Assume an average Compound Annual Growth Rate (CAGR) for BTC price. Lets say 30%.
After 5 years $10,000 becomes $37,000
After 10 years it becomes $138,000
After 15 years it's $512,000
After 20 years it's $1,900,000
After 25 years it's $7,000,000
After 30 years it's $26,000,000
Start early. stack hard.
CAGR has nothing to with BTC price or price action. CAGR as it is applied to BTC is simply a way to compare BTC’s hypothetical fiat spot sale price to the performance of a TradFi investment that has an actual compounding mechanism built into it ie. yield folded back into principal. To apply a CAGR equation to BTC’s future spot sale price is logically irrelevant because Bitcoins price is not subject to a compounding mechanism.
That's actually a really good point. The definition of CAGR assums reinvestment of any interest over time only to simplify the formula. But the calculation does not require a yield. The 1/n in this equation is the compounding mechanism.
Yes, it doesn’t require a yield as it is applied to BTC because it assumes that it is built into the final sale price. That is why it is used as a way to compare the return to an investment that has an actual compounding mechanism built into its growth. Because it usually varies annually, CAGR is used to smooth out the variance to arrive at an average over the time being measured. Fundamentally though BTC’s price is not subject to a compounding mechanism so CAGR should not be used as a way to evaluate historic or future price trends unless you are comparing it directly to something that has an actual compounding mechanism. 🙂
