# Betfair giving odds of 9/1 on Bitcoin being over $50k at the end of the year



## Brendan Burgess (6 Jan 2018)

This is a very interesting bet. I am saying interest, and not necessarily a good bet. 

I think that Bitcoin will have collapsed by then. But I might be wrong in my timing. I suspect that if it's still going at the end of year, it will probably have bubbled up even further. In other words, it will be worth nothing or a lot. 

My earlier estimate that there was a 99% chance of it being worth than $15k is probably a bit too high. But does 90% seem reasonable?   

If I am wrong and it's worth over $15k, it will probably be also worth over $50k. 

If it collapses, not only will it be worth less than $15k, it will also be worth less than $5k .

Brendan


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## Fella (6 Jan 2018)

Brendan Burgess said:


> This is a very interesting bet. I am saying interest, and not necessarily a good bet.
> 
> I think that Bitcoin will have collapsed by then. But I might be wrong in my timing. I suspect that if it's still going at the end of year, it will probably have bubbled up even further. In other words, it will be worth nothing or a lot.
> 
> ...



You seem like a decent guy and I take doubt your actively trolling with your posts but if anyone else was posting this stuff I'd accuse them of been a troll , I think your just placing two bad bets now instead of the initial one bet you've been placing on under 5000.


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## ant dee (6 Jan 2018)

There is definitely more value in buying €200 worth of bitcoin and keep it for a year, than betfair bet of €200 @ 10.00  on it being over $50k.


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## Brendan Burgess (6 Jan 2018)

ant dee said:


> There is definitely more value in buying €200 worth of bitcoin and keep it for a year, than betfair bet of €200 @ 10.00 on it being over $50k.



Why do you say that? What do you see as the range of outcomes and the payoffs?


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## ant dee (6 Jan 2018)

If you risk €200 on Betfair, price can go to 49k and you still lose all your stake.
Price can stay stable and you still lose your stake.
Price can go to 500k and you still only win €1800 - 5%.
I believe 40/1 odds might hold value, but that's just my opinion

If you buy bitcoin, you only lose all your stake if bitcoin goes to zero. Granted, if you lose 90% it makes little difference, but one might say you can risk a larger bet with effectively the same exposure as the €200 betfair bet.
Even if you just stick to the €200, you gain all the way up. You have your stake protected at the current price, make like 3 times your stake at 49k, instead of total loss.

Maybe a total loss of €200 or €2k doesnt sound like much, but the logic is the same in bigger amounts too.


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## Dan Murray (6 Jan 2018)

Brendan Burgess said:


> My earlier estimate that there was a 99% chance of it being worth than $15k is probably a bit too high. But does 90% seem reasonable?



Brendan,

Whilst some of your other comments (in this post) are still a bit dubious - the one highlighted above represents a significant improvement in your thinking. Whether 90% is reasonable or not is still obviously debatable but let's recognise that it's miles and kilometres more reasonable that 99%. [Like I still can't imagine that you would be especially tempted to place a wager based on a 90% probability - which is a useful litmus test in these scenarios! I have asked you to let me know what you think would be fair odds and you haven't done so. One way of determining fair odds is to strike odds at which you wouldn't mind being on either side of the bet, if that makes sense. The level of "buffer" or "comfort" that you would need is a separate calculation. Sorry a bit rushed - shouts of "you're not on that bloody site again" being yelled here!]

Anyway, once again, there is clearly much to support your central thesis re bitcoin - what I and others couldn't support was the excessive degree of certainty you were ascribing to your various opinions.


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## TheBigShort (6 Jan 2018)

Brendan Burgess said:


> My earlier estimate that there was a 99% chance of it being worth than $15k is probably a bit too high. But does 90% seem reasonable?



That would depend on your perspective Brendan. Notably your certainty level has dropped 9% in a short space of time, indicating a possible period of volatility and uncertainty in that quarter for the time ahead.



Brendan Burgess said:


> If I am wrong and it's worth over $15k, it will probably be also worth over $50k.



...as I was saying...




Brendan Burgess said:


> If it collapses, not only will it be worth less than $15k, it will also be worth less than $5k .



No disrespect Brendan, but the bag-of-hot-air that is bitcoin has certainly caught your attention.
This 'worthless' punt that is 'certain to return to zero' can now be defined as having 'collapsed' if it goes below $5,000. The statement implies that contrary to your call that bitcoin will return to zero, that when the collapse does come, you are picking up a sense of price resilience in bitcoin?


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## Duke of Marmalade (6 Jan 2018)

Yes that is an interesting bet, _Boss_.

How would a bot dispassionately calculate the odds based purely on observing the market and making no judgement calls?
Well I would presume same bot would use the ubiquitous tool of the quant nerds - the lognormal.  She only needs to estimate two parameters - the volatility and the drift.  Typically, for example, she might assess FTSE as having an *annual *positive drift of +6% and an *annual *volatility of maybe 15%.

