Bitcoin's Path to $1 Million

by: Erasmus Cromwell-Smith March 31st. 2023.

[This is a guest post by Erasmus Cromwell-Smith. Opinions expressed are entirely his own and do not necessarily reflect those of Simply Bitcoin.]

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"MANIFESTO"

• The Path to a $1Million and beyond Bitcoin is already built-in.

• Corporate adoption is the tipping point for Bitcoin's unstoppable dissemination while becoming the world’s reserve currency.

• The SAT is BTC's second dimension, the replacement currency ready for worldwide-widespread acceptability, consensus, and trust.

"The inefficiency of the set of heterogeneous resource allocation databases we call money is astounding." - Elon Musk, 3/17/23.

"Fix the Money, Fix the World." - Lawrence Lepard, 10/22/21.

Preamble:

The bluntness and preciseness of Musk's statement go well beyond the obvious —our currency system simply does not work. In addition, Elon's inference contains the sternest of warnings —Where is this all leading us?

Lepard's words could not complement Musk's better. We need to fix the Money Problem — through a truly decentralized, honest, proof of work, self-custody currency.

And we better do it soon.

Is anybody truly listening?

Our current Monetary System does not work.

Recent events indicate that the creation of inorganic money—not earned by the country's economic factors is eventually going to cause the world's financial system to implode.

Take, for example, the case of the FED buying treasuries in the open market, also known as Quantitative Easing (QE). For more than a decade, through QE, trillions of Dollars, created out of thin air, have been pumped into the economy. By and large, they've served their purpose in getting us out of a couple of major liquidity crises (the most recent in February 2020).

Now we've learned the hard way what the real problem with QE is:

We can't unwind it.

The reverse process, coined Quantitative Tightening (QT), is a Dragon with two heads: On one side, at least theoretically, over Time, the Fed drains from the economy the same amount of liquidity it has previously pumped into it (by selling or letting the treasuries expire). A couple of tries by the FED (Fall 2019 & Summer 2022 until March 2023) have proven that our financial system cannot withstand this kind of massive and sustained liquidity drainage. Additionally, with the FED's mammoth demand gone, the artificially inflated treasuries' price tanks, creating huge losses for the holders of expensively bought treasuries (case in point SVB).

The first Time the FED tried QT in the fall of 2019, it lasted just a few weeks; a sudden and unexpected jump in the inter-banking rate (due to a mini-liquidity crisis by a couple of banks in the repo market) caused the FED to stop QT for almost three years until the summer of 2022!

Now it turns out that in desperate need of liquidity, Silicon Valley Bank was forced to sell under-water treasuries (bought at Fed-inflated prices), and the loss wiped out SVB’s equity. Further, the US banking system paper losses (1) on artificially expensive treasuries exceeds half a trillion U$D. And this only after just a few months of QT!

To avert a banking crisis the FED reinstated QE (a new version of it in the form of credit lines to the banks). In a week the FED injected funds that practically erased the amount of QT (balance sheet shrinkage) it had accomplished over the course of almost a year!

The US economy is apparently stuck with QE's trillions of U$D of inorganic money that apparently cannot be flushed out of the system ever.

A different example of where our monetary system is headed is a FED Graph posted by Lawrence Lepard on his Twitter account:

The lower line is GDP, and the upper line is "All Sectors; Debt Securities and Loans; Liability." What the graph shows is not only an unsustainable situation but how the Government's financial condition contaminates the private economy.

The healthy and largest component of the