Hyperbitcoinization: Winner Takes All
By: Obiwan Kenobit
Tags: Economics, Bitcoin, Cryptocurrency, Investing, Money

As of this writing I believe Bitcoin is in the mid to late nucleation phase. The current bubble cycles are “microbubbles” on this scale. As we’ll see in the next sections, $10K 200 day moving average is not even a rounding error in the world of hyperbitcoinization.

In 2018 Bitcoin is still under the peak nucleation graph building its infrastructure.

Global Valuation of Money

Social acceptance, resulting demand coupled to Bitcoin’s technology are driving growth at network speeds. Fundamental, beneficial sound monetary properties give Bitcoin the opportunity to become the world’s first universal digital currency:

No border control — Bitcoin unwinds nationalistic/feudal monetary systems that trap local populations into using government decreed currencies. It is a digital currency that can achieve global consensus.

— Bitcoin unwinds nationalistic/feudal monetary systems that trap local populations into using government decreed currencies. It is a digital currency that can achieve global consensus. No centralized authority — Bitcoin has inherent property rights & security. No central agency can confiscate your coins nor prevent you from transacting with Bitcoin.

— Bitcoin has inherent property rights & security. No central agency can confiscate your coins nor prevent you from transacting with Bitcoin. No inflationary policy — Government agencies cannot artificially deflate Bitcoin’s value via conventional currency machinations. Price is determined by the market. Money supply is based on computational work and math.

Bitcoin’s recent ATH market capitalization reached $326B on Dec 17, 2017. Although a phenomenal achievement for nascent technology, if Bitcoin aims to displace fiat it has a long way to go.

What does Bitcoin need to do? How much value must it absorb? Trace Mayer endows Bitcoin with infinite expansive capacity.

By analogy, these institutional products [futures, ETFs] are like connecting a major metropolis’s water system (US$90.4T and US$2 quadrillion) via a nanoscopic shunt to a tiny blueberry ($150B) that is infinitely expandable. — Trace Mayer, November 2017

If Bitcoin becomes the only unit of account, medium of exchange and store of value it will need to absorb a global glut of value.

This is what we have today —

$7.7T of gold

$73T value in global stock markets

$127T in money (coins, notes, checking, savings)

$215T in debt (and growing)

$217T global real estate

$1.2Q+ in derivatives

and more

(Q = quadrillion = 1,000,000,000,000,000)

Though not an exhaustive list, it gives us a general idea of the scale and scope of the market. This accounting will include derivatives and similar instruments though they may be significantly altered, scaled back or perhaps even entirely eliminated in an ideal implementation of hyperbitcoinization.

In order to supplant fiat, Bitcoin must be at least equivalent value and play every part in our traditional currency system and satisfy money’s various roles. Hyperbitcoinization requires complete and total domination over every corner of the financial world. Bitcoin should be able to buy coffee and power the global economy.

In hyperbitcoinization, Bitcoin needs to be all money.

Bitcoin Valuation

Bitcoin proponents talk about “abandoning” the use of “Bitcoin” as a commonly used unit of denomination. They reason as Bitcoin becomes a global currency its astronomical value will not be feasible for everyday transactions. Like any good form of money Bitcoin is divisible. In fact, by up to 100,000,000 satoshis. The satoshi will act as our base accounting unit. You will buy goods and services and be paid in satoshis.

Let’s see if this is plausible.

There will be nearly 21 million coins once the last Bitcoin block is mined. It’s estimated 20% of current mined Bitcoins are forever lost. If this loss rate holds then the total accessible will be at most 16.8 million. The list of global value of all money totals about $1.8Q.

Some basic math:

Global value of all money= $1.8Q. Divide by 16.8 million Bitcoins = $107,142,857 Round result = $100,000,000/Bitcoin

Next step:

100,000,000 satoshis per Bitcoin $100,000,000/Bitcoin ÷ 100,000,000 satoshis per Bitcoin = $1 per satoshi

Each Bitcoin is $100,000,000 and each satoshi accounts for $1 of value in the age of hyperbitcoinization. Of course, this may be more or less depending on the actual total value that Bitcoin subsumes. And we have not accounted for changes in how we may value assets and Bitcoin’s future impact on practices such as fractional reserve banking. For this exercise I will defer discussion as much of this has yet to be determined.

Let’s put this in perspective with today’s prices.

Current 200 DMA = $10,000/Bitcoin Hyperbitcoin price = $100,000,000/Bitcoin Current % of future value = 0.01%

Bitcoin’s current price is a fraction of its potential should hyperbitcoinization become a reality. Even if we reduce the scope of Bitcoin’s market an order of magnitude to $10,000,000/Bitcoin (a Fundstrat price estimate) we are still in the 0.1% of future value range.

Does price trajectory support the immense increase in value?

Bitcoin Price Trend

Bitcoin’s price will not go up forever as at some point all economic value will be accounted for. First let’s determine when price reaches $100,000,000 per Bitcoin. I will use a model introduced in one of my earlier articles. It uses “top of the bubbles” and a non-linear regression curves to form a channel. We’ll use this as our guide.