Correcting CAGR
CAGR is a popular metric, which is used, and abused by both the bulls and the bears. One camp pitches moon-math, whilst the other blames the market for their top blasts. Today, we correct CAGR.
‘Bitcoins performance sucks bro, CAGR is collapsing, and it’s the same price as it was in 2021, dead asset’ - Reply Guy who went all-in at the 2021 top.
G’day Folks,
How many times have you seen remarks like this out in the wild?
I always find it interesting to think about, and evaluate these claims. I totally understand where the frustration comes from, especially once the bear market rips off the rose-tinted glasses.
However, when I think about my own Bitcoin experience, reflect on my buying decisions, and run the performance numbers myself, it seems to me as if those reply guys might benefit from doing a similar exercise.
Naturally, it is much easier to blame market manipulators, price suppressors, shadowy cabals, and even the asset itself for poor performance. This is the approach many inexperienced investors tend to default to.
The more likely reality, is that their expectations for the market being a personal cash ATM didn’t play out as planned, and the result was their decisions of when to buy (and how much) were highly sub-optimal.
Opining about Bitcoin’s declining compound annual growth rate (CAGR) is a reply-guy favourite, as predictions of it allow them to extrapolate how rich (or poor) they WILL be 5 to 10yrs in the future.
As is tradition, bear markets are predicted to go on forever when you’re already deep into one, and bulls have no ceiling, as measured during the run-up.
In today’s piece, I want to share my perspective on why I believe CAGR is a busted and misleading metric. I will then show you how I think about Bitcoin’s future growth potential, and try to re-frame in a more sensible, grounded, and measured way.
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