There is a term in the game of poker to determine how good a particular situation is for a designated player. This term is called expected value, or “EV” in its abbreviated form. For crypto, it can roughly be translated into the hypothetical question “when I bet a certain amount, what do I expect to win on average over time”?
The EV Of Bitcoin At The Poker Table
At this juncture in history, and particularly with the price of Bitcoin being sliced in half from it’s all time highs, I would argue that the EV of betting on this cryptocurrency is quite substantial. For instance, if you purchased a full bitcoin right now for roughly $11,000 dollars, where would the price be half a decade from now?
It’s certainly within reason to assume that Bitcoin could be at 100k or 200k in the early 2020’s, but there is also the doomsday scenario that it could go down to nothing. Similar to poker games, hungry players are prepared to accept both extreme outcomes when they approach the table with their chips. They can either clean up the table, or walk away empty-handed.
Fortunately, in the very early stages of 2018, the ‘clean up the house’ extremity has a much stronger metaphorical magnet compared to a great Bitcoin collapse. Just take it from the expected value (EV) formula.
The EV Formula
When you think about your EV in regards to bitcoin trading, you factor in the times that you lose (right now for example if you bought in at 20k!) and average that with the times your crypto holdings appreciated. Finally, you multiply those two factors by their frequency.
In the long run, I have no doubt in my mind that Bitcoin and some other strong cryptocurrencies will have a positive return on investment. As the years pass by, there are more and more cases being presented where people should be able to rely more on cryptocurrencies rather than fiat. Venezuela is a perfect example, where hyperinflation and government mismanagement has decimated the economy.
Bitcoin and other cryptocurrencies will allow these vulnerable populations to have a medium of exchange they can believe in, especially since a global marketplace is responsible for helping to maintain its value. The increasing desire for privacy in financial transactions will also fuel further demand for cryptocurrencies, in addition to increased government support (who would love to collect taxes on crypto gains!).
But Word To The Wise
At the end of the day, poker playing and crypto investing are both risky investments. There is no guaranteed positive outcome, so don’t bet more than what you can afford to lose. Stepping into the game with a clear head, a sound body of knowledge, patience, and not being intimidated about taking some loses on occasion, are just the right kind of virtues you need to help you become a winner.
This article was originally published at CryptoGeography. Permission to reprint this article elsewhere is granted, provided that all text and hyperlinks (including this footnote) remains intact.