Yesterday, Didi Taihuttu asked a question about the possibility of living off Bitcoin.
How many #bitcoin do you need to own to be able to live the next 10 years with 50k a year?
— ₿ Didi Taihuttu ₿AM
(@Diditaihuttu) September 5, 2021
The question was aimed at asking his followers how many bitcoin they would need to own today to be able to retire for the next 10 years on at least $50,000 a year in income.
That is, Taihuttu assumes that over the next 10 years the price of BTC could continue to rise, so much so that it is hypothetically possible to generate more or less constant income from the sale of BTC at prices higher than the purchase price, with an average income of at least $50,000 per year.
Live off Bitcoin, Didi Taihuttu did not give an answer, but there have been many who did.
Many speculated that 0.5 to 3 BTC might be enough, and several followers answered 2 BTC. Buying 2 bitcoin today means investing around $100,000.
In order to generate an average profit of $50,000 over the next 10 years, the investment would have to generate a total profit of $500,000 over 10 years.
If we imagine that we don’t sell any of the satoshi purchased with this hypothetical plan, and then resell all 2 BTC only in 10 years and collect $600,000, in order to return the $100,000 invested while generating a profit of $500,000 in ten years, we would have to sell the 2 BTC at an average price of $300,000 each.
In fact, selling 2 BTC at a price of $300,000 each would earn $600,000, and having spent $100,000 to buy them, the profit on such a transaction would be $500,000.
In contrast, in order to resell next year only the profits from a hypothetical current investment of $100,000 in bitcoin, so as to earn $50,000, the selling price would have to be $75,000, and the BTC sold would have to be about 0.66.
The next year you would only have 1.33 BTC left, and you would have to sell 0.44 BTC at a price of about 112,500$ to generate a new 50,000$ profit.
Making a profit that generates a fair return
Doing all the calculations, and going forward at this rate, the price of a bitcoin in 10 years time would have to reach over $2,800,000 to support such a plan, i.e. selling a certain number of the 2 BTC initially purchased every year in order to earn a $50,000 profit.
Assuming you invest about $50,000 today to buy 2 BTCs, there is a big difference between selling a few every year to earn a profit of at least $50,000 a year for 10 years, or waiting 10 years to sell them all in the hope of earning a total profit of $500,000.
Taihuttu’s tweet suggests quite clearly that the scenario under consideration refers to cashing in at least $50,000 per year for 10 consecutive years from the sale of bitcoin, so buying 2 BTC today would require the price to rise to over $2,800,000 to support such a plan.
It is virtually impossible to say whether such a scenario is likely or not, but at the very least PlanB’s stock-to-flow model would seem to make it plausible. Indeed, according to this projection, even less than 2 BTC could theoretically be enough to generate an average profit of $50,000 per year for the next 10 years.
No one can currently make predictions
However, these are only projections based on past data, which is not sufficient to make realistic predictions about how bitcoin’s price might actually evolve in the coming years. No one can even predict with any certainty or accuracy what the maximum price at which BTC can be sold next year will be, so all of these assumptions remain pure theory, with probabilities of occurrence so low as to be considered irrelevant.
However, this kind of reasoning does allow you to set some benchmarks that will help you get a clearer and more accurate idea of what investing in bitcoin might mean, should similar scenarios turn out to be realistic. Obviously, if this were not the case, the above points of reference would also become meaningless.
The post Didi Taihuttu: how much does it take to live off Bitcoin? appeared first on The Cryptonomist.
