I and I think most people use it just as the annual price appreciation. AGR would be more appropriate, but CAGR is easier to say and more commonly cited. However, the two are trivially the same if there are no payments compounding (which is the case here)
Discussion
Good question though - genuinely gave me a pause to wonder why everyone **is** saying CAGR.
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!!
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!