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Could Bitcoin Pay for Your Child’s Tuition? The Extremely Long View
Bitcoin is my savings plan. The level of gratitude I have for the existence of bitcoin is high. It’s a digital asset that is simple to acquire, simple to use, and doesn’t depreciate in value due to inflation. Put simply, bitcoin is a savings technology. It is my preferred savings vehicle to carry the value of my money into the future.
One plan I have in motion is saving for my yet-to-be-born children’s future. While the eventual date is 18 years away, it doesn’t hurt to plan for the reality that my children may one day want to go to an educational institution of their choice. I have the utmost confidence that I’ll be able to use BTC to pay my kid’s tuition in 18 years. Let’s discuss where this conviction is coming from!
While this might not be the right choice for most people, let’s discuss where my conviction comes from.
Understanding Bitcoin’s Four Year Cycle
The key to understanding why Bitcoin is a viable method for saving for my children’s future lay’s in understanding Bitcoin’s quadrennial cycle. As of the time of writing, we’re at the end of the 3rd cycle, and about to enter Bitcoin’s 4th cycle.
A fun way to think about this, is that every four years bitcoin has a birthday. This “birthday” event is called the “halvening” and it takes place roughly every four years, or specifically every 210,000 blocks. When the halvening takes place, the inflation rate of bitcoin is cut in half forever. This reduction in inflation rate causes an exponential decrease in the number of new bitcoins coming into circulation on a block by block (and therefore day by day, year by year) basis.
The Inflation Rate of Bitcoin in 18 Years
This hard-coded halvening event allows everyone who is interested to accurately predict the inflation rate of bitcoin at some arbitrary date in the future. So what will be the rate of inflation for BTC in 2041?
By then, four additional halvenings will have taken place, including the one that is taking place in May 2024. Currently, the number of bitcoin entering circulation on a daily basis is about 900 BTC. In 2041, that number will be 56 BTC, a 94% reduction from current levels. The inflation rate at this point will be far less than 0.1%. But why am I talking so much about inflation?
Fiat Currencies in 2041
I think it is relevant to forecast where Bitcoin’s inflation rate will be, respective to where fiat currency’s inflation rates are likely to be. The truth is, no one knows what the inflation rate of fiat currencies will be in 2041. We don’t really even know which ones will still be around, given the accelerated rate at which fiat currencies are failing or being hyperinflated post 2020. I think it is remarkable to be able to determine what the economic dynamics of bitcoin will look like at any point in time in the future. This provides me with a certain degree of assurance of what I’m investing in today.
There are two ways to think about the value of bitcoin in the future. It is either going up as a function of supply and demand for BTC itself. Or it is going up because it is being valued in a currency (USD) that continually depreciates. So a bet on BTC encompasses a bet on both – BTC increasing in price and a bet against the value of fiat currencies in the future.
Since I am armed with the fact that historically, ALL fiat currencies that have ever existed have failed, I get solace knowing that I’ve invested in a currency that is resilient to being shut down. One of the things I can say with confidence about the future is that Bitcoin will exist. The form that BTC will be in is up for question, but I know it’ll be there.
How Much BTC Today Will Pay Tuition in the Future?
This is a really hard question to answer because we don’t know what tuition will be in 2041, nor do we know what the price of BTC will be. I decided to ask ChatGPT to predict the price of bitcoin given an 8x increase every 4 years, and a 80% re-tracement after each pump.
Based on current prices ($35k USD), the price of BTC in 2041 could be somewhere around $1.8 million per coin. If the current average tuition in the United States is $35k and we assume 4% increases year over year, then 18 years later, the average tuition may be somewhere around $70k.
- Estimated Price of Tuition in 2041: $70k
- Estimated Price of 1 Bitcoin in 2041: $1.8M
- Estimated Price of Tuition in 2041 in BTC Terms: 0.038 BTC
- Cost to accumulate 1 year of BTC Tuition in 2023: $1330.00 (0.038 * 35,000)
If you do the math out on these estimates, then it’ll cost me roughly $1,330.00 per year today, to send my child to an average university in the future. Obviously there is a lot that can go wrong between now and 18 years from now.
When the Plan doesn’t Go According to Plan
It is imperative that you (the reader) understand that any number of variables can change drastically the outcomes of these numbers. However, I think the basis of my estimates are sound. Here are the facts that I am using to build conviction and confidence in my savings plan.
- Bitcoin will exist in 2041
- Bitcoin will have an inflation rate of less than 0.1%
- Fiat currencies will continue to devalue
- Tuition will continue to rise modestly with inflation
So what happens if my plan doesn’t go according to plan? Well, I think I’ll have to figure that out as I go. For now, the facts outlined above are alone enough to power my conviction. Set your reminder to check back with CryptoVantage in 18 years to see how well my plan went!
