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Bitcoin does not have a compound annual growth rate CAGR. It has an annual rate of return ARR. At it’s core CAGR is a way to describe in one number what happens when you reinvest an interest payment or dividend back into the original principle over many years at different interest rates. Bitcoin does not pay interest so you cannot use the CAGR maths from the fiat investment system to evaluate a return. Bitcoin is a completely different beast.

Born To Be Free 7mo ago

I appreciate your response! I’m so used to meeting my fiat friends where they are so I sometimes default to the fiat terminology.

I think CAGR can still Be useful in backwards measuring bitcoins performance. Of course it doesn’t have cash flow but we can convert the typical cash flow to price appreciation, or at least that’s how I’ve explained it

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Discussion

GJM 7mo ago

I think there is a natural reflex to want to reach for a tried and true explanation of how certain types of returns work in order to explain what we see happening in Bitcoin, but unfortunately CAGR actually distorts rather than clarifies what happens with BTC gains. CAGR relies fundamentally on being paid interest on then folding the interest back into the principle. This can only happen if you give your BTC to someone who will pay you interest for the privilege of using it for other things. If all you are talking about is buying and holding your own BTC then you are never paid interest. It’s just my personal opinion but I think it is important to be factually correct when trying to describe bitcoin and how it works. Otherwise you may lead someone down the wrong path and/or make ill informed decisions.