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I watched a video today where @michael_saylor was explaining how to build wealth with Bitcoin and it got me thinking, so I broke it down to understand it further. Here's the breakdown:
To create lasting wealth, here's the formula;
1. Create or amass a high value asset like Bitcoin that isn’t impaired (has no tangible, foreseen issue that could cause it to stop growing in value or cause it to lose value), & grows by 10% per annum. hold it and never sell it.
1. Create or amass a high value asset like Bitcoin that isn’t impaired (has no tangible, foreseen issue that could cause it to stop growing in value or cause it to lose value), & grows by 10% per annum. hold it and never sell it.
2. When you need cash, borrow money against the asset, but don't sell. For instance, I’ve amassed BTC currently worth $100m, I use it as collateral to borrow $20m from the bank at 5% APR for 10 years, that’s a good $10m for the bank.
For instance, if your BTC (currently valued at $10m) gains 10% in value for the next 10 yrs, your BTC is now worth $270m. Now, remember your BTC interest is compounding while your loan interest is adding. So at the time you borrowed, your $20m was 20% of your BTC value,...
but a decade later, your $30m debt is now 11% of your BTC value.
Now, if we want to make things a bit more interesting;
- We put 50% of our $100m worth of BTC (so $50m worth) on a low risk investment platform that accrues us 5% APY on our BTC (eg, @cakedefi ).
Now, if we want to make things a bit more interesting;
- We put 50% of our $100m worth of BTC (so $50m worth) on a low risk investment platform that accrues us 5% APY on our BTC (eg, @cakedefi ).
Going by current price, BTC is currently worth approx. $37k, so $50m worth of BTC would be 1351.4 BTC. If left to compound over 10 years, it would yield us an additional 874BTC. Our total BTC holding now comes up to 1,351.4BTC + 1,351.4 + 874 BTC = 3567.8 BTC
Now from our previous calculation, after 10 years of compounded growth in dollar value, one BTC is now worth $99,896 ($270m/2,702.8BTC-the original amount of BTC we’ve always had).
So the total dollar value of our BTC would be 3,567.8 BTC x $99,896 = $356,408,948.8
So this is the moment of truth. After a decade, our $30m debt is now 8.4% of our BTC’s dollar value, down from 20% at the time of borrowing.
We can still make things even more interesting
- When we borrow, we collect 1.5x or 2x the amount we actually need
We can still make things even more interesting
- When we borrow, we collect 1.5x or 2x the amount we actually need
- Split it into 2; one part for spending, one part to be staked on a platform that pays 5% APY.
- At the end of 10 years, our loan would have paid for itself and left us some change. Here’s how; $10m worth of BTC (270.2 BTC at $37k) if left to compound for 10 years at 5% APY
- At the end of 10 years, our loan would have paid for itself and left us some change. Here’s how; $10m worth of BTC (270.2 BTC at $37k) if left to compound for 10 years at 5% APY
will now be 445 BTC.
445 BTC x 99,896 (BTC value after 10 years) = 44,530,720. After we pay back $30m, we have $14.5m in change.
Also, I have to point out that this is all hypothetical, but very modest. Modest in the sense that the projected value of BTC after 10 years
445 BTC x 99,896 (BTC value after 10 years) = 44,530,720. After we pay back $30m, we have $14.5m in change.
Also, I have to point out that this is all hypothetical, but very modest. Modest in the sense that the projected value of BTC after 10 years
according to the above calculation is approx. $100k and this figure could be achieved within this year or next, so our asset to debt ratio will get even smaller as the BTC dollar value goes up.
While this may not be useful info at the moment, you can save it for the future. Also, you can scale the numbers up or down to fit your current position
THIS IS NOT INVESTMENT ADVICE. Just sharing my thoughts as inspired by Michael Saylor. Peace
THIS IS NOT INVESTMENT ADVICE. Just sharing my thoughts as inspired by Michael Saylor. Peace
