Crypto-Currency

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Buster65
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Crypto-Currency

Post by Buster65 » Wed Dec 06, 2017 10:52 am

I'm wondering if any bogleheads dabble in crypto currency? I'm interested in understanding how you went about it, what exchanges you're on and what currency's you own.


Valuethinker
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Re: Crypto-Currency

Post by Valuethinker » Wed Dec 06, 2017 12:45 pm

Buster65 wrote:
Wed Dec 06, 2017 10:52 am
I'm wondering if any bogleheads dabble in crypto currency? I'm interested in understanding how you went about it, what exchanges you're on and what currency's you own.
There are at least 5 active threads on bitcoin and its ilk right now.

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CaliJim
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Re: Crypto-Currency

Post by CaliJim » Wed Dec 06, 2017 1:02 pm

No. Speculation in such things is not allowed per the BH membership agreement.
-calijim- | | For more info, click this Wiki

Valuethinker
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Re: Crypto-Currency

Post by Valuethinker » Wed Dec 06, 2017 1:15 pm

CaliJim wrote:
Wed Dec 06, 2017 1:02 pm
No. Speculation in such things is not allowed per the BH membership agreement.
Shhh... the first rule of Bogleheads is "Do not talk about ... "

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nisiprius
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Re: Crypto-Currency

Post by nisiprius » Wed Dec 06, 2017 1:21 pm

1) There are many people posting on this board who dabble in cryptocurrency.

2) I don't know the percentage of people who self-identify as "Bogleheads" who dabble in cryptocurrency.

Image

3) This board is about "investing advice inspired by John Bogle" and Bogle has made his opinion clear. Indeed, right after saying "Avoid bitcoin like the plague," his next words were "Do I make myself clear?"

4) This might be a good time to re-read the Bogleheads investment philosophy You don't need to follow it or agree with all of it. However, it is difficult to reconcile investing in cryptocurrency with the idea of "owning the whole market" and "using index funds when possible." I also question how many cryptocurrency investors (some) actually plan to stay the course, long-term, and how many are simply speculating, intrigued by the run-up and hoping to get in on some of it.

5) Although there is a lot of support for the idea that it is OK to use some of your money as "fun money" to scratch your gambling itch so that you can keep it out of your core investing, I personally have two problems with the idea. A commonly mentioned allotment is 5%. The first problem is whether there isn't some way of getting more fun for the same amount of money. The second, which I have yet to see answered, is "what do you do if you lose it?" The idea is that you are limiting your possible losses to 5% and everyone can afford that big a loss. I agree that everyone can afford that big a loss, but I'm not sure whether people are really limiting their losses. The unspoken assumption is that you won't lose it--the worst that happens is you fail to beat the index. But it's possible, and the question I have is, if you lose your "fun money," what then? Do you really, truly never do it again? Or do you wait a while and decide you can now allot another 5%... or, worse yet, put in more in hope of recouping.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

shiboghe
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Re: Crypto-Currency

Post by shiboghe » Wed Dec 06, 2017 1:48 pm

Been thinking a lot about this myself lately, against my best interest.

In some perfect hindsight scenario even a little extra cash in bitcoin would have been extreme in changing my financial outcome. However, I think its unreasonable to expect returns like in the past. I also am uncomfortable with risking large amounts of my portfolio. Therefor even if the return is substantial but at least somewhat reasonable I don't think it would be a huge boon to my bottom line. However, because of the amount I am willing to risk in index funds the returns are more then I can reasonably expect from crytpocurrency.

At least this is what I am trying to convince myself of.

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curiouskitty
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Re: Crypto-Currency

Post by curiouskitty » Wed Dec 06, 2017 1:55 pm

Still lots of money to be made but be careful and don't invest in some random ICO. In my opinion, look for a solid team with a good track record with Bitcoin, Ethereum, etc. and invest in some of their new projects. If one blockchain gets ahead on scaling, the market will likely reward them handsomely especially if it looks like their rivals aren't close behind. Ethereum is having issues with transaction times due to CryptoKitties for the past few days as you likely heard in the news. Once one of the chains can support substantially more transactions, it will make more sense to integrate it into more applications for micropayments, as a database, etc.

So many of the coins are based on Ethereum that you could take some fun money, buy Ethereum, and then use that to diversity into some of the Ethereum (aka ERC-20) tokens.

