It’s got me wondering as well. There was one influencer who was suggesting that listeners should look at an online CAGR calculator and set the start price at $10k for 0.1 BTC and a 60% rate of return with a 20 year time period. You get something like $64 million! He was using the example to hype listeners up as to the potential returns. Problem is that a CAGR calculator ALWAYS folds each years interest or return back into the principal amount so that the subsequent years principal can benefit from getting interest on a bigger amount, hence the word “compound.” From where I stand I am unable to find any similarity between tradfi CAGR and BTC spot prices for returns. Average Annual Rate of Return AARR makes sense, not CAGR. But obviously if I am wrong I would like to know about it!!
Discussion
one slight benefit i see is that since bitcoin's ARR is equivalent to its CAGR (all paments during the year are of size 0), then you can compare Bitcoin's ARR to a company's CAGR and call them both CAGR for simplicity's sake.
Still, I agree that its sloppy.
Also, some people might just not know the difference and think that the compounding is just a yearly phenomena
Agreed. It’s misleading though if someone is using the CAGR math which includes the annual returns while simultaneously trying to wrap their heads around BTC, which truly is a different beast!