Obi Nwosu is the CEO and co-founder of Coinfloor, the UK’s longest-running Bitcoin exchange. He has over 20 years’ experience building online marketplaces and bringing virtual currencies to tens of millions of people. Obi writes The Road to Bitcoin Hegemony, a weekly recap of some of the most impactful developments in Bitcoin.
One of the biggest worries of our Age of Uncertainty is that technology is advancing at a rate far faster than humans’ ability to keep up. And it’s true that our species is still struggling to understand the impact the communications revolution has had on our brains, our relationships with each other and — most importantly — our relationship with technology itself.
But sometimes our slow adoption and adaptation isn’t simply a case of people being incapable of keeping pace, but a wilful attempt to ignore, deny, or misrepresent technologies that challenge decades- or centuries-old orthodoxies. It’s difficult to think of a technology that has attracted such opprobrium as Bitcoin, with its opponents constantly deriding it as having no intrinsic value.
That might seem odd in a week when Bitcoin burst through the $60,000 barrier. But while we are all obviously psyched at its continued climb to hegemony, we are approaching another, even more important “milestone of the mind” — one that will enable us to unequivocally answer the question “What price a Bitcoin?”
Last year saw the first murmurings from the traditional financial industry that Bitcoin could replace the almighty dollar as the world’s reserve money. To do that, it must pass through three stages. First, it needs to be seen as a solid store of value, and Bitcoin has achieved this — although you don’t have to go far to find dinosaur deniers.
The second stage is to become the standard unit of account. In layman’s terms, the common way we measure the value of goods, services, transactions, and any asset or currency. Becoming a standard unit of account is when Bitcoin is finally recognized by the wider financial community — including markets, banks, investors, and policymakers. The final stage is when it becomes a medium of exchange, something that is inevitable once the first two milestones are achieved.
Last week I talked about how Bitcoin has become an asset that’s gooder than gold, but now we’re seeing the start of Phase 2, as illustrated by Michael Saylor and Microstrategy, who have given us a site that offers a glimpse of tomorrow. Bitcoin Strategy is a simple proposition: take some of the world’s most recognized assets and map their changing value against Bitcoin.
They’ve helpfully added colour codes to show how stocks and currencies have performed against Bitcoin, but it’s rather redundant because almost all of them are underscored in red, indicating drops of more than than 66% compared to the almighty Orange.
What does this mean? Well, not only are we on the cusp of BTC becoming the standard unit of account: we are also about to see yet another Bitcoin prediction come true. Way back in the mists of time (2014, to be precise) the Nakamoto Institute predicted “hyperbitcoinization,” which happens when Bitcoin steamrollers over any hapless currency that attempts to stand in its way. While governments can demonetize by inflating the money supply, they cannot exert the same power over Bitcoin and its fixed, 21 million units. In short, it means that Bitcoin’s value and power inflates in inverse proportion to fiat’s loss in value — and so, QED, its hegemonic position is strengthened even more.
Wonderful as this is, the most fascinating implication is that Bitcoin will slowly force everyone to rewire their brains and see through the fiat-priced fog of traditional financial metrics and charting sites. This was all predicted long ago — but every day, more of us are starting to see it.
Perhaps the most satisfying consequence will be to turn the volatility discussion on its head. Once Bitcoin becomes the standard by which other currencies are measured, even Bitcoin’s most determined critics will realise what was true all along: that it is not Bitcoin that is volatile, but rather fiat currencies like the USD, which are plunging precipitously and have already lost over 99% of their value in BTC.