Now based on recent observations the bot would give bitcoin zero drift i.e. completely agnostic as to whether it will go up or down.  But it might ascribe a volatility of 15% *per day*.  Then the chances of being higher than 3 times current prices by end year would be 35%.  Similarly (because log(3)=-log(1/3)) the chances of being less than 1/3rd of today's price would be the same 35%.  The 50k and 5k marks are roughly 3 times today's price and 1/3rd that price respectively.  So that 9/1 would look very good to the bot.

In fact it is only if the bot made a subjective call that volatility will reduce to 5% that the 9/1 price becomes the "correct" price.

However, I would completely override that bot's naive method.  The bot is ignoring all fundamentals and simply observing silly humans at their market games.  But the fundamentals are that bitcoin has no intrinsic value and has indeed spent the greater part of its life at less than 5k.  At 50k it is approaching unbelievable adoption metrics on Investopedia's model.  The bot is taking the view that fundamentals don't matter as they clearly do not at the present time but that will not continue IMHO.


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## Brendan Burgess (6 Jan 2018)

ant dee said:


> If you risk €200 on Betfair, price can go to 49k and you still lose all your stake.
> Price can stay stable and you still lose your stake.
> Price can go to 500k and you still only win €1800 - 5%.
> I believe 40/1 odds might hold value, but that's just my opinion



Thanks for trying to answer it.

This is the sort of calculation you need to do.

*Buy $200 of Bitcoin *
Ultimate expected value: zero - when Bitcoin crashes

In the mean time, of course it could double in value, but you would have to get your timing right.
So buying Bitcoin is a terrible strategy.

*Let's look at betting on Bitcoin closing price 
*
Probability of <$5,000 at year end: 85%
Probability of $5,000 to $50,000: 5%
Probability of >$50,000: 10%

I am just guessing these probabilities. It will either crash or continue to explode. The chances that it will be $16,000 this time next year must be close to zero - so say 5% for $5k to $50k . (I think that is an overestimate)

So bet on <$5,000 at evens.  Lose $200 15% of the time, and wind $200 85% of the time, so there is a positive expected value of $120. (Is my maths correct?)

Bet on >$50,000 at 9/1. Lose $200 90% of the time. Win $1,800 10% of the time.  so that is an expected value of - $20.

So fair odds would be about 10/1.

Here are the current odds for over $50,0000 





Somebody is prepared to bet at 37/1. Someone is prepared to lay at 9.5/1. So they clearly see the >$50k chances as being much lower than I estimate them. 

Brendan 

Brendan


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## Brendan Burgess (6 Jan 2018)

Duke of Marmalade said:


> The bot is ignoring all fundamentals and simply observing silly humans at their market games. But the fundamentals are that bitcoin has no intrinsic value and has indeed spent the greater part of its life at less than 5k. At 50k it is approaching unbelievable adoption metrics



Agreed that the bot can't estimate it.  We have to make a judgement call. 

Will silly humans be still playing market games this time next year? Will they be putting a price on something which is worthless? 

It's certainly possible. Could it be as high as 15% for over $5,000? 

Brendan


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## Brendan Burgess (6 Jan 2018)

TheBigShort said:


> This 'worthless' punt that is 'certain to return to zero' can now be defined as having 'collapsed' if it goes below $5,000. The statement implies that contrary to your call that bitcoin will return to zero, that when the collapse does come, you are picking up a sense of price resilience in bitcoin?



Hi Shortie

I am still certain that Bitcoin will collapse to zero at some stage.  Unfortunately, I don't know when. 

The $5,000 is the  lowest level at which it is possible to bet on Betfair. 

There is no long term value in Bitcoin. There is clearly price resilience but it will not last forever. 

Brendan


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## ant dee (6 Jan 2018)

Hi Brendan. 

You are convinced Bitcoin will collapse to zero so you dismiss buying it , even just to sell it on the scenario it increases. 
So you outright dismiss buying , even for the short - medium turn.

You also made up your mind about some probabilities and certain price bands. 
And made some calculations based on those.
Well, all this might be helping you convince yourself but in reality it's no different than the mugs trading horses.

The spread on the 50k market is huge .
Volume is low so the market is inaccurate. 
The guy that wants to lay it at 9.5/1 will probably have value , not you backing it.
The guy trying to back at 40/1 will probably have value. 

Maybe the market gets some liquidity after a few weeks and we will see a more accurate view of the probabilities. 
High liquidity Betfair markets tend to be very accurate with their odds!


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## Dan Murray (6 Jan 2018)

Brendan Burgess said:


> Let's look at betting on Bitcoin closing price
> 
> Probability of <$5,000 at year end: 85%
> *Probability of $5,000 to $50,000: 5%*
> Probability of >$50,000: 10%



Dear Brendan,

I honestly think you are not great with probabilities. No oh fence.

