
How many LWers bought Bitcoin in 2011 and ended up with poor returns due to the demise of Mt. Gox?
I almost ended up losing a little of my money that way, but was stopped when my KYC evidence was rejected for no clear reason. I ended up doing well by buying Ripples a couple of years later, but I don't know whether I would have done that if I had lost money in my first attempt.
I have 2-3 friends I know about who lost $5k+ on Mt. Gox going down, and didn't hold crypto anywhere else.
More broadly, someone aggregated reported BTC theft from 2011-2020. The spreadsheet linked from the article includes a graph where you can see that about 1-5% of BTC was stolen each year from 2011-2014. Since 2015, BTC theft has been lower, around 0.02-0.7% annually. For comparison, 3% of the US money supply is about $150 billion.
I'd be curious to know how that compares to other forms of theft. Unfortunately, statistics seem to include crypto theft in larger theft statistics, so it's hard to evaluate whether crypto or dollars is safer from theft. I have to imagine that dollars are generally safer (FDIC something something?).
My advice is to accept that 'haters are gonna hate' and just take the hit. Make your arguments as clear and your advice as easy to follow as possible. But understand that no matter what you do, if you tell people to buy bitcoin at $230, the top comment might be critical. Some people will listen and benefit.
Yes. If the people are in the following categories:
then the best you can do is help the last two groups buy the Bitcoins or whatever.
Given an investment that will double forever your investment and money in the bank with the 20 percent rule will be, starting with 100:
Number of doubling: 0; Invested: 100.00; Bank: 0.00; Pure HODL: 100; ratio: 1.00
Number of doubling: 1; Invested: 160.00; Bank: 40.00; Pure HODL: 200; ratio: 1.00
Number of doubling: 2; Invested: 256.00; Bank: 104.00; Pure HODL: 400; ratio: 0.90
Number of doubling: 3; Invested: 409.60; Bank: 206.40; Pure HODL: 800; ratio: 0.77
Number of doubling: 4; Invested: 655.36; Bank: 370.24; Pure HODL: 1600; ratio: 0.64
Number of doubling: 5; Invested: 1048.58; Bank: 632.38; Pure HODL: 3200; ratio: 0.53
Number of doubling: 6; Invested: 1677.72; Bank: 1051.81; Pure HODL: 6400; ratio: 0.43
Number of doubling: 7; Invested: 2684.35; Bank: 1722.90; Pure HODL: 12800; ratio: 0.34
Number of doubling: 8; Invested: 4294.97; Bank: 2796.64; Pure HODL: 25600; ratio: 0.28
Number of doubling: 9; Invested: 6871.95; Bank: 4514.63; Pure HODL: 51200; ratio: 0.22
Number of doubling: 10; Invested: 10995.12; Bank: 7263.41; Pure HODL: 102400; ratio: 0.18
Number of doubling: 11; Invested: 17592.19; Bank: 11661.46; Pure HODL: 204800; ratio: 0.14
Number of doubling: 12; Invested: 28147.50; Bank: 18698.33; Pure HODL: 409600; ratio: 0.11
Number of doubling: 13; Invested: 45036.00; Bank: 29957.33; Pure HODL: 819200; ratio: 0.09
Number of doubling: 14; Invested: 72057.59; Bank: 47971.73; Pure HODL: 1638400; ratio: 0.07
Number of doubling: 15; Invested: 115292.15; Bank: 76794.77; Pure HODL: 3276800; ratio: 0.06
Number of doubling: 16; Invested: 184467.44; Bank: 122911.63; Pure HODL: 6553600; ratio: 0.05
Number of doubling: 17; Invested: 295147.91; Bank: 196698.60; Pure HODL: 13107200; ratio: 0.04
Number of doubling: 18; Invested: 472236.65; Bank: 314757.77; Pure HODL: 26214400; ratio: 0.03
Number of doubling: 19; Invested: 755578.64; Bank: 503652.42; Pure HODL: 52428800; ratio: 0.02
Generated with:
investment = investment0 = 100
bank = 0
pure_hodl_ratio = 1percentage_to_sell_at_each_doubling = 0.2
for i in range(20):
print(f"Number of doubling: {i}; Invested: {investment:.2f}; Bank: {bank:.2f}; Pure HODL: {investment0*2**i}; ratio: {pure_hodl_ratio:.2f}")
investment *= 2
bank += percentage_to_sell_at_each_doubling * investment
investment -= percentage_to_sell_at_each_doubling * investment
pure_hodl_ratio = (bank + investment) / (investment0*2**i)/2
You can change the 20% to another value, 50% is a critical value to stay below.
Not investment advice, have fun with this.
I HEREBY DECLARE: Kalshi and PredictIt still have room for LW-style rationalist investors, I reckon. Mostly based on the lowish trade volumes and sometimes being slow/inaccurate to react to new information. Kalshi more so.
(I would've added "And FTX's real-money prediction market", but they have literally 2 markets as of this writing, and they aren't available for non-US citizens. Then again, if your a non-US-citizen interested in Bolsonaro's reelection, that market is likely much less adequate than the Trump market, so go forth!)
Solana is no longer a truly amazing investment but it's still worth buying/holdingThere doesn't seem to be much evidence backing this claim. And the recent trajectory of Solana all but backs this.
