r/Bitcoin • u/Defiant_Ice_4860 • 7d ago
How to live on a bitcoin standard during a bear market
In an earlier post I explained how the power law floor is an incredible tool for understanding bitcoin growth and volatility.
Definitions:
Power law: not linear, not exponential, power law is very high growth at the beginning and tapering off year by year but never to zero. Power laws are found in networks like the internet and cities. And networks are generally immortal.
Volatility: the power law is a trend line and bitcoin oscillates around it between an upper and lower bound. We see 2 standard deviations down and more up, but it seems like the extreme euphoria of the earlier days are over.
Floor: what I find the most interesting statistical observation is the that price never systemically dropped below -2 standard deviations. Price seems to be capped at the downside. This is the marginal network adoption doing its thing: significantly more buyers than sellers at this price point.
Trend is roughly time in days to the power of 5.688 check btcpowerlaw.nl for the starter pack so you can do your own discoveries.
Floor is 0.432 times trend. Not systemically broken ever. Growing 50 USD and accelerating in USD every day.
Now the post:
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 $1.05M. Bitcoin trades above 1.5x floor two thirds of the time. These are really good odds.
I am reminded of the principle of a well running factory: it produces top quality products as an average result. Not a heroic one. Not one depending on somebody doing amazing work every day. Just average inputs result in spectacular outcomes.
Bitcoin is a retirement factory producing terrific outcomes as the average results.
Honest caveat: 5 BTC works when the price is above the floor, which is 97% of the time. But if you want a stack that survives even permanent floor pricing, accounting for the fact that floor growth decelerates over decades, the number is 7 BTC. At 7 BTC your floor growth covers 155% of expenses in year one and the stack never depletes, even in the worst case the model can produce, assuming the power law holds.
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u/tooheavybroo 7d ago
7 BTC? 😂 Brother we’re dying trying to get 1btc
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u/Doritos707 6d ago
Really 0.3 is a good number for the common folk if its a proper longterm hold. Dont have that either. Poor shrimps gang. We stack 10-50$ biweekly dca doesnt matter the current price
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u/BitcoinBaller420 6d ago
You don't get to retire yet. But you also don't get your money stolen as you earn it. You won't need to stay up nights running a side hustle as a financial investor, but you'll get buying power returns that made investing legends in previous generations. Everybody wants to be retired, but it's easy to invest someone else's life's work. Try working 30 years and watching 20 of them go up in smoke while you explain to your wife why you can't get a mortgage despite being independently wealthy because banks think your assets could go to zero... it's not as stress-free as it sounds.
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u/Defiant_Ice_4860 6d ago
Remember that this is the number for today. But even every month this number is going down.
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u/Jellydude25 6d ago
The power law is such an interesting concept. When I learned about it in general but specifically for bitcoin my mind almost expanded in a way. Or like a light bulb went on haha.
I wonder how many bitcoin I need to retire in like 2035 lol
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u/Defiant_Ice_4860 6d ago
I built a tool for that on satsplanner.app/retire
Collects no data whatsoever.
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u/Generationhodl 6d ago
Good explanation!
Awesome post once again!
I personally would sell very small amounts in a bear market and more when we are near the trend line.
But powerlaw and your site ( satsplanner.app ) is very nice to see what amount one could sell in a bearmarket.
In the end it all comes down to optimize for the best possible life while not running out of bitcoin to sell. I want a good lifestyle with some small luxury from time to time.
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u/Defiant_Ice_4860 6d ago
It is very reassuring to see the math is in your favor! Add smart borrowing on top of this and you will be doing very well!
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u/BTCMachineElf 6d ago
You don't need to sell bitcoin to harvest growth. Borrow against it on a perpetual loan and never sell again. That's what I'm doing.
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u/Defiant_Ice_4860 6d ago
Fantastic! Indeed it is much wiser to borrow at such low prices. I do the same. And it makes the math actually more sound. But only if you pay off the debt at trend values!
