How High Will Bitcoin Go?

Bitcoin will continue to appreciate as long as there is inflation, which is not about to stop. But how far?

The unstoppable inflation

Bitcoin’s great destiny is to be the quintessential store of value in an increasingly inflationary world, hemmed in by the physical limits of growth.

These limits are getting closer and closer ever since the invention of the steam engine and its tremendous productivity gains which have made it possible to democratize credit (in other words, the debt-money ponzi).

Will come after coal, oil, gas, electricity and major inventions like the combustion engine, the dynamo, the telephone, etc. Oil has established itself as the queen energy thanks to its exceptional energy density which has made possible the multiplication of means of transport.

This abundance of trucks and container ships is necessary to be able to mass transport minerals, basic materials, semi-finished products or manufactured products.

Without transport, or rather, without oil, our overall production/consumption would be much lower, and so would our comfort. There would be no globalization since 95% of world transport runs on oil!

There is one criterion for measuring globalization: the share of trade in world GDP. It was 25% in 1970, then 60% in 2008, the record. Coincidentally (or not…), this year was also the year of the conventional oil peak (all world oil except for so-called shale oil in the USA and tar sands in Canada).

Since 2008, the share of trade in global GDP has continued to decline:

Share of trade in world GDP
Source: The Echoes

As oil has become more expensive to get out of the ground, rising transportation costs have reduced world trade. Some things are simply no longer profitable to export (ship).

The causal relationship is as follows: less oil (or rather, less cheap oil), less transport, less trade and, ultimately, less production, less comfort.

Unfortunately, technology will not save us. The more complex a machine is (autonomous electric truck, for example), the more different elements it requires. Cobalt, copper or lithium mines are rarely located in the same place.

In other words, electric cars exist thanks to globalization itself made possible by oil. Let’s do away with thermal engine trucks and container ships and say goodbye to wind turbines, Tesla cars, exotic fruits, etc.

As Jean-Marc Jancovici says: “An energy-efficient economy [en pétrole notamment] will be much less globalized than today. This should logically lead to inflation – or even supply disruptions – for all products that come from international value chains (which is a lot!)”.

The word is out: inflation. At the end of the day, we will inevitably produce and buy fewer things. Money will circulate less quickly, which means that debts will not be repaid on time…

Unless you borrow more to drive the debt on a mad rush. The latter is illustrated by budget deficits which act as a ratchet effect on inflation.

Enter Bitcoin

Whether it is because of budget deficits, interests that impose an exponential trajectory on monetary creation or the decline in productivity, we will not cut inflation.

Without productivity gains (cheap energy), hyperinflation and/or shortages are inevitable. There is no miracle. Without dense, inexpensive energy, the amount of things we enjoy will dwindle.

Now that we have said all these physical celebrations, how to avoid that it is always the same ones that escape inflation? I mean those with deep enough pockets to buy stocks, paintings by old masters, vintage cars, luxury real estate, exotic bonds, etc.

These will be protected from the great hyperinflationary reset. But not the guy who will realize sooner or later that his Mona Lisa is bitcoin. The reason being that it is possible to buy from 20 euros, unlike a canvas or an apartment in the 7th arrondissement of Paris.

Bitcoin is the ultra-liquid store of value people have always dreamed of. But right now, 90% of people just don’t know:

  • That there will be no more than 21 million bitcoins.
  • That the issuance of bitcoins is halved every four years

Most are afraid of Bitcoin volatility without realizing that it is normal. The evolution of its value is a series of bubbles until it becomes the most popular store of value in the world. And everyone will get their bitcoins at the price they deserve.

bitcoin bubbles
Source : Jesse Myers (aka Croesus)

There are other stores of value. Bitcoin competes with gold, but also bonds, real estate, artwork, and stocks. Each has its own characteristics.

The value of a company is determined on the basis of anticipated revenues minus expected inflation. As technology multinationals are in the best position to find technical solutions to energy scarcity, they should continue to earn value.

The value of real estate? It is limited by borrowing capacity (interest rate and borrowing terms). Demography, building erosion and other parameters must also be taken into account. On average, a house lasts 100 years.

Income from bonds depends on rates of remuneration, inflation and the size of the overall debt of the country in question (risk of default). Today, rates should remain close to zero. The reason being that States no longer have the means to pay interest on their debt.

In the case of gold, you should know that miners increase the stock by about 2% per year. Humanity has already taken out of the ground a quantity of gold equal to 21 cubic meters. Or 12,000 billion dollars at the current price. Clearly, he must buy at least 240 billion dollars of gold each year for its price to remain stable.

It’s time to choose Bitcoin

Stocks and bonds need economic growth to bring in money. However, as we have explained, there will in all likelihood be less and less growth. Not to mention the gargantuan debts that will force central banks to keep rates low. And apart from luxury real estate, stone is not a very durable store of value. Gravity has no mercy.

Gold has kept its purchasing power through the ages. But the barbaric relic now has to do with a predator.

Bitcoin is different. Its offer which is halved every four years (halving). The number of BTC today increases by 1.8% per year, then only 0.9% in 2024, 0.45% in 2028 and so on.

[Certains disent que l’impact du halving diminue avec le temps. C’est vrai, l’impact est mathématiquement deux fois moindre à chaque fois. Cela dit, il suffit que la demande ait doublé entre temps pour que l’impact global reste aussi fort.]

In short, the innovation of Bitcoin is the advent of “digital scarcity”. This ownership is not possible in the real world where it is always possible to build more houses, mine more gold or create new multinationals.

Conversely, Bitcoin exists finitely and its rate of issuance slows exponentially. Exactly the opposite of the fiat currency ponzi doomed to hyperinflation.

Gold is a good way to store purchasing power, but bitcoin is just better. Just embrace the initial volatility (brutal, it must be admitted) that characterizes all innovations.

This volatility will fade as Bitcoin increases in value. It weighs only 400 billion dollars! In other words, a fraction of all global assets ($900,000 billion according to Jesse Myers). Or 1/2000th of the value of global assets.

What are the chances that we go from 0.05% to a few percent? They are big…

Assuming that bitcoin will eventually absorb 70% of the value stored in gold; 10% works of art; 50% of central bank foreign exchange reserves; 20% of sovereign bonds and 10% of stock market shares, we arrive at 140,000 billion dollars.

That is, over $6 million per bitcoin. X 240… Hodl!

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