Rate of return of #Bitcoin versus existing system. Actually had to pick a higher price in 2011 or it would be higher AND that is measure against existing system. (So doesn’t capture the true effect of what I talk about in measuring prices falling) In any 4 year period if you bought at the very highest and held for 4 years, your lowest IRR is 23%.
nostr:nprofile1qqsg86qcm7lve6jkkr64z4mt8lfe57jsu8vpty6r2qpk37sgtnxevjcpz4mhxue69uhkummnw3ex2mrfw3jhxtn0wfnsz9rhwden5te0wfjkccte9ehx7um5wghxyecpr3mhxue69uhkummnw3ezucnfw33k76twv4ezuum0vd5kzmqug4hxr I've heard you use the 45% IRR metric a few times as the rate to beat for Ego Death. Can you tell me where that measurement comes from?
Discussion
Hey Jeff, that's about the number I came up with as well.
I looked at the hashrate in November 2018 and compared it to the hashrate 6 years later. I also compared the miner's efficiency gains during that same time period.
I found that the hashrate had grown 15.09x, a CAGR of 57.2%, and flagship miner efficiency had growth 6.53x, a CAGR of 36.7%.
To find actual energy (and value) input, I divided hashrate growth by efficiency gains 1.572/1.367 = 1.15. So the mining network grew by 15% energy/value input a year on average.
I then add to that the annualized effect of the halving doubling the value of all coins every 4 years, 1.1893^4 = 2, and the USD currency debasement rate of 6.8% a year.
1.15 * 1.1893 * 1.068 = 1.46.
So a 46% GAGR on average over long time periods.
However, from Nov 2018 to Nov 2024 there were 2 halving events, so the CAGR for that period would've been higher as a result. 1.26^6 = 4.
So 1.15 * 1.26 * 1.068 = 1.548.
I did November 2018 because the price was just before the oversold bottom a month later and right around the average cost to mine at the time. Nov 2024 because it's nearly a year before the bull peak of this cycle (and when I did the calculation), and again the price was right around the average cost to mine at that time.
Actual price Nov 13, 2018 = $6350
Actual price Nov 13, 2024 = $88,899
$6350 x 1.548^6 = $87377. A 98% correlation.
Lastly, because the mining network doubles the cost to mine coins "overblock" in terms of time and energy, the actual calculation would be more accurate if it took that into account. So really, measured in dollars it's (1.15 * 1.068 = 1.228) 22.8% CAGR a year, with a sudden doubling every 4 years (this causes a shock wave that slowly makes its way through markets, culminating in the bull peak, before crashing back to the production cost of the mining network the following year).
Plotted out on a graph, that looks like this:
https://www.desmos.com/calculator/u5myjhotyz
The blue line is dollar growth, the red line is spending power growth.
This is what I believe the data strongly supports to be the true average growth rate of Bitcoin's value over time, and it's Earth shattering to society if true. You are absolutely right that the world of tomorrow is a world of prosperity for everyone, I can't wait to see it manifest over the next few decades.