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Sminston With

@sminston_with

Jan 8

Both online and IRL, the question I continue to hear the most is "How much Bitcoin should I get?"

I've spent some time putting a visual guide together that has helped some people close to me set stacking targets based on when they expect to retire. I hope this can also be helpful to you or the people you care about.
- - -

How it works:
1) Decide the age at which you would hypothetically retire—the point at which you could live off it for the rest of your life if necessary (not that you'd actually want to sell it). There are groups of lines that represent retirement ages 35, 45, 55, 65 and 75 for simplicity.

2) Determine (in 2025 dollars) the annual expenses you expect to live on starting in your year of retirement (these are denoted by the different colors dark grey --> Bitcoin orange, $50,000/yr --> $300,000/yr)

3) Find your current age on the x-axis

4) Find where the line colored according to your expected annual living cost, within the Retire@ line group of your retirement age target, intersects with the line of your current age

The Bitcoin Needed Today (BTC) that corresponds with that point (see y-axis) is the minimum amount you should target.

If the several groups of lines are too difficult to navigate, look below in this thread's replies to see the isolated Retire@ cases by age (35, 45, 55, 65, 75).

Assumptions:
1) Future BTC price is projected by 50th percentile power law model.
2) Everyone dies at age 100.
3) Money supply (USD) grows at constant rate of 7%CAGR - meaning, whichever colored line you choose accounts for this 7% inflation from today to your retirement year, and beyond (ex: if you choose $100,000/year, in 2035 that would be about $196,715 - the model accounts for this).
4) The Bitcoin Needed Today amounts represent the minimum amount to prevent your BTC stack from hitting zero by age 100 - this is meant to be a minimum target, and therefore the individual should determine how much additional buffer BTC they should target.
5) Assumes a 'constant withdrawal rate in real 2025 USD terms', meaning the only increase year-year is to offset assumed 7% inflation.
6) Assumes no taxes will exist on withdrawals.

Disclaimers:
*this is NOT financial advice
**this is NOT a suggestion that you should sell your Bitcoin

Retire at 35:

Retire at 45:

Read 6 tweets

Sminston With

@sminston_with

Jul 17, 2024

I bring you: The Bitcoin Decay Channel™

. . .

1/ There are a number of #Bitcoin price guides both inside and outside the X sphere; oscillators/indexes for short-term trading, and projections for longer-term planning. The Decay Channel is the latter but is the basis for an index that I will follow up with soon.

The problem is, it is very difficult to find projections that are tracking the true, observed bounds of the price channel so far (the cycle tops and the bottoms), and often the methods used, I think, lead to some amount of wishful thinking towards the top end. You may hear about the ‘exponential decay’ of the price bubbles, but there has not been a ‘roadmap’ in the form of a channel that clearly and explicitly shows this and projects it out. I believe this is the best way to set realistic expectations for the years and cycles to come.

The recipe for the Decay Channel is simple:

It uses a solid support line for the bottom of the channel, generated by fitting the #powerlaw we all know and love.

The channel upper bound is generated by fitting a simple exponential model to the top data residuals using regression; this creates the ‘decaying’ trend of the upper channel that you see, where it actually converges into and intersects with the power law support line.

[Note: in the plots, showing support line as derived with .01, .03, .05 quantile regression for comparison]

2/ Things you’ll notice from The Decay Channel:

a) The exponential decay of the cycle tops is hard to ignore, and it shows the upper bound intersecting the power law support in 2031 (assuming you use all historical data; some argue to leave out outliers from 2010, but this is a topic for another time).

This is a serious thing to consider - what happens in 2031? This would imply that the bubbles... completely disappear at that point. And, that we only have two significant bubbles left before the closing of the Decay Channel in 2031. This, of course, assumes the ~4-year period of the cycles continues until then.

It seems hard to imagine that hype cycles/bubbles/bitcoin bull runs will go away, but this is what the data points to. There is a world of opportunity to continue exploring why, but my early stab at the cause is: Bitcoin behaves both like a natural system based on a true network, but is also traded in the marketplace by populations of humans; the power law support is indicative of the true nature of the scale-invariant network, while bubbles represent the excitation seen in human markets during bullish phases following liquidity surges.

[Legend shown here, separately, to let the plots look cleaner]

3/

b) The upper bound of the channel is not a power law!
In many published channels (including some from my own posts!) the upper bound on the price channel has been previously plotted as a straight line in log-log space (see: Bitbo for example); this is a mistake, as the shape and function of the highest percentile of the price data deviate significantly away from a power law and towards an exponential.

A straight line in log-log space = power law (not reality for the channel ceiling), a curved line in log-log space = exponential (real for the channel ceiling).

There are at least a couple of versions of these channels: “Open,” “Narrowing,” and now you have the “Decay.” Examples shown.

Thus, one is at great risk of overestimating the future value of Bitcoin using other channels.

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