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Re: Crypto-Currency

Post by LadyGeek » Wed Dec 06, 2017 4:32 pm

This thread is now in the Investing - Theory, News & General forum (asking about crypto-currency / Bitcoin investments).
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greg24
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Re: Crypto-Currency

Post by greg24 » Wed Dec 06, 2017 4:41 pm

I am shorting Bitcoin and most other crypto-currencies.

azanon
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Re: Crypto-Currency

Post by azanon » Wed Dec 06, 2017 4:43 pm

nisiprius wrote:
Wed Dec 06, 2017 1:21 pm
5) Although there is a lot of support for the idea that it is OK to use some of your money as "fun money" to scratch your gambling itch so that you can keep it out of your core investing, I personally have two problems with the idea. A commonly mentioned allotment is 5%. The first problem is whether there isn't some way of getting more fun for the same amount of money. The second, which I have yet to see answered, is "what do you do if you lose it?" The idea is that you are limiting your possible losses to 5% and everyone can afford that big a loss. I agree that everyone can afford that big a loss, but I'm not sure whether people are really limiting their losses. The unspoken assumption is that you won't lose it--the worst that happens is you fail to beat the index. But it's possible, and the question I have is, if you lose your "fun money," what then? Do you really, truly never do it again? Or do you wait a while and decide you can now allot another 5%... or, worse yet, put in more in hope of recouping.
I just play "lucky for life" every time I fill up the car (one play), and if I lose it, I just buy another one next time cause it's only 2 dollars. And I don't have any plans to ever quit because, again, it's only 2 dollars a pop (and a charity too for my state). And it's fun knowing I have about a ~ 30 million to 1 chance of getting to quit my job every time I play.

But 5% of my portfolio for something fun where I'll probably lose my ***, such as bitcoin? I can't even comprehend considering doing something like that, much less actually doing it. I'm, as you say, just too boglehead.
Last edited by azanon on Wed Dec 06, 2017 4:46 pm, edited 2 times in total.

Swelfie
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Re: Crypto-Currency

Post by Swelfie » Wed Dec 06, 2017 4:45 pm

curiouskitty wrote:
Wed Dec 06, 2017 1:55 pm
Still lots of money to be made but be careful and don't invest in some random ICO. In my opinion, look for a solid team with a good track record with Bitcoin, Ethereum, etc. and invest in some of their new projects. If one blockchain gets ahead on scaling, the market will likely reward them handsomely especially if it looks like their rivals aren't close behind. Ethereum is having issues with transaction times due to CryptoKitties for the past few days as you likely heard in the news. Once one of the chains can support substantially more transactions, it will make more sense to integrate it into more applications for micropayments, as a database, etc.

So many of the coins are based on Ethereum that you could take some fun money, buy Ethereum, and then use that to diversity into some of the Ethereum (aka ERC-20) tokens.
Ethereum isn't having too much problem with the kitties really. It's more of a shock that came out of nowhere of very high gas transactions (because breeding kitties takes a lot of gas). There is a miner designated gas limit to keep spikiness down and it works well, but in this case it wasn't a spike as it was sustained, so the miners just needed to vote the limit up to a more appropriate level. Also, some wallets/institutions pay a maximum of gas prices so they don't way overpay on really spiky blocks. It appears coinbase does this as they were overly affected when the kitties drove the limited gas prices way above the statistical normal. Again, just a volatility stopgap that needed adjusting rather than a real challenge.

And remember. Ethereum was running more transaction volume than all other coins combined including Bitcoin BEFORE the kitties took over like tribbles in a warp coil.

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Re: Crypto-Currency

Post by saltycaper » Wed Dec 06, 2017 4:52 pm

Swelfie wrote:
Wed Dec 06, 2017 4:45 pm

Ethereum isn't having too much problem with the kitties really. It's more of a shock that came out of nowhere of very high gas transactions (because breeding kitties takes a lot of gas). There is a miner designated gas limit to keep spikiness down and it works well, but in this case it wasn't a spike as it was sustained, so the miners just needed to vote the limit up to a more appropriate level. Also, some wallets/institutions pay a maximum of gas prices so they don't way overpay on really spiky blocks. It appears coinbase does this as they were overly affected when the kitties drove the limited gas prices way above the statistical normal. Again, just a volatility stopgap that needed adjusting rather than a real challenge.
This post indicates we are either on the verge of a great leap forward for civilization or on the precipice of a remarkable impending decline.

I hope to stick around to find out and to see if 30 years from now anybody has a clue as to what in the world Swelfie is talking about.
Quod vitae sectabor iter?

