What does Bitcoin going to the moon look like?
There are two stages of going to the moon in bitcoin. The first is mass adoption. The second is the first moon bounce which I will describe later.
Mass adoption will occur in one of a few ways:
1. People and companies in your nation will “see the light” and switch to the bitcoin standard.
2. Your nation’s banks will collapse meaning that when local companies export they will decide that they want to be paid in bitcoin because they do not have bank accounts.
3. Your nation’s local currency will hyper-inflate. Instead of making payments in local currency by the wheel barrow you will make payments in bitcoin.
4. This one is a combination of all of them: other larger nations will have problems with their currencies or banks and your nation will just tag along and get into bitcoin as well.
Great so now we are all using bitcoin. Bitcoin has gone to the moon! Not quite. On the other hand life might be pretty awful. Your “muggle” (we need a name for non-bitcoiners) neighbor may have lost his bank account or other investments either through hyper-inflation or bank collapse. Don’t worry though, human beings are pretty industrious and life will recover.
So life has recovered and people are starting to discover that they need bitcoin. They need it to buy groceries and pay rent. Some people have decided that instead of spending bitcoin that they own they would like to borrow bitcoin at interest so that they can buy more expensive items than they can afford. Borrowing starts to expand and then expand some more.
At this point we need to understand how to price bitcoin. We cannot price it in dollars any more because dollars have become obsolete. Let’s price it in barrels of oil. All numbers that I use will be approximate because everything here is a relative guess. Today a bitcoin is worth about 600 barrels of oil. Mass adoption of bitcoin as a currency could be estimated at a price of 10,000 barrels of oil. (Today bitcoin is worth about $45,000 and a barrel of oil is worth about $75).
Great. So now we are trudging along. A barrel of oil costs 1/10,000 of a bitcoin or 10,000 satoshis.
How can we get to the moon? It’s very simple: debt crisis.
Every person who goes bankrupt sells his stuff at a discount to pay back some of his debts. Eventually to stay solvent, people and companies are selling their goods at a discount to pay for their debts and there is deflation. Your bitcoin is now worth 20,000 barrels of oil.
The next economic growth cycle will likely increase the value of bitcoin even more because while more goods may be produced through economic growth, the number of bitcoin will stay the same. Somewhere around here is the moon. It may not be that fun, but I think we will go there anyway.