How Bitcoin will eat the World
In what year, and at what price will Bitcoin evolve from store of value to unit of account/global currency?
If there is a ONE THING you need to take away from this and understand about Bitcoin it is this: THERE IS NO SUPPLY RESPONSE. Bitcoin is the FIRST asset in the history of humanity where the demand has absolutely ZERO impact on the supply. The total supply is fixed and issuance is scheduled via an algorithm. It does not matter that if tomorrow half the planet decides to start mining Bitcoin, the protocol’s difficulty adjustment will move to keep Bitcoin’s supply schedule fixed. The supply is totally unaffected by it’s demand.
This helps to explain the parabolic nature of Bitcoin’s price after halving events.
With that in mind, let’s answer the question posed above:
My prediction for when Bitcoin transitions from being simply a good store of value to actually becoming the global currency/unit of account is 2034 and at that point the price of Bitcoin will be ~$7mm.
I am basing this prediction from extrapolation of the “cycles” Bitcoin experiences every 4 years centered around the halvings and the stock-to-flow model of Bitcoin. Explanation below.
As my mentioned in “The Bitcoin Utopia”, the Bitcoin halvings (when Bitcoin’s rate of creation is cut in half) that occur roughly every 4 years are critical to understanding its algorithmic scarcity and what drives it’s fast appreciation in value.
Below is a log chart of BTC/USD for its entire history to date with each of the three halvings so far marked out. As can be seen from the chart, each halving precipitates a +1000% rise in the value of Bitcoin with the bullrun peaking roughly a year after each halving. Following the peak there is a subsequent sharp correction as the “hype bubble” temporarily bursts before later recovering again:
Each 4 year cycle marks a new phase for Bitcoin in which adoption increases and the halvings mark the phase transitions. History doesn’t always repeat itself but it often rhymes.
Phase / Year / Market Cap / Price
Phase 1 / 2008–2012 / $50mm / $7
Bitcoin exists initially purely as a novel form of collectible e-cash and its cheap payments network is mostly proof of concept. It has very low levels of adoption, with only a select few in the cryptography and computing community having any awareness of its existence. Before long though awareness outside of the cypherpunk community increases and several wealthy and prominent technologists decide to invest in what they see as the potential for stateless money.
Phase 2 / 2012–2016 / $5bn / $400
During this phase, the access to buy Bitcoins and the subsequent liquidity increased significantly following the arrival of the notorious MtGox exchange. The exchange allowed brave retail and institutional investors who were technologically savvy enough to navigate it an early opportunity to buy into Bitcoin. The exchange quickly collapsed in 2013 though following a devastating hack leading to the loss of funds for many users. It would take a two year “crypto winter” following the collapse of MtGox before deeper sources of liquidity were created in the form of more regulated exchanges such as Coinbase.
Phase 3 / 2016–2020 / $100bn / $6500
Retail speculation and mass awareness.
By 2016, it became relatively easy for retail investors to buy and store Bitcoin due to the healthy number exchanges now online. This allowed for a colossal retail-driven hype bullrun in 2017 with Bitcoin topping out at a then-ATH of ~$20k.
In this phase, Bitcoin started to be seen as a censorship-resistant form of “digital gold” and emerged as a new uncorrelated financial asset. It did not yet have mass mainstream adoption but it is fair to say it at least had mainstream awareness around the globe now. Bitcoin was no longer confined to just a small community of cyperpunks and technologists.
Derivatives trading began with the launch of CME-based Bitcoin futures, allowing more institutions to enter the speculative market.
Towards the end of this phase, institutions also started to appreciate Bitcoin’s potential as a reserve asset and long term store of value, looking at how they could convert parts of their balance sheet to Bitcoin.
Phase 4 / 2020–2024 / $2 trillion / $150k
This is the phase of Institutional adoption and the phase we are currently in.
