Bitcoin bulls never discuss risk. It’s wonderful to make money in a good trade, but few pay attention to the risk taken in pursuit of that winning trade.
Bitcoin Is The Worst Form of Gambling Ever
In regards to risk, bitcoin is nothing more than pure gambling. Worse, bitcoin gamblers face odds that are worse than found at even the worst table games in Las Vegas. It is worth nothing.
Over the very long term, stocks have a positive return expectation. We expect the stock market to rise over time because earnings growth drives stock prices.
Earnings always grow over time because economies, particularly the United States economy, always grow over time (regardless of even lengthy recessions).
If you look at rolling 30 year periods of the Dow Jones, stocks have averaged an 6.7% increase.
In the past ten years, the Dow Jones has delivered a 13.6% average annual return.
Bitcoin Carries Risk That Nobody Thinks About
But we cannot just look at return. We must look at risk. Risk is expressed by standard deviation, which gives us an expression of probability that a return will fall within a given range.
So the proper way to express the return of the Dow Jones is to say that, in any given year, there is a 95% probability of the Dow Jones returning 13.6% plus or minus 24%.
Gambling in Las Vegas almost always has a negative return expectation over time. That’s because games are tilted in the casino’s favor. If the casino doesn’t make money over time, it goes out of business.
The best long-term return you can expect in Las Vegas is -0.28% plus or minus 1.15%, and that is if you play blackjack exclusively and make all the right decisions.