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Vaniver comments on A proposed inefficiency in the Bitcoin markets - Less Wrong
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Look at the grandparent:
Given that the expected value for the change between today and tomorrow ((+250-200)/2=+25) is publicly known, I wonder who will sell him bitcoins for $1000 today.
In other words, the situation as described is unstable and will not exist (or, if it will appear, it will be arbitraged away very very quickly).
If someone has a log utility function, a half chance of $800 and $1250 is as valuable as a certainty of $1000. Basically, people who have more risk than they want are selling to people that have less risk than they want.
(The stated example- of 2.5% growth in absolute terms per day- is very exaggerated compared to actual asset prices, I think. If this were about an asset that had an expectation of 2.5% growth in absolute terms per year, but the high variance, then it would be reasonable to imagine the market being much happier with the $1000 today than the gamble, because of how risky and low-growth it is compared to other options.)