As I write this post, Bitcoin is currently trading at $32,000 with a market cap of 602 billion. As an avid supporter of Bitcoin, I wanted to take the time to provide a detailed explanation of why I believe Bitcoin will reach 2 million per coin within twenty years.
To be clear, this is not financial advice. Instead, this is a compilation of theories and practical reasoning which has led me to this belief. If you are someone who doesn’t really understand cryptocurrency or perhaps you are simply a non-believer of cryptocurrency, I will attempt to explain in plain English the benefits of Bitcoin over fiat currencies as well as debunk much of the fud being spread in the markets today.
During our lifetimes, we’ve all seen disruptive technologies come under scrutiny, especially when they stand to challenge the status quo. For example, in the early days of UBER, they faced massive challenges scaling into new cities due to lobbyists and local governments enacting regulations making it nearly impossible to operate. As humans, we are creatures of habit and resistant to change. If we’ve learned anything from history, superior technologies tend to prevail in the long-term, just take the car replacing the horse as an example which only took a decade.
This is usually the point where we start to explain Bitcoin as being a store of value like Gold which resides on the blockchain which is a public ledger regulated by the people as opposed to a central authority such as a government. I could also ramble on about Satoshi Nakamoto being the mystery man behind the principles and cryptography in which the digital asset was founded. Instead, I will lead you down a different rabbit hole and attempt to explain why a currency for the World has been needed for some time now.
In 1964, a Russian Physicist by the name Nikolai Kardashev introduced what is now known as the Kardashev Scale. The Kardashev Scale attempts to break down societies into Type I, Type II, and Type III based on their energy consumption and technological advancements. Below I have outlined a simple explanation of each:
Type I: This is perhaps the best explanation as to where today’s society is heading. Currently, we would land at about 0.7 as the theoretical limit on this scale. A Type I society is reliant on renewable energy such as solar derived from the Planet’s host star such as the Sun. Today, we are more reliant on dead plants and coal for energy but making strides towards becoming less dependent on those energy sources.
Type II: This could be described as an interplanetary society in which humans as an example could form civilizations on more than one planet. Elon Musk is currently trying to achieve becoming a multiplanetary species by colonizing Mars and eventually other planets with his company SpaceX. Achieving this goal would help the human species to ensure survival from extinction due to catastrophic events on Earth, hence what happened to the Dinosaurs.
Type III: This type of society is far more technologically advanced than what we will see in our lifetimes and essentially suggests a galactic type society in which humans could travel to other Planets the way that we travel to other countries today. Star Wars would be the best example of this type of society.
In order for our society to transition from our current state to a Type I society, there are certain requirements for this to happen. First, you need to have a universal language in which everyone can communicate. That language is English. Secondly, you need to completely remove your dependence on fossil fuels and instead take control of renewable energies which would allow us to control things such as the weather to prevent natural disasters such as volcanoes, tornadoes, or earthquakes posing potential threats to the human race. Finally, we need a medium of exchange that everyone has access to such as a currency of the world. This is where Bitcoin comes into play.
After World War II, the United States held most of the World’s supply of Gold. In 1944, we introduced what has become known as the Gold Standard and the emergence of the Petrodollar. The Petrodollar can be described as any US dollar paid to oil exporting countries in exchange for oil. The Gold Standard is what essentially brought intrinsic value to the US dollar because for every dollar printed, it was secured by a real store of value such as Gold. As a result, many foreign countries began pegging their currencies to the US Dollar and it ultimately became the World’s reserve currency. Fast forward to today, this has given the United States tremendous power over foreign countries. You may be asking yourself, so why isn’t the US Dollar going to be the standard for a Type I civilization? Don’t worry, we are getting there.
On August 15th, 1971, President Richard Nixon announced that the US would no longer be adhering to the Gold standard. This presented an enormous problem because now we have a fiat currency that is not backed by a real store of value. Additionally, it allows governments to simply pump more money into the economy whenever they want. With the Gold standard, your money had real inherent worth because it was backed by a scarce resource. Today, we are susceptible to inflation when our governments decide to print an extra 4 trillion dollars to combat Coronavirus and refuse to tell us where they are actually spending that money. Long story short, the fiat currency system is broken and has been broken for many years. One of the main reasons the system is broken is due to manipulation by centralized authorities.
For years, many foreign countries have longed to limit their vulnerabilities to the US Dollar in which they depend upon for oil. Unfortunately, there hasn’t been a better alternative to the US dollar unless they want to swap it out for the second largest of fiat currencies which is the Euro. This still won’t solve the core problem of stagflation which is a result of having a currency system that is essentially backed by thin air.
And then there was Bitcoin. There are many key attributes to making money valuable; Durability, portability, divisibility, uniformity, acceptability, and perhaps the most important of all, limited supply. While Bitcoin is still in the early stages, it is the number one contender to replace the Petrodollar and become the standard for oil consumption over the next 20 years.
Durability: Much like the Internet, Bitcoin is mined all over the World and simply put, it can not just be turned off. There are many redundancies in place making the digital asset one of the most durable forms of money in existence
Portability: While transaction fees are still relatively high due to the onset stage of cryptocurrency, it’s much easier to send Bitcoin in real-time than it is to issue an international ACH transfer that could take up to 1-5 business days
Divisibility: Bitcoin offers the ability to change the way we pay for things in the future. For example, instead of paying a fixed monthly fee to your cell phone service provider, we could instead pay a metered usage fee breaking out the payment into a fraction of a satoshi such as 0.00000001.
Uniformity: Bitcoin could serve as a Type I societies form of currency as opposed to having literally hundreds of different currencies with different exchange rates. It simplifies the system at large.
Acceptability: While still in the early stages, Bitcoin is one of the top performing asset classes having outperformed Gold in 2020. The cryptocurrency is being mined all over the World and ATMs, wallets, and other forms of hardware and software are being created everyday to help gain widespread access to the asset. Additionally, many unbanked communities will soon become banked, solving major problems for countries like El Salvador who just announced Bitcoin as their legal tender.
Limited Supply: There are 21,000,000 Bitcoins in circulation and this number can not be altered. Using advanced computing known as cryptography, the last Bitcoin is said to be mined in the year 2140. The finite supply protects against inflation and manipulation from centralized governments.
In conclusion, here’s why I believe Bitcoin will hit 2M within 20 years and I will leave you a prediction for the future. Myself and many others believe that oil will eventually be priced in Bitcoin as opposed to the US Dollar. Many countries like Russia looking to sell oil are likely going to opt to be paid in digital energy such as Bitcoin as opposed to the Petrodollar that is susceptible to inflation. Once enough countries opt to price oil in Bitcoin, it will become the global reserve asset. Currently, there are over 900 trillion global assets in the year 2021.
If Bitcoin were to make up 5% of the global assets, that equals 45 trillion US dollars. If you divide 45 trillion dollars by 21,000,000 bitcoins, you arrive at roughly 2 million US dollars per coin. I believe this will happen within the next 20 years or by the year 2041. Much like most disruptive technologies, many people who do not understand the technology will be totally against it but, if history has taught us anything, it’s superior technologies that prevail in the end.