Let me first state the conclusion: use the compound interest model.
I wrote an article before about how to perform rolling positions, in which I mentioned a concept, which is compound interest!
So what is compound interest? Compound interest is a special form of exponential growth. In simple terms, it is fission, just like the spread of viruses and the development of technology.
So how do you compound interest with Bitcoin?
All that needs to be met is one thing: the annualized rate of return of Bitcoin reaches 100%.
What does it mean when the annualized rate reaches 100%?
If you invest 10,000 yuan now, it will be 320,000 yuan in five years and 10.24 million yuan in ten years.
If you earn 100,000 yuan now, you will earn 3.2 million yuan in five years. Ten years later is just a small goal.
So what problems will arise in actual application?
1. Can the annualized rate of Bitcoin reach 100%?
In simple terms, can Bitcoin double every year? Of course not. Generally, it doubles several times in a bull market and falls back in a bear market.
In March 2019, the price of Bitcoin was 4,000. In March this year, the highest price of Bitcoin was 73,000. In five years, it has increased 18 times, with an annualized rate of 78.75%. And this is only the income of the coin hoarders, which is a fool-proof investment strategy of holding on to it.
Using stablecoins to navigate through bull and bear markets will definitely yield a much higher annual interest rate than holding on to them, but we also conservatively estimate the annualized rate to be approximately 100%.
2. What if Bitcoin returns to zero within 10 years?
There is no need to discuss this question. Anyone who has worked in the Bitcoin spot industry for one or two years will have the answer (except for those who play with contracts).
3. It’s so simple, why are so many people losing money?
On the one hand, I don't understand it. Top traders such as Jesse Livermore and Buffett all have a core viewpoint of getting rich slowly. In simple terms, it is a strategy of selecting high-quality companies and holding them for a long time. Top strategies are often simple and public. Are you sure you can outperform the growth of Bitcoin after all your efforts?
The other aspect is human nature. The currency circle is highly volatile and the wealth effect is significant. If you play Bitcoin spot in the bull market, you will be laughed at. Even if no one laughs at you, you can't help it yourself.
By the way, let me explain the chain of contempt in the cryptocurrency circle: those who play contracts look down on those who play spot, those who play copycats look down on those who play big and second cakes, and they curse and scold each other, and love and hate each other.
If the capital is large, buy Bitcoin; if the capital is small, buy altcoins; there is nothing wrong with just hoarding coins. Each has its own advantages and disadvantages. But I think it is better to use stablecoins to cross the bull and bear markets. Buy Bitcoin in a bear market and buy altcoins in a bull market.
At the same time, I think if I tell you that the annualized rate is 100%, no one will believe it? Ponzi schemes only dare to say 50%. Buffett's is only 19.8%, and the highest period did not exceed 50%. So why doesn't Buffett come when the annualized rate is so high? Is he stupid? Of course not, because he doesn't need it. One of his core investment philosophies is to only do what he is good at, so he will not take risks easily. On the other hand, Musk is a pure coin circle person. A person who dreams of going to Mars, a person who studies brain-computer interfaces, Starlink, and open source Tesla. Obviously, his ideas are more avant-garde.
There is also a very interesting phenomenon here. If you go outside the circle and say that you recently invested in a target with an annualized rate of 100%, then others will definitely think that it cannot be so high and they must have been cheated.
In the industry, if you say you want an annualized rate of 100%, others will say you are stupid. They don’t even care about currencies with a leverage of less than 10 times. If the leverage is not 20 times, they will not even enjoy their meals.
Why does this phenomenon occur? I analyzed the logic behind it, and this may be the true definition of track, trend, and dividend.
Bitcoin on the blockchain is likely to be an opportunity after real estate and stocks that ordinary people (ordinary people here are still a minority, because you can understand blockchain, but most people won’t even understand it) can see and touch, but not necessarily understand.
The above are all theoretical analyses and cannot constitute actual investment advice.
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