An education at a university is considered the most effective way to achieve financial security and a superior income over the course of your life. The actual earnings appear to confirm this. People with a four-year degree make far more over their lifetimes than those without—about 75% according to this study Federal Reserve Bank of San Francisco. This path should be considered in comparison to other options. Bitcoin has also been a great investment with an average annual compound growth rate of 71% over the last ten years. This growth curve of bitcoin offers an alternative way to achieve financial freedom. Would we invest in bitcoins instead of tuition and time for university? What would be more profitable over the course of a career?
The value of university education
Price of university education has decreased vastly outpaced inflationThe tuition increases by more than 25% in inflation-adjusted dollars The nominal value of the growth has been 830% during the past forty years. Many observers also claim that the focus of universities has shifted over time to politicization and controlling speech More than just free inquiries entertainment of students Parents are beginning to doubt the value of university education. Students and parents are asking the right questions about whether or not university is worth it. Confidence in higher education has dropped The number of students enrolling in college has fallen from 57% in 2005 to 36% by 2023. College enrollment is down; students are voting with their feet. dropped in the US For recent high-school graduates, the percentage has dropped from 2009’s high of 70 percent to 61% in 2023. Both parents and children are seeking other alternatives.
The 75% premium for college graduates is also misleading. It is true that students with a 4-year degree are more intelligent and hardworking than their peers who start working right after high school. It doesn’t indicate what premiums would be paid for a specific student. It is a good idea to use But chooses to not pursue a degree of four years.
The book is titled “In His Book” Education: The Case Against ItBryan Caplan argues that college wages are reduced significantly when a student is considered individually rather than as a group. In his extensive analysis of data, Caplan shows that when a student with similar abilities in college and high school is isolated from the group, college wage premiums drop by half. The college wage premium for individuals is more like 38%. A person who earns $1 million over their lifetime without a college degree is expected to make $1.38 million with a university degree.
Caplan’s calculations show that the value added by college is overestimated. Caplan calculated approximately 80%. Signage—demonstrating to employers that the student is the kind of student who has the characteristics to achieve a four-year degree and be successful in the workplace. Education adds only 20% to the value of a person.
Students lose four years’ wages during their time in college, on top of the costs of the university. The four-year period could have been used not just to make money, but rather in learning valuable skills and becoming more marketable after the four-year period.
Valuing bitcoin investment
Bitcoin represents an entirely new asset class—a digital asset whose supply remains absolutely scarce regardless of demand. Both sophisticated investors as well as ordinary people seek an asset which cannot be inflate by powerful individuals, governments, or banks. The absolute scarcity of bitcoin means that the price will only rise in the future as the rest of the world becomes familiar with it and adds it to their portfolios. The superior performance of bitcoin over the course of its life has been surpassed by every common asset in 11 years out 14 in comparison. Bitcoin’s 71% CAGR over the past 10 years has dwarfed the 11% that the S&P 500 has yielded in the same period.
Bitcoin is more scarce, portable, and verifiable than gold. There is a low ownership cost and limited jurisdictional risk. Comparatively, it is less susceptible to risk from regulatory authorities. It is clear that bitcoin will significantly reduce the store of value for gold, stocks, real estate and bonds.
Michael Saylor published his latest book a few weeks ago. 21-year price forecast Bitcoin. He estimates that his bear case will have a CAGR of 21%. His base case, 29%. And, finally, his bullish scenario, 37%. Students and parents should carefully consider bitcoin’s returns before investing their tuition funds up-front and risking four years without income or practical skills development.
The price of the model is also available. power-law model The price of bitcoin has been remarkably faithful to the model promoted by @Giovann35084111. This model suggests a more rapid increase in growth at the beginning of Bitcoin’s development, followed by a decrease as Bitcoin matures. The model posits the bitcoin price will increase. on average Increases in proportion to time to the six-th power. Time refers to all the time that has passed since the creation of the block. This model predicts a CAGR of 45% in the next year. It will then fall to 25% over the following ten years.
Comparison of the two
We look at both options as investment in capital—a university education as an investment in human capital and bitcoin as an investment in an appreciating capital asset.
A university education is expensive in terms of both direct and indirect costs. For example, you have to pay four years’ tuition at university and then forgo four years worth of valuable work experience and income. A 38% wage increase is expected over the course of a career. As an alternative, we could invest the money saved up for tuition in Bitcoin from day one. We also assume parents will pay for living expenses in both scenarios. So, the living costs aren’t added to the price of the university option or subtracted. In order to avoid the cost of university, the net income is spent on bitcoin at the conclusion of every year.
Both scenarios assume a salary growth of 3% per annum. It is meant to take into consideration both inflation and real growth. Dollar values and model are assumed in nominal terms and inflation is not taken into account. We are comparing the performance of two scenarios over the same period of time, so the level of inflation is not a significant factor.
