Anyone who has gone down the crypto rabbit hole probably has their own investment thesis on $BTC and cryptocurrencies- whether it be technological innovation, a dominant store of value, becoming your own bank or just FOMOing in with the crowd etc. Here is an alternative view:
This has been inspired by TRADFI's message to the typical retail investor that the stock market does not go down... or rather - over a long enough time horizon it has always gone up.
This is where things like "timing doesn't matter", "just keep DCAing" and "HODL" come from. As an amateur trader, I don't like the idea of holding through a bear market but for most people this idea does have merit..
Let's apply this logic to $BTC and arbitrarily pick 4 years (avg time of a bull/bear cycle) as your time horizon. In other words, if you went back in time, picked a random date to buy Bitcoin and then sold it exactly 4 years later, how much money would you have made?
This is the 4 year return chart - how to read this (examples below)
1. If you bought $BTC on 14 November 2011 and sold exactly 4 years later you would have 130x your investment
2. If you bought $BTC on 28 March 2018 and sold exactly 4 years later you would have 5x your investment
Ignoring 2011-2012 we observe the following:
1. 4 Year returns have ALWAYS been positive
2. With impeccable timing your BTC at the best times you could have 50x your investment (green line)
3. Even with the worst luck and timing you would still enjoy 2-5x returns (red line)
In Fact the "worst" time to buy $BTC (based on 4 year returns) was 18 December 2017 you would have ONLY gotten 2.5x your returns - that doesn't seem to shabby to me. For the TRADFI guys that's a CAGR of 25% versus the typical 8-10% return in the stock market
Key Takeaways:
1. Generic/typical advice to DCA or HODL does have some merit if you hold $BTC for a minimum of 4 years
2. Based on the 4 year historical returns $BTC seems like a good investment (MINIMUM 25% CAGR) in a world where 8-10% is considered the benchmark
Any feedback (good or bad) is welcome. If you found this interesting/helpful please like/retweet. I'll be posting my views on things like the NFT Market and some of my favorite projects shortly.