People are talking about one million dollar bitcoin today, as if it is inevitable. And, i believe it is, as long as the dollar doesn't collapse first.
The question i want to ponder today is, how high can bitcoin go?
If bitcoin becomes the world reserve currency, how much is "all the money in the world"?
All the money in the world
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21,000,000 bitcoin
"All the money in the world" is a weird number, like "market cap".
"Market Cap" is an irrelevant number in real terms, because everyone could not sell their "xxxx" for the current market price. It is only a number you can use to compare to other market caps in the same field. Sort of a size comparison metric.
M1 and M2 are supposed to be measures of money in circulation, however, they leave a lot to be desired in accuracy and relevancy. We can't even accurately know how many paper dollars are out there.
Imagine if Musk decided to sell everything to buy bitcoin. He starts selling off Tesla shares, and since he has to tell everyone he is selling before he starts, everyone front runs them, the market price drops long before Musk sells stock #1. And then, each stock sold lowers the price, until there is someone with enough "stock-market-money" to buy up all the rest, or the stock drops to zero. Musk, by himself could probably drain the stock exchange of all available liquidity.
Musk's "net worth" is a pie in the sky number. The actual money he wields is much, much, smaller. However, in our current financial paradigm where we can just print money out of thin air, Musk can go to the bank and borrow against his "net worth". And with this borrowed money, could go and inflate the price of bitcoin to the moon. Even though Musk got free money, each bitcoin costs more than the last. (there are currently a lot of people selling at $100k, because, to them it is life changing money. Like, they bought at $1000. But this won't last much longer.)
Musk trying to cash out of his stocks, would crash the stock market. And Musk trying to buy bitcoin would send it past the moon. It is within imagining that Musk could not get even 10,000 bitcoin. (especially now that the ETFs swallowed up so much of the available supply)
And we all know that as soon as Musk moves, everyone else will try to beat him to the punch.
Musk's idea of selling Teslas for bitcoin way back when, was a brilliant idea. (although i think he was forced to sell them to keep a lid on the market)
Instead of asking how much is "all the money in the world" a better metric would be, how much "money" can make it into the bitcoin/new monetary system.
There are two factors that limit the amount of money that can flow into bitcoin.
How much liquid money is available in the market. It is no where near the market cap.
How much money can be printed through "borrowing" before the dollar becomes worthless.
The big banks keep trading around derivatives that will never be settled. Right now they are worthless, but the banks keep moving them around to keep themselves appearing solvent. (They are worthless because the bets made inside those contracts will take lawyers a decade to unravel. Further, just one of these actually coming due will destroy the paying entity). So, how much of this will be able to get into bitcoin? Not much, because as soon as one bank moves any of it, it quickly unravels.
This phenomena is known as Exter's Pyramid. Which shows the financial system as an upside down pyramid, with money at the bottom, and more and more aetheric layers above. They higher up, the less likely it can be converted to cash.
In a financial collapse, or even a panic, it is believed that many of the upper layers will just go poof.
There probably won't be much "asset" flow into bitcoin, just because there isn't enough of a liquidity pool.
However, the banks can print (loan) money into existence as fast as they can type on a computer. Further, there is about 10x the amount of money secretly printed already.
So, how much of this gets into bitcoin?
This is hard to compute, hard like predicting which snow flake causes the avalanche.
There will come a point where people won't sell their bitcoin for dollars that are heading to zero. It is a bad investment over any long time frame. And those who are buying at $100k will not be selling till $100m, or later, but, in getting to that number, the value of the dollar plummets.
The value of bitcoin stops being measured in dollars. No one with bitcoin wants the dollars, so you will here of so and so, sold their super-yacht for one bitcoin. And that is the only hints about what the price of bitcoin is.
I expect bitcoin to hit one million, but before it hits ten million, it is not tied to the dollar anymore.
I do not know what that will mean for the dollar.
What will happen to bitcoin past that point is people just start pricing thins in bitcoin… well, satoshis. And, that will lead to bitcoin being the world's reserve currency. Although, most people will never use bitcoin (it gets converted on chain) because a satoshi will be a large amount of money.