There are vast differences in tuition across different university categories. For the year 2024-2025In-state tuition for a public US university ranked in the top 100 is $11K annually. The cost of tuition for students who live outside the state is $25K. Private colleges will cost students an eye-watering amount of $44K each year. Families will pay $65K in tuition per year for Ivy League schools. The cost of community college is less expensive than that of four-year colleges. Additional financial assistance is available to some students through scholarships. And some may live in places where tuition is free (well—paid for by further fiat money printing).
Let’s consider two cases—an in-state public university and free tuition. Assume that in the bitcoin option, the amount of annual tuition is used in order to buy bitcoins annually in a sort of dollar cost averaging in order to spread the risk at the time of market entry.
In order to model the price of bitcoin, we will consider two possible scenarios. The Saylor bear scenario (21% CAGR), or the power-law-model, that begins with higher returns and then gradually decreases over time. This is in accordance with its historical power-law-curve.
Comparing results for a career of 40 years (4 years at university + 36 years working in the case of university). The annual premium for college is calculated based on the assumption that non-college pay will be $30K annually. The non-college route is assumed to save the bitcoins purchased with the tuition and first four years’ take-home salary, and then nothing else. The college route purchases bitcoins with each college wage premium and has the same amount of take-home income as the non college path.
Three values are plotted in each graph.
- Non-College investments: dollar value of bitcoin purchased with tuition savings and earnings earned during the first four years
- The dollar value of bitcoins purchased with college wage premium each and every year
- Calculate the dollar value of your savings on college wages (not in bitcoin).
In order to provide the best treatment possible for college options, we also assume that each year the wage premium invested into bitcoin is the same.
You can find out more about the results by clicking here.
The college wage premium is still outperformed by investing the tuition money, and your first four years’ income into bitcoins. Even after 40 years, the college wage premium does not catch up. Both scenarios are attractive due to the bitcoin investments. Financial freedom is defined as $5M of bitcoins saved. This can be achieved within 20 years on the non-college route and 25 years on the college path. In comparison, if you save the premium for college in fiat currency without investing in Bitcoin, it is a terrible strategy. You will get less than 1/100 the return on the non-college route and only 1/100 the return with the bitcoin investment.
Now let’s suppose your student gets free tuition, either through a scholarship or government-subsidized tuition. The only benefit of the non-college option is that it allows you to earn less for four years before you are on par with the college alternative.
Even in this situation, the results indicate that investing four years’ salary rather than deferring a superior wage for four years yields better returns.
What happens if bitcoin’s appreciation continues to be matched by the power law? Consider both free and public tuition at universities.
The non-college route is clearly superior to the free college option, regardless of whether tuition is included. The public university tuition alternative with the power law achieves financial freedom ($5M) in only 15 years from high school—at age 33.
Additional scenarios
What happens when these scenarios overestimate the performance of Bitcoin? Both scenarios break even if the bitcoin CAGR is reduced to 10%. It still takes 18-years for college to be more profitable than the alternative.
What if the college path prepares the student for a more lucrative career—like engineering, medicine, or law—where the college path may be the only option for those careers and where the college wage premium may be much higher? If a university has a CAGR of 21% for bitcoin, then the college wage premium would need to be 113% in order to break even over the course of a career.
It’s still not enough. Even more deferred wage years and tuition are required for a law or medical degree than they would be with a 4-year diploma. Even if you take into account eight years’ deferred pay and eight-years of tuition at a public university (that is an underestimation for law or medical school), your college wage must exceed 300% to make it back. Engineering appears to be the sweet spot here—preparation for a professional career in four years with a larger-than-average expected wage premium. But even here the breakeven requirement of 113% seems high.
You can also explore other possible scenarios by clicking on the link below. Google Sheet You can play around with these parameters, and you can even see the formulas that I used.
Considerations broader
This analysis is based on a narrow focus of the financial return from a capital expenditure. The analysis doesn’t take into account personal satisfaction, networking, or the growth that comes from a higher education compared to working straight out of high school. The study also does not consider bitcoin’s volatility, whether it is the added stress or uncertainty of the Bitcoin rollercoaster.
This study suggests that even if this thesis about bitcoin’s appreciation turns out to be accurate, an alternative path for education without a degree with a bitcoin-savings strategy would likely prove to be more advantageous financially than one with a college diploma and a bitcoin-savings strategy. Students and parents can now consider other options that fit with their values and personalities. Bitcoin offers not only a financial path to freedom, but a career path that is less restricted by academic or financial factors.
Stan Reeves is the author of this guest post. The opinions expressed by Stan Reeves are their own, and not those of BTC Inc. or Bitcoin Magazine.
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Source: bitcoinmagazine.com
