Former Goldman Sachs trader leaves Wall Street for crypto

Discussion in 'Cryptocurrencies' started by johnarb, Jun 15, 2018.

  1. johnarb


    Good explanation of a small portfolio allocation can still result in outsized gains = asymmetric bet. Good enough for grandmas, good enough for ET'ers.
    Last edited: Jun 15, 2018
  2. Daal


    The assymetry is there but he didnt explain why the expected value is there. That same grandmother could put 0.5% of her portfolio in a single number in roulette, the payoff would be 35-1 (more than the 10-1 touted by the Goldman guy) and if she lost it would be 'no big deal'. Yet, the it would be a bad bet regardless of the assymetry. And I'm a BTC holder, I just think that people talk about the assymetry without understanding it that it doesnt mean much
  3. Well..yes and no

  4. Religion got some % of flock's money assuring them better after life. Cryto brahmins are trying to do the same....but playing to human greed.
  5. johnarb


    But they did explain it. It's a form of diversification for portfolio fund allocation and it's hardly fair to compare a roulette bet to putting money on an emerging asset class. Yes, it's risky, but... The other thing, too, is this is a site for traders and speculation and should be able to do their own research.
    Last edited: Jun 15, 2018
    itspossible likes this.
  6. Expected payoff is more important than assymetry.

    E.g. if you invest 5% in something. Odds are, you will lose most of it. Or maybe you 5x your money. Even then that's only a 25% gain. The probability of you turning $10k into $1 million is very low. It's like gambling.
  7. johnarb


    That's at least a pretty rational argument even if you don't believe in bitcoin.

    An investment in bitcoin is like an option with no specific expiration date. Say you invest one bitcoin's worth, $6,500, you can only lose that much, and yet what is a realistic upside given a timeframe of 2 years? Would you at least give it a fair shot of reaching a previous high $20,000?

    I'd say paying for non-expiring option for $6,500 seems like a fair price given the risk/reward ratio, wouldn't you?

    The first result from a google search of "asymmetric bet bitcoin" is this article:

    And from my point of view, what hurt this person is his non-belief that bitcoin can be as revolutionary as the ideology behind it when it first stared. Had he given it a 20% chance of possibility, he would still be holding 666 bitcoins worth over $4 Million. Fat tails? 6-sigma event?

    Hodlers don't seem to have a problem considering the wildly unrealistic. I have no problem seeing bitcoin priced at $50,000 each in the next 2 years. We'll have to wait and see but I do have skin in the game.
    itspossible likes this.
  8. It's "asymmetry" because it's a-symmetric as opposed to ass-ymetry which is a study of buttocks :)

    Expected payoff and the symmetry of the reward/risk are naturally related. The distribution of the returns gets progressively asymmetric as your assets gets cheaper (if you assume that prices can not go negative) and your median and mean outcomes start diverging dramatically. In short, the asset starts acting like an option.

    PS. asymmetric assets are usually overpriced and yet you would be a fool to sell them short