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greg24
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Re: Crypto-Currency

Post by greg24 » Wed Dec 06, 2017 4:53 pm

That post makes me feel really good about my shorts.

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saltycaper
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Re: Crypto-Currency

Post by saltycaper » Wed Dec 06, 2017 4:57 pm

greg24 wrote:
Wed Dec 06, 2017 4:53 pm
That post makes me feel really good about my shorts.
Whenever I'm out and about in business casual dress in the summer, and I go home and change into a pair of shorts, I feel really good about myself too.
Quod vitae sectabor iter?

SEAworld9
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Re: Crypto-Currency

Post by SEAworld9 » Wed Dec 06, 2017 5:04 pm

greg24 wrote:
Wed Dec 06, 2017 4:53 pm
That post makes me feel really good about my shorts.
what's your exposure and what are you looking to close out at? at what price will you fill, both low and high? bitcoin's gone from $11,739 to $13,457 just in the last 24 hours on gdax.

no condescendtion or negative tone implied... more so interested in how you approach shorting anything in a rapidly rising environment.
Last edited by SEAworld9 on Wed Dec 06, 2017 5:06 pm, edited 1 time in total.

J_Markov
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Re: Crypto-Currency

Post by J_Markov » Wed Dec 06, 2017 6:36 pm

greg24 wrote:
Wed Dec 06, 2017 4:41 pm
I am shorting Bitcoin and most other crypto-currencies.
How are you shorting Bitcoin?

J_Markov
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Re: Crypto-Currency

Post by J_Markov » Wed Dec 06, 2017 6:37 pm

One concern would be that if the Fed or any other central bank comes up with their own cryptocurrency Bitcoin and the other cryptocurrencies would basically have no value.

joer1212
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Re: Crypto-Currency

Post by joer1212 » Sat Sep 29, 2018 7:06 pm

I have about 5% of my portfolio invested in a basket of 54 cryptocurrencies (by market weight). Basically, the top 15 or so, with selected cryptos from lower down the list. The rest of my money is in low-cost index funds.

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Re: Crypto-Currency

Post by nisiprius » Sat Sep 29, 2018 7:29 pm

J_Markov wrote:
Wed Dec 06, 2017 6:37 pm
One concern would be that if the Fed or any other central bank comes up with their own cryptocurrency Bitcoin and the other cryptocurrencies would basically have no value.
Well, Venezuela has the Petro... supposedly...
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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nisiprius
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Re: Crypto-Currency

Post by nisiprius » Sat Sep 29, 2018 7:31 pm

So I haven't heard much about the Winklevoss twins Bitcoin ETF, COIN. Wasn't it supposed to be... oh, wait: July 26th, 2018: Winklevoss Twins Bitcoin ETF rejected by SEC. (For the second time).
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

TomCat96
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Re: Crypto-Currency

Post by TomCat96 » Sat Sep 29, 2018 7:55 pm

Bull Markets are born on pessimism, grown on skepticism, mature on optimism, and die in euphoria.

Of all the folksy wisdom that relates to markets, that quip above has been for me one that's consistent.
Whether it was the tech boom of the 90s, the real estate boom of the mid 2000s, or the cryptocurrency boom of 2017, bull markets die in euphoria.

The crypto market absolutely collapsed with a magnitude that makes the global recession of 2009 seem like pleasant summer rain.
Ethereum is -84% from its all time high, and went as low as 88% from its all time high. These numbers would sound scarier. But its only possible to lose 100%. For a relative comparison, losing 88% would require a gain of about 730% to break even.

The other cryptos show similar numbers. Bitcoin seems to be the most "stable" of all of them being some -68% from its all time high less than a year ago.

Like I said before, regardless of the actual merits of crypto, the volatility alone makes it completely unsuitable for the boglehead portfolio. If stocks scare you so much you need bonds, I don;t know what to tell you about an asset that has 50-100 times the volatility of the diversified stock market.

Nate79
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Re: Crypto-Currency

Post by Nate79 » Sat Sep 29, 2018 8:01 pm

Not too many crypto threads in a few months LOL.

