An asymmetric trade is a situation where investing a relatively small amount of money holds the potential of yielding a profit many times the amount of the original sum at risk. In other words, where the risk to reward is skewed massively in the direction of reward.
This took place recently with Bitcoin (BTC). Is this conceptually different from bets made years ago on Microsoft, Cisco, Amazon, or Facebook, which yielded hundreds of percent profit to intrepid investors? Does it have relevance to the possible returns during the next few years for those who hold physical gold and silver?
I would answer “yes” and “yes.”
The current “mania” in the cryptocurrency space – most notably BTC and Ethereum (ETH), along with a few other “app coins” – offers an in-future lesson for a similar setup in the precious metals. (For more on the above topic, see “The Blockchain: A Gold and Silver Launchpad?”
First: This may be the first time ever that an investment “story” has had the ear and investment dollars of a global audience on a simultaneous basis. Individual investors, hedge funds, businesses, and even countries, are sending a torrent of funds, with the effect, to paraphrase Doug Casey’s famous remark, of “trying to push the power of the Hoover Dam through a garden hose.”
3-Month Bitcoin Chart
At this point, trying to use technical analysis, Elliott Waves – or common sense – in predicting when and how this moon shot is going to end, or even level out, is of little help. Taking some money off the table of a large position still makes sense. But “going to cash” with the idea of getting back in might become a tactical – or even strategic mistake.
In January 2017, ETH could be had for $10 each. By $50, the charts and many soothsayers said that it was “grossly overbought.” Time to cash out? Today ETC sells for $328 each. Can you predict at what price level this will end? Not I. During a bull run of indeterminate length and height, losing your (core) position can knock your profit-making efforts to the curb.
This is exactly what metals’ and miner-holders will face as the next leg(s) of the secular bull run in gold and silver starts moving upward in a sustainable manner. The temptation to sell out at 3-4x will be overwhelming – especially for those who bought at higher levels and are looking for an excuse to “get out at break-even.”
In order to ride the tiger for as long as possible, you will need to have decided beforehand what part of your holdings are defined as “core” – insurance and longer-term investment-related, versus “speculative” – selling into great strength, in order to take profits and “play with the house’s money.”
Without having a plan early on, you WILL end up selling too soon.
Second: Because of the Internet’s power to instantly broadcast information, good or bad, the time it takes for this kind of price run to get underway and rocket off into space has been …read more
Source:: Gold Silver Worlds
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