Institutions have continued buying Bitcoin at an accelerated rate either via the Grayscale GBTC fund or directly as a treasury reserve asset on their balance sheet (e.g. Microstrategy, Telsa). The narrative of Bitcoin as “digital gold” has also taken hold with Bitcoin continuing to eat into Gold’s marketshare as governments around the world print trillions of fiat currency in efforts to curb global economic collapse due to the pandemic.
So far as of time of writing, only several major institutions have announced their purchases of Bitcoin as a treasury reserve asset. However you can guarantee than many others (and possibly even some sovereign nations) have already followed suit as well and they are just yet to announce it. Those subsequent disclosures will add more and more legitimacy to Bitcoin as a store of value and further limit the available supply of Bitcoin on the market.
Following the pattern of previous halving cycles and the stock-to-flow model  Bitcoin could peak as high as $288k this year giving it a market cap of over $5 trillion. This rise will be propelled by more and more institutions buying large amounts of Bitcoin to function as a long term store of value on their balance sheets. As the hype wears off again though, 2022–2023 will see the return of a bear market in which Bitcoin temporarily corrects with the price of Bitcoin possibly retracing to the $50k-100k range before we enter the next phase.
Phase 5 / 2024–2028 / $8 trillion / $500k
With the fourth halving, Bitcoin’s stock-to-flow ratio will double again and for the first time overtake Gold. Real Estate will now be the only asset class with a higher stock-to-flow ratio than Bitcoin. This will make Bitcoin flip Gold which will see its market cap soar above $8 trillion and a price per Bitcoin of roughly ~$500k. Bitcoin could even reach as high $1 million in this cycle.
Furthermore, with mass adoption now as a store of value, I believe in this phase we will also finally see the first official US-regulated Bitcoin ETF. Something the Bitcoin community has been hotly anticipating for a long time since it will again bring additional investment into Bitcoin driven by a new wave of institutional and retail investors looking for a simple way to get exposure to Bitcoin without actually buying it spot.
All major banks and payments providers (Paypal etc) will now also be firmly entrenched within the Bitcoin ecosystem and will offer lending facilities collateralized by Bitcoin. This creates even further supply-side shocks of Bitcoin since major holders now no longer need to sell their Bitcoin to spend it they can simply borrow against what is an appreciating asset and there will be a plethora of “Bitcoin banks” to provide this service.
During this phase, seeing central banks start to adopt Bitcoin as a reserve asset could also be on the cards. Once it is firmly entrenched as a reserve asset for private institutions, central banks of governments are the logical next step.
Phase 6 / 2028–2032 / $30 trillion / $2 million
This is where things really start to get interesting.
By this phase, mass adoption of Bitcoin as a store of value will have taken place. Every single person on the street, every company, pension fund, hedge fund and even central banks will hold some portion of their savings/treasury reserve in Bitcoin the asset.
Some small countries may even be the first ones to adopt a Bitcoin-backed currency as an attempt to salvage their economy after seeing their own local fiat currency hyperinflate to oblivion. This will start a trend leading into the next phase.
Phase 7 / 2032–2036 / $100 trillion / $7 million
With the 6th halving, the block reward on Bitcoin will become just 0.78125 BTC per block (every ~10 mins) or 112.5 BTC per day. That is compared to about 900 new BTC mined per day at today’s rate!
Thus it is in this phase in which I see Bitcoin finally transitioning from just a store of value to an actual hard-backed currency/unit of account globally. By this point almost all countries’ original fiat currencies would have hyperinflated to zero and so will have no choice but to adopt the Bitcoin standard.
Even the mighty US dollar backed by the world’s largest economy and greatest military force the world has even known will capitulate to Bitcoin as all countries around the world drop the USD for BTC as their reserve currency. Hence the price of Bitcoin in this phase as measured in USD will begin to lose all meaning. Until the point at which USD is no more — consigned to the history books as the final fiat currency to capitulate — and we will usher in a new digital world where all prices are expressed in BTC!