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fortfun
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Re: Crypto-Currency

Post by fortfun » Sat Sep 29, 2018 9:45 pm

Buster65 wrote:
Wed Dec 06, 2017 10:52 am
I'm wondering if any bogleheads dabble in crypto currency? I'm interested in understanding how you went about it, what exchanges you're on and what currency's you own.
You should read this first.
http://www.mrmoneymustache.com/2018/01/ ... is-stupid/

typical.investor
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Re: Crypto-Currency

Post by typical.investor » Sat Sep 29, 2018 10:34 pm

fortfun wrote:
Sat Sep 29, 2018 9:45 pm
Buster65 wrote:
Wed Dec 06, 2017 10:52 am
I'm wondering if any bogleheads dabble in crypto currency? I'm interested in understanding how you went about it, what exchanges you're on and what currency's you own.
You should read this first.
http://www.mrmoneymustache.com/2018/01/ ... is-stupid/
Also, CVE-2018-17144 is significant news.

The flaw allowed creation of bitcoins at will (as opposed to being discovered through algorithmic mining).

Luckily the third party that discovered the bug reported it to bitcoin core developers who hid the flaw until a fix was published.

The flaw impacts smaller currencies too. Apparently 14 coins (ACED, CREA, DYN, GRLC, HANA, KREDS, MATRX, MLM, PGN, PLUS, POLIS, UFO, VEGI and VIPS) have been attacked via the flaw.

The bug is still being debated ferociously online in regard to whether or not the network is safe, if people really need to upgrade, and if the bug was handled correctly. Some in the community are asking to know how and why the flaw happened (full root cause analysis), while others just say move-on. The move-on camp seems to be winning with comments from the investigate crowd getting locked on the github developer forum. https://bitcoinexchangeguide.com/bitcoi ... -analysis/

In any case, the original OP asked about which currencies. I'd be most wary about holding any of those under attack.

Also, per Reddit five days ago, 87% of the #Bitcoin network is *still* vulnerable to CVE-2018-17144. Some comments say 50%.
https://www.reddit.com/r/btc/comments/9 ... ulnerable/

Note:
In addition to the obvious threat of attack, the non-updated software contains a threat of mining unacceptable blocks, invalid transactions, and even network forks (and when the resulting two branches merge back into one, the transactions from the "unextended" chain will be automatically canceled). Theymos noted that the last scenario is unlikely, but still advised taking precautions and "to take into account that any transaction with less than 200 confirmations can be canceled in the coming week."

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Re: Crypto-Currency

Post by nisiprius » Sun Sep 30, 2018 6:34 am

typical.investor wrote:
Sat Sep 29, 2018 10:34 pm
...Also, CVE-2018-17144 is significant news...
Interesting, thank you very much.

As a retired software developer, let me say, ironically, "The last bug has been fixed."

Buggy software attached to real money in an unregulated environment.

Not a rhetorical question: if bad actors managed to exploit such a bug, does the visibility of the blockchain mean that we would be sure to know that a theft had taken place (even if we could not easily discover the identity of the thieves?)
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Crypto-Currency

Post by Valuethinker » Sun Sep 30, 2018 7:57 am

TomCat96 wrote:
Sat Sep 29, 2018 7:55 pm
Bull Markets are born on pessimism, grown on skepticism, mature on optimism, and die in euphoria.

Of all the folksy wisdom that relates to markets, that quip above has been for me one that's consistent.
Whether it was the tech boom of the 90s, the real estate boom of the mid 2000s, or the cryptocurrency boom of 2017, bull markets die in euphoria.

The crypto market absolutely collapsed with a magnitude that makes the global recession of 2009 seem like pleasant summer rain.
Ethereum is -84% from its all time high, and went as low as 88% from its all time high. These numbers would sound scarier. But its only possible to lose 100%. For a relative comparison, losing 88% would require a gain of about 730% to break even.

The other cryptos show similar numbers. Bitcoin seems to be the most "stable" of all of them being some -68% from its all time high less than a year ago.

Like I said before, regardless of the actual merits of crypto, the volatility alone makes it completely unsuitable for the boglehead portfolio. If stocks scare you so much you need bonds, I don;t know what to tell you about an asset that has 50-100 times the volatility of the diversified stock market.
Actually if the correlation with the stock market were reliably less than 0 then the volatility is your friend. You could could buy a lot of insurance with very little money.

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Re: Crypto-Currency

Post by Valuethinker » Sun Sep 30, 2018 8:03 am

Nate79 wrote:
Sat Sep 29, 2018 8:01 pm
Not too many crypto threads in a few months LOL.
that aspect of BH that tracks the latest investment fad is confusing and depressing

BUT I understand from those that follow other investment forums that BH is actually a "dampening down" of that - lots of wise heads and wise words.

