What will happen to Bitcoin?
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I said I didn’t want to write about it. I promised. I swore.
And I lied.
Last weekend, Twitter was on fire with reactions to the former Coinbase Chief Technology Officer Balaji Srinivasan accept a game suggested by James Medlock that due to hyperinflation in the US a single bitcoin would be worth 1 million dollars in just 90 days (by 15 June 2023).
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The bet works loosely like this: In 90 days, Srinivasan will send Medlock 1 million US dollars and Medlock will send Srinivasan 1 BTC.
It feels like a marketing ploy. It is a marketing ploy. Srinivasan himself has admitted that this is an ideological effort and not a “money bet”. Instead, this marks a moment to sound the alarm about the horrors of money printing and impending hyperinflation.
See also: You can be a Bitcoin maximalist and like Ethereum too | Opinion
Before all this he traveled “BitSignal“, a promise to pay $1,000 in BTC to people with the best tweets about the state of American decay. Last weekend, Srinivasan and the Twitter faithful sounded the alarm: Economic ruin is near.
And then the US financial markets opened flat on Monday morning. Balaji’s peers, venture capitalists like Jason Calacanis, have had mixed reactions. Calacanis called the bet “glorious” because the increased attention would likely increase the price of bitcoin, but Balaji warned of starting a bank run.
Anyway, I’ll go on the record: Bitcoin will not be worth $1 million on June 15, 2023, due to US hyperinflation. This is not financial advice. But instead of focusing on the stake itself, I’d rather focus on what a hyper-inflated, $1 million bitcoin would even look like.
First and foremost, hyperinflation in the US would be disastrous for the global economy. Full stop. The fallout would be truly unimaginable. The United States is a beacon of stability for the rest of the world. Hyperinflation in the US probably means hyperinflation everywhere.
But at least we have bitcoin, right?
Right now you can get about $28,000 in exchange for one bitcoin. During hyperinflation with $1 million bitcoin you can get 35 times that amount for one bitcoin. If you have some bitcoin, it might excite you. But don’t think of this as the dollar value of your bitcoin stack increasing 35x. Rather, consider the price of bread, gas, rice, steak, cast iron pans, electricity, everything increases 35 times. It would be the same for your bitcoin.
And then there’s the glaring problem: How will you even use your bitcoin? If you are in a circular bitcoin economic ecosystem like Bitcoin Beach in El Salvador or Bitcoin Lake in Guatemala, you will probably be fine because they have the infrastructure to support a local economy. But even with the many millions of bitcoiners out there and the many thousands of businesses that accept bitcoin and the hundreds of exchanges that will give you dollars for your bitcoin, is it enough?
Probably not.
Bitcoin needs to serve billions of bitcoiners and millions of businesses. And where will those who did not have bitcoin before the hyperinflation get bitcoins? Will the stock markets even survive the sudden onset of hyperinflation? Maybe they will. Perhaps people will mostly start accepting bitcoin for payment for goods and services. Maybe someone will sell their assets for bitcoin. Who knows?
The bottom line is that right now bitcoin would not save us from sudden global hyperinflation. The ecosystem is simply not developed enough. We need more bitcoiners, more businesses that accept bitcoin, more bitcoin companies, more Lightning Network companies (to handle the increased transaction volumes) and more distributed mining.
See also: Paul Dylan-Ennis – The Rise and Fall of Bitcoin Culture | Opinion
How many more Bitcoiners do we need? How many BTCPay servers do we need to set up for companies to trade with bitcoin? How many Lightning channels do we need to open? How many ASICs should mine bitcoin? How many more developers?
More. We simply need more everything in bitcoin.
Hyperbitcoinization is the term used to describe a post-government-controlled-money world where bitcoin is the main global currency. Bitcoiners want hyperbitcoinization to improve money. “Fix the money, fix the world.”
But if we are pushed into hyperbitcoinization before the ecosystem is ready, we may not be able to actually use bitcoin even if it could save us.
