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Bitcoin vs. The Naked Shorts

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The Bitcoin Safe Withdrawal Rate

That would be the best option. It is a shame to sell Bitcoin for Fiat and not the other way around.

I think 5 would get you through no problem at a 40% growth rate, even 20% growth rate if you sell 10% per year.  However, the optimal strategy would probably be Bitcoin @200k and you have 5 and sell 5% per year.

There has been some interesting discussions on Twitter about selling 10% of your Bitcoin each year to live off of and whether your Bitcoin would last forever or could it be completely drawn down?

I think this is a good question, because with saving and investing, it is good to start with the end in mind. What are you saving for and what are your saving goals. Typically in the traditional finance space, the safe withdrawal rate is suggested at 4% from many personal finance bloggers and even 3% if you want to be extra safe.

The recommended portfolio value is to have 25 years worth of expenses, so if you spend $50k per year, you would need a $1.5m portfolio to sustain you. The thinking logic goes that, your portfolio should hopefully keep growing or staying around the same level despite your withdrawals. Here a $50k withdrawal from a $1.5m portfolio would be 3,3%. Therefore, your portfolio growth after taxes should hopefully be more than this to sustain you. In some lean years of bad market performance, maybe you can also be flexible with your withdrawal rate. 

The performance of Bitcoin is much higher than the traditional finance portfolios because Bitcoin has a fixed supply and therefore is better and storing value than fiat or fiat based investments. Therefore, would Bitcoin support you with a 10% drawdown each year and what portfolio value would you need in this case?

If we assuem a Bitcoin price at $50k to keep the figure easy, if you have annual expenses of $50k, you would need to sell 1 BTC each year to sustain yourself. That means you would need 10 Bitcoin if you are selling 10% and that would give a portfolio value of $500k. The average growth rate of Bitocoin in the last 4 years has been around 40% per year, so with this growth rate, it should be able to cover your expenses and continue to grow in real terms.

Year  Portfolio Value      Expenses          BT Value    BTC 
1       500 000                  50 000             50 000      10-1= 9
2       630 000                  63 000             70 000       8.1
3       793 800                  79 380             98 000       7.3
4       1 000 188              100 019           137 200      6.6
5       1 260 237              126 024           192 080      5.9

Here we can see that with the great 40% increase per year, the portfolio value grows very high in fiat still and your standard of living with expenses should also increase over time, despite selling less and less Bitcoin each year. Interesting to note though is your Bitcoin stack is down by 40% after 5 years, possibly it would be worth to wait until Bitcoin reaches a higher price before starting to draw down.

Can the value of Bitcoin keep increasing at this rate though? Will it slow down the rate of increase? Some people may look to try instead to take a loan in fiat with their Bitcoin as security. This would then allow you to keep possession of your Bitcoin and still live from it. Over time though, your fiat debt would increase quite abit and some people may not feel comfortable with this strategy.

What do you think the future growth rates of Bitcoin are and what is a safe withdrawal rate?

Thanks for reading.