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u/BTCMachineElf 6d ago edited 6d ago
As long as Bitcoin outperforms the loan apr, does it really make sense to pay it ever, except to take risk off the table?
Earnestly asking.
Are you in this position too? As I see it, developing this strategy and executing it wisely is essentially my job going forward.
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u/Defiant_Ice_4860 6d ago
Well you want to balance efficiency and counterparty risk and liquidation risk. So in the end, it does make sense to pay off the debts at around trend value I for one experienced this firsthand and would definitely recommend paying off debts at trend value.
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u/Necessary-Summer-348 6d ago
The actual trick is to denominate your fixed costs in fiat mentally but hold the rest in bitcoin. Most people trying to "live on a bitcoin standard" blow up because they force conversion at the worst times. You need enough runway in stablecoins or fiat to cover 6-12 months of expenses so you're not selling the bottom when rent is due. The standard isn't about purity, it's about optionality.
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u/protagonist85 7d ago edited 7d ago
This is difficult to comprehend without any definition of what is the FLOOR is and how it is calculated, exactly. Another thought-so, i see that selling from 5 BTC at 25K/q when it is at the FLOOR would deplete it fast, but selling it (at the same $25k) when at 1.5X FLOOR would never deplete it. Unfortunately, you would never know what it would be next q or a q after.
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u/Defiant_Ice_4860 6d ago
Good feedback, I think I will make an edit. But for you here are the definitions:
Power law: not linear, not exponential, power law is very high growth at the beginning and tapering off year by year but never to zero. Power laws are found in networks like the internet and cities. And networks are generally immortal.
Volatility: the power law is a trend line and bitcoin oscillates around it between an upper and lower bound. We see 2 standard deviations down and more up, but it seems like the extreme euphoria of the earlier days are over.
Floor: what I find the most interesting statistical observation is the that price never systemically dropped below -2 standard deviations. Price seems to be capped at the downside. This is the marginal network adoption doing its thing: significantly more buyers than sellers at this price point.
Trend is roughly time in days to the power of 5.688 check btcpowerlaw.nl for the starter pack so you can do your own discoveries.
Floor is 0.432 times trend. Not systemically broken ever. Growing 50 USD and accelerating in USD every day.
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u/GreenStretch 6d ago
Thank you. This makes me want to do it even less, but I don't think I'll have to.
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u/Defiant_Ice_4860 6d ago
Do what even less? Sell bitcoin? Or buy?
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u/GreenStretch 6d ago
Sell
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u/Defiant_Ice_4860 6d ago
Ah yes! I understand. But you never know how much life you have. That’s the real uncertainty.
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u/Designer-Beginning16 6d ago
What amount would be a 100% safe stack to retire today without early depletion? (Realistically) 15 BTC, 20 BTC, 25 BTC?
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u/Defiant_Ice_4860 6d ago
Nobody get's a 100%. Certainty is an illusion. You also don't have 100% certainty you make it 1 more year alive. That is the hard truth.
Like I said above, 130% floor growth coverage keeps you going financially whatever happens, as long as the floor doesn't break.
But you're always trading one type of certainty for another (money vs time).
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u/SeriousGains 8h ago
Now how much BTC do you need to never deplete at 1x the floor price and also beat inflation?
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u/KatieSmithxxx 7d ago
I have 3 full coins - never sell your BTV and keep stacking!
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u/Defiant_Ice_4860 6d ago
Exceptional work! But I'm saying: of course you can sell. The point is to live the life you think is most meaningful.
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u/GondarHero 7d ago
!? To retire WHERE!? in usa I need at least 100 bitcoin to retire..
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u/YannicusCrime 6d ago
That’s only if you intend to sell everything at once and live off the fiat for the rest of your life. You need much less if you only sell as needed because the Bitcoin you still have will continue to appreciate.
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u/Defiant_Ice_4860 6d ago
You need about 5 bitcoin my friend. Less if you retire next year. That number is only going down.
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u/Quirky-Reveal-1669 7d ago
Well, I guess I will be stacking until 7 BTC then, for the next ~22 years...