Important points:
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Power law modeling shows that Bitcoin generates strong returns over the long term, regardless of the exact entry timing.
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Global liquidity is well above pre-cyclical levels, supporting a more favorable macroeconomic backdrop.
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Bitcoin is currently trading at an unusually large discount compared to liquidity trends, with its fair value nearing $170,000.
A new Bitcoin (BTC) simulation suggests that long-term investors may be overly concerned about the timing of their BTC purchases. In a detailed 10-year model, Bitcoin researcher Sminston With tested how a hypothetical investor with $100,000 currently deployed would perform under three different entry points: buying at a price of $94,000, buying 20% lower, or buying 20% more expensive.
The model then used the median of the power-law trend to predict the price of Bitcoin, assuming that investors withdraw 10% of their holdings each year for savings or spending.
To further stress test the results, the study includes three exit scenarios. You can sell at the expected median price in 2035, sell for more than 20% of that price, or sell for less than 20% of that price.
The results were consistently profitable. Even the “unfortunate” path of buying 20% above $94,000 and selling 20% below the median expected price yielded a 300% return on the remaining holdings, even after 10 years of steady withdrawals. In total savings, the same investor would end up getting 7.7 times their original money.
Meanwhile, investors who entered at 20% below $94,000 saw final totals ranging from $1.15 million to $1.47 million, depending on their exit. A purchase for $94,000 yielded a profit of $924,000 to $1.18 million.
According to the researchers, the conclusion remained simple. Timing can boost returns, but Bitcoin’s long-term power law trajectory plays most of the role. While saying,
“Don’t stress too much about the entry point. Let time do the heavy lifting.”
Related: $1 trillion crypto market drawdown masks Bitcoin’s strong fundamentals: Coinbase executive
Global liquidity gap reaches rare extreme for Bitcoin
A new macroeconomic lens added further context to the simulation’s long-term optimism. The last time Bitcoin traded near current levels, global liquidity was about $7 trillion lower. Total liquidity is now estimated at $113 trillion, reflecting significantly easing financial conditions.
From a macroeconomic perspective, increased global liquidity typically supports risk assets by improving credit availability and investor appetite. While it does not guarantee immediate upside, it does indicate a more accommodative backdrop compared to previous cycles.
Analysts are also tracking an unusual disconnect between Bitcoin and global liquidity. According to JV Finance, BTC’s liquidity gap has widened to -1.52 standard deviations, a level rarely seen in bull markets.
This indicator compares Bitcoin’s market value to where it “should” be trading compared to liquidity trends. A highly negative reading means that Bitcoin is undervalued, rather than undervalued, relative to macro conditions.
This gap briefly reached -1.68σ on November 17th, the most extreme underestimation since this bullish cycle began. While BTC could still fall in the short term, such divergences have historically increased the likelihood of long-term upside, with BTC’s current fair value based on liquidity models estimated at approximately $170,000.
Related article: Average Bitcoin ETF investor is in trouble as BTC falls below $89,600
This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making decisions.