I have been thinking a lot about the crypto autopsy Scott posted in 2018. In retrospect, there was still an enormous amount of money to be made 'buying the dip' in BTC/ETH. And there was even more money to be made buying altcoins. Scott also links to this thread from 2015 strongly advising people to buy bitcoin at around $230 (so approximately 250x gains on the percent you held). The earlier bitcoin discussion on lesswrong might have represented an even more lucrative opportunity but this is some of the best completely explicit advice ever posted on the forum:
LessWrong is where I learned about Bitcoin, several years ago, and my greatest regret is that I did not investigate it more as soon as possible, that people here did not yell at me louder that it was important, and to go take a look at it. In that spirit, I will do so now.
...
This is a time to be good rationalists, and investigate a possible opportunity, comparing the present situation to historical examples, and making an informed decision. Either Bitcoin has begun the process of dying, and this decline will continue in stages until it hits zero (or some incredibly low value that is essentially the same for our purposes), or it will live. Based on the new all time high being hit in number of transactions, and ways to spend Bitcoin, I think there is at least a reasonable chance it will live. Enough of a chance that it is worth taking some money that you can 100% afford to lose, and making a bet. A rational gamble that there is a decent probability that it will survive, at a time when a large number of others are betting that it will fail.
And then once you do that, try your hardest to mentally write it off as a complete loss, like you had blown the money on a vacation or a consumer good, and now it is gone, and then wait a long time.
As I am writing the thread itself has four upvotes. Conversely, the following comment has twenty-six (this thread long predates variable weight votes though we can still vote on it going forward)
I used to believe that bitcoin is under-priced before, but there are so many agents involved in it now (including Wall Street), that I can't really convince myself that I know better than them - the market is too efficient for me.
Additionally, I'd be especially wary about buying based on arguments regarding the future price based on such obvious metrics, that many agents pay attention to.
This seems like a really strong indictment of the community's collective rationality. On the other hand, I have been posting some financial advice threads on lesswrong. I have posted much more advice on rationalist adjacent facebook and discord. People listen. I frequently get messages from people telling me they made money thanks to my posts. Several friends of mine got into Solana around $2.50 at the same time and have made six or seven figures from that investment. A few people got in later or for smaller amounts and still made meaningful amounts of money (Solana is no longer a truly amazing investment but it's still worth buying/holding). Villiam's comment is important to keep in mind:
Some of us were smarter than others. Good for them! But if we want to help each other, and avoid having the same thing happen the next time, next time when you see an exceptionally important article, don't just think "others have read the same article, and they are smart people, so they know what to do". That's another form of illusion of transparency; after reading the same text, some people will jump up, others will just continue reading. Here are two things you can do to nudge your fellow rationalists in the right direction:
1) Imagine a person who has very little knowledge in this specific area, and for some reason is not going to study more. Can the whole thing be simplified; ideally into a short list that is easy to follow? For example: "Step 1: register online at BitStamp. Step 2: send them the required KYC documents. Step 3: do the money transfer. Step 4: buy Bitcoins. Step 5: HODL!" More people will follow this procedure, than if they just read "buy and/or mine some Bitcoins, find out how".
2) Offer help at your local meetup. Make a short lecture, explain the details, answer questions. When people are interested, guide them step by step
It is very hard to grok how context people are missing. You need to make it as easy as possible for people to follow your advice. And you need to tell them a real plan. Many of us held a lot of bitcoin at one point or another. Just buying bitcoin was not enough, you needed to stick to a plan for selling. I personally like 'sell 20% at every doubling' for volatile investments. Give people the tools to succeed. A good friend of mine wanted to get into Solana for a few thousand dollars but found it difficult to buy. He is out tens of thousands of dollars because I did not make it easier for him to buy. He really could use that money.
Am I now become your enemy, because I tell you the truth? - Galatians 4:16
The problem is that the more explicit you are the more pushback you should expect to receive. If you just explore a topic and 'hint hint' at your advice you won't expose yourself to the same types of criticisms. You don't need much plausible deniability to shield yourself. However, you cannot shield yourself very much if you are giving step-by-step instructions and making clear claims. We should take trivial inconveniences very seriously. Therefore we must not add any unnecessary friction.
My advice is to accept that 'haters are gonna hate' and just take the hit. Make your arguments as clear and your advice as easy to follow as possible. But understand that no matter what you do, if you tell people to buy bitcoin at $230, the top comment might be critical. Some people will listen and benefit.
As a group, we should really be taking Aumannian reasoning and noticing confusion more seriously. If something very interesting is going on we need to stop and think and come to a logical conclusion. Obviously, not everyone is going to agree. But at least smaller groups should be able to 'Stop, Drop and Think'. I hope we can do better as a group but if we cannot, or you leave lesswrong, at least Stop, Drop and Think when you notice a potential opportunity. The rewards for making the right choices can be enormous.
This post mostly argues in favor of sharing your well-thought-out positions. But another implication of 'people will listen' is that you should not give advice flippantly. Don't quickly fire off conventional wisdom. If you have not thought through your counsel make sure you make this clear. Of course, if you have thought things out I strongly suggest speaking your mind.
There is a season for all things and this seems like a season for thinking about crypto. However, I think pretty much every season is for thinking about money. Money is instrumentally useful for the vast majority of goals. If you want to 'win' you should probably think at least a little about money. But I also think these principles extend across domains and are not limited to financial decisions.