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Not all investments lose value equally: A recovery period for digital assets
Published Jul 09, 2022 10:17AM ET
Updated Jul 10, 2022 12:20PM ET
Not all investments lose value equally: A recovery period for digital assets
When investing in financial markets, people often underestimate the possibility that, over a period of time, the investment may lose its value, and it will take time to recover temporary losses. The deeper the loss becomes, the more energy required to recover the losses increases out of proportion. If I invest $100 and lose 10%, I end up with $90 (whether I keep the investment or liquidate it). So, to get back to $100, which returns do I have to make? I have to make 11% because, with a base of $90, if I make 10%, I end up with $99. This effect is amplified if I lose 20% — to get back from $80 to $100, I will have to make 25%.
So, the losses are not exactly symmetrical to the gains you must make to recover them. If I find myself having lost 50% of my investment, to get back to $100 from $50, I must double it, so it should be intuitive to the reader that the more the loss is amplified, the more energy required to recover.
Daniele Bernardi is a serial entrepreneur constantly searching for innovation. He is the founder of Diaman, a group dedicated to the development of profitable investment strategies that recently successfully issued the PHI Token, a digital currency with the goal of merging traditional finance with crypto assets. Bernardi’s work is oriented toward mathematical models development which simplifies investors’ and family offices’ decision-making processes for risk reduction. Bernardi is also the chairman of investors’ magazine Italia SRL and Diaman Tech SRL and is the CEO of asset management firm Diaman Partners. In addition, he is the manager of a crypto hedge fund. He is the author of The Genesis of Crypto Assets, a book about crypto assets. He was recognized as an “inventor” by the European Patent Office for his European and Russian patent related to the mobile payments field.
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