In an earlier post I explained how the power law floor is an incredible tool for understanding bitcoin growth and volatility.
Because if stack * floor growth > yearly expenses = financial freedom.
People point out correctly that to ‘harvest’ the floor growth you need to actually sell bitcoin, which in turn reduced your stack and therefore hurts next year’s floor growth. There are two points I would like to make to clarify and then I’m going to show you how it actually works.
1: the floor is always growing
2: the price is almost never actually on the floor
Point number 1: the floor grows every day
You don’t sell an entire year’s worth of expenses today at $67K. We are currently at 0.51 times trend. Sell as little as possible at this current trend value. Borrowing would actually be wiser, but the math doesn’t need borrowing to work.
Let’s say you sell $8,333 every month at the beginning of the month at floor levels. For the next 12 months that would be the following:
As you can see the amount of bitcoin sold is going down every month. A reassuring thing. This is actually the adoption happening.
But as a commenter correctly pointed out: after 6.1 years, on May 2032, this stack runs out of bitcoin. Which brings me to point number 2.
Point number 2: Bitcoin is actually almost never at floor prices
Look at the price today: $67K and what is going on in the world? Massive downward pressure from an ATH in October. Fear and greed was below 8 in February, conflicts in Iran. And still bitcoin hovers about 20% above the floor. This is an interesting datapoint. And it is confirmed by historical data:
In 2015 the price spent a total of 70 days at the floor. Then it left and didn’t come back for 6 years. In 2022 with FTX and all that the price was 34 days at the floor, then it left after two months.
On average the price is at the floor for 10 days per year but it is not evenly distributed per year.
Back to our example of 5 BTC allows $100K withdrawals: you run out of bitcoin after 6 years or 72 months of floor price. The price has never remained at the floor for 72 months. And it is not at the floor now.
Here’s a table showing what happens when you sell quarterly at different floor values.
1x floor depletes after 6 years like we discussed, so does 1.1x two years later. From 1.2x floor you actually kind of make it, but 1.5x and above is really thriving. And anything above is doing great. Now for perspective: how many days per year average was the price above 1.5x floor? 242 days on average. But it’s never average: there is usually a string of multiple years: 586 days in the 2017-2018 bull, 779 days in the 2020-2022 bull, and 801 days in the Nov 2023 to Jan 2026 period.
Conclusion:
So now you see the floor math in conjunction with the historical power law trend multiples. Together they show that withdrawing $100K from a 5 BTC portfolio is not just possible. It is the most efficient and therefore logical system for retirement. At 1.5x floor your stack survives 10 years and ends at $1.05M. Bitcoin trades above 1.5x floor two thirds of the time. These are really good odds.
I am reminded of the principle of a well running factory: it produces top quality products as an average result. Not a heroic one. Not one depending on somebody doing amazing work every day. Just average inputs result in spectacular outcomes.
Bitcoin is a retirement factory producing terrific outcomes as the average results.
Honest caveat: 5 BTC works when the price is above the floor, which is 97% of the time. But if you want a stack that survives even permanent floor pricing, accounting for the fact that floor growth decelerates over decades, the number is 7 BTC. At 7 BTC your floor growth covers 155% of expenses in year one and the stack never depletes, even in the worst case the model can produce, assuming the power law holds.
How to live on a bitcoin standard during a bear market
byu/Defiant_Ice_4860 inBitcoin
Posted by Defiant_Ice_4860