The bolded statement suggests odds of 19/1 that the price will be outside the range $5k to $50k.

To quote a gas New Yorker: _you can not be serious!_

If you are, I'll give you (very happily) €1k now and if the BTC price is within the specified range at the relevant date, you will give me 20 big ones.

There is no way in hell you will accept such terms - am I right? 

And if I'm right, what does that mean?

And if you ignore this post (long odds-on ), what does that mean?


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## ant dee (6 Jan 2018)

Dan Murray said:


> The bolded statement suggests odds of 19/1 that the price will be outside the range $5k to $50k.


You mean inside right ?

Not that it makes sense since Brendans probabilities are made up anyway.


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## Dan Murray (6 Jan 2018)

ant dee said:


> You mean inside right ?


Of course



ant dee said:


> Not that it makes sense since Brendans probabilities are made up anyway.


The point is that these are BB's best guesses, as in:


Brendan Burgess said:


> It will either crash or continue to explode.



My point stands 110%


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## Duke of Marmalade (6 Jan 2018)

Dan Murray said:


> If you are, I'll give you (very happily) €1k now and if the BTC price is within the specified range at the relevant date, *you will give you* 20 big ones.


I doubt the _Boss_ would have any problem at all with that proposition.  Go on fix it on the QT.  Oh dear, broke my new year's resolution not to engage with you


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## ant dee (6 Jan 2018)

Brendan Burgess said:


> Probability of <$5,000 at year end: 85%


In any case , this is a more interesting line .
Would anyone give me €10,000 now to get €11,500 next year if the price closes below 5k?
Lose the whole stake if price closes between 5k to infinity ?
Does that sound anywhere near fair odds to you?


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## Fella (6 Jan 2018)

You should ask them to put up a more aggressive line for yourself Brendan , Bitcoin under 100$ or whatever you think it will drop to


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## BreadKettle (6 Jan 2018)

Brendan Burgess said:


> I am just guessing these probabilities. It will either crash or continue to explode. The chances that it will be $16,000 this time next year must be close to zero



It could go to $60k during the year and then crash back down to the $16k at the end. 

And as usual, it's death would be announced however people that bought in 2015 would be up 8000% or so and those at the start of the year would be even and as usual also it would recover.


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## john luc (6 Jan 2018)

history of investments such as Bitcoin show that when the faith in their enormous value comes into question and doubt begins to become apparent then the fall is quite quick and very dramatic


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## Brendan Burgess (7 Jan 2018)

Fella said:


> You should ask them to put up a more aggressive line for yourself Brendan , Bitcoin under 100$ or whatever you think it will drop to



Hi Fella

That is a very interesting point. 

Bitcoin will crash. 

I don't know if the believers will still assign it a residual value. 

It might crash to a couple of dollars and then rebound a bit.  So this time next year, there could have been a crash but the price might still be a few hundred dollars. 

On balance, I am very happy with the below $5,000 bet.

If they change the bands to "Below $100" and $101 to $5000" , then I think it would be too risky to bet. 

The odds on below $100 would have to be much higher than the current evens on below $5,000. 

Brendan


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## Dan Murray (7 Jan 2018)

Duke of Marmalade said:


> I doubt the _Boss_ would have any problem at all with that proposition.  Go on fix it on the QT.  Oh dear, broke my new year's resolution not to engage with you



Hey Duke,

I purposely made a critical typo to see if this might help engage Brendan. Alas, it failed. No more of it.

I know you have always been much more concerned about what's right rather than who's right. It would be great if you would be good enough to explain my point to your boss - there is, perhaps, some chance that he might listen to you?


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## Brendan Burgess (7 Jan 2018)

ant dee said:


> You also made up your mind about some probabilities and certain price bands.





ant dee said:


> The guy that wants to lay it at 9.5/1 will probably have value , not you backing it.
> The guy trying to back at 40/1 will probably have value.



Hi Ant

What I was trying to do was give my estimate of the probability of all the various outcomes.  Then work out the fair odds.  I certainly haven't made up my mind.  I am giving my best estimate but I would welcome hearing other people's estimates. 

Brendan


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## Duke of Marmalade (7 Jan 2018)

Dan Murray said:


> Hey Duke,
> 
> I purposely made a critical typo to see if this might help engage Brendan.


You think purposeful traps add to AAM? There is the reason for my new year's resolution not to engage with you, which I have now broken for the nth time but absolutely no more.  If you abuse this self restraint I will report your posts.


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## TheBigShort (7 Jan 2018)

Brendan Burgess said:


> What I was trying to do was give my estimate of the _probability of all the various outcomes._ Then work out the fair odds. I certainly haven't made up my mind. I am giving my best estimate but I would welcome hearing other people's estimates.



After yesterdays 9% fall to 90% in the BB Bitcoin to Zero Certainty Index, how much is it falling by now? I thought that there was only one outcome?


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