gjm on Nostr: Understanding Bitcoin price 101. ...

Understanding Bitcoin price 101.

quoting
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It’s important that when you use the acronym CAGR and the word BITCOIN in the same sentence to please explain that the growth of bitcoin’s price has NOTHING TO DO with compounding. The formula is used to compare returns with a product that relies on a compounding mechanism. The formulas percentage result is an AS IF answer. CAGR is used to compare Bitcoins returns with a Tradfi product THAT HAS a compounding mechanism AS IF bitcoins returns also had a compounding mechanism involved. Just because you can use the CAGR formula to calculate bitcoin’s historical price growth DOES NOT IMPLY that bitcoin is subject to compounding. Thank you 🙏