I think crypto was Reddit land, and Reddit appears to conform to a lot of the academic research re the internet, conspiracy theories, extreme opinions etc. A "vile swamp" is how one more knowledgeable friend of mine called it.

There's a couple of types of thread I have noted on BH:

- the momentum followers. So right now it's 100% equity threads, why would you hold bonds? etc. etc. We are even getting towards the "use leverage to buy more stocks" threads (but that's so frowned upon here that it probably does not get discussed much)

- the reflexive contrarians. Aka "catch the falling knife". If it is down then people who want to buy things because "it must be cheap, because it has fallen a lot" appear. There are times when I am minded that way, myself. The reality is that the market is not stupid-- if things can get worse, then the market doesn't blindly buy (in aggregate). When things are going to get better, then the market will move like lightening on it. Don't expect that you can catch the inflection points either way

TomCat96
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Re: Crypto-Currency

Post by TomCat96 » Sun Sep 30, 2018 5:08 pm

Valuethinker wrote:
Sun Sep 30, 2018 7:57 am
TomCat96 wrote:
Sat Sep 29, 2018 7:55 pm
Bull Markets are born on pessimism, grown on skepticism, mature on optimism, and die in euphoria.

Of all the folksy wisdom that relates to markets, that quip above has been for me one that's consistent.
Whether it was the tech boom of the 90s, the real estate boom of the mid 2000s, or the cryptocurrency boom of 2017, bull markets die in euphoria.

The crypto market absolutely collapsed with a magnitude that makes the global recession of 2009 seem like pleasant summer rain.
Ethereum is -84% from its all time high, and went as low as 88% from its all time high. These numbers would sound scarier. But its only possible to lose 100%. For a relative comparison, losing 88% would require a gain of about 730% to break even.

The other cryptos show similar numbers. Bitcoin seems to be the most "stable" of all of them being some -68% from its all time high less than a year ago.

Like I said before, regardless of the actual merits of crypto, the volatility alone makes it completely unsuitable for the boglehead portfolio. If stocks scare you so much you need bonds, I don;t know what to tell you about an asset that has 50-100 times the volatility of the diversified stock market.
Actually if the correlation with the stock market were reliably less than 0 then the volatility is your friend. You could could buy a lot of insurance with very little money.
That is a fascinating theoretical point. I hadn't considered market forces that would put downward pressure on volatility

Valuethinker
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Re: Crypto-Currency

Post by Valuethinker » Mon Oct 01, 2018 3:03 am

TomCat96 wrote:
Sun Sep 30, 2018 5:08 pm
Valuethinker wrote:
Sun Sep 30, 2018 7:57 am
TomCat96 wrote:
Sat Sep 29, 2018 7:55 pm
Bull Markets are born on pessimism, grown on skepticism, mature on optimism, and die in euphoria.

Of all the folksy wisdom that relates to markets, that quip above has been for me one that's consistent.
Whether it was the tech boom of the 90s, the real estate boom of the mid 2000s, or the cryptocurrency boom of 2017, bull markets die in euphoria.

The crypto market absolutely collapsed with a magnitude that makes the global recession of 2009 seem like pleasant summer rain.
Ethereum is -84% from its all time high, and went as low as 88% from its all time high. These numbers would sound scarier. But its only possible to lose 100%. For a relative comparison, losing 88% would require a gain of about 730% to break even.

The other cryptos show similar numbers. Bitcoin seems to be the most "stable" of all of them being some -68% from its all time high less than a year ago.

Like I said before, regardless of the actual merits of crypto, the volatility alone makes it completely unsuitable for the boglehead portfolio. If stocks scare you so much you need bonds, I don;t know what to tell you about an asset that has 50-100 times the volatility of the diversified stock market.
Actually if the correlation with the stock market were reliably less than 0 then the volatility is your friend. You could could buy a lot of insurance with very little money.
That is a fascinating theoretical point. I hadn't considered market forces that would put downward pressure on volatility
I was thinking simply from a personal perspective - Efficient Frontier. As opposed to the macro implications.

It's the argument for gold, which I get warmer on as gold gets more and more neglected. Unfortunately gold this cycle has attracted the lunatic fringe (as it always does) although the younger version of that is probably in cryptocurrency. But gold seemed to lose its hedging properties.

William Bernstein wrote a piece about it. Gold is an insurance policy and therefore a painful one - you pay away money, year after year, in poor or negative returns. Maybe things hit the fans and maybe it serves as its traditional insurance.

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