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.

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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. 

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:

  • if some people you have some trust in argues loudly about an idea
  • that this occurs rarely enough
  • then it's worth putting 100$ into it (or whatever amount you're confortable, that would not make you tick if it's lost) just in case

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.

Yes. If the people are in the following categories:

  • already disagree with the idea;
  • not aware of the idea, after explanation disagree;
  • not aware of the idea, after explanation agree;
  • already agree with the idea;

then the best you can do is help the last two groups buy the Bitcoins or whatever.

I'm interested in two things here:

  1. What do you think is the base rate of investment advice value on LW? If we'd invested the same amount of money in each piece of advice the day it was given, and sold the stock today, what would our net profit/loss be?
  2. Why is our community's inability to separate good advice from bad an indictment of its rationality, rather than an indicator that this is a really hard problem?

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.

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?).

I have 2-3 friends I know about who lost $5k+ on Mt. Gox going down, and didn't hold crypto anywhere else. 

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.

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.

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 = 1

percentage_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.

Reasonably you'd probably skip the first few doublings for something that low value, which changes the outcome significantly.

Yes a doublingsToSkip variable, where the 20% is withdrawn only if i > doublingsToSkip  would be an interesting addition