OF BITCOIN VOLATILITY & EXPONENTIAL RETURNS: GAMEMAKER WATCH 3

BITCOIN WATCH – DID WE HIT A BOTTOM?
Thus far bitcoin has rebounded almost 70% from its lows around $150, while litecoin has rebounded over 120% from its lows around $1. This substantial rebound was the strongest in several months and certainly makes $150 into a firm candidate for a bottom.
For the first time in over a year, litecoin rebounded more strongly than bitcoin, and in fact, came close to re-attaining the 1% level it held for much of 2014.
While bottoms are obviously impossible to predict with any certainty, $150 may well turn out to have been the low for 2015. At a minimum, such a scenario merits a probability of at least, say, 40%, and according to some as high as 60%. If we use that 40% figure in combination with a potential upside of, say, $1000, it seems like an attractive bet. Even if the probability is only 25%, it is still an attractive bet. Remember, even a bet with a 25% probability of success can still be a good one if the upside is exponential. To win, I simply have to make enough of these bets.
This kind of bet with the expectation of a loss is a typical contrarian one, because its underlying mathematical logic contradicts emotional logic. Most people prefer not to place bets which they expect to lose, which is one reason why such bets can be so lucrative for the people who DO place them. The recent Swiss franc revaluation was a good case in point. At least from a short-term perspective betting on a Swiss franc revaluation was likely a losing bet. So unsurprisingly, few people made it. But those who did got an exponential payoff.
So will bitcoin or litecoin once again produce exponential returns in 2015? There is no way to know, but it is clearly a possibility worth punting on.

This post was published at Dollar Vigilante on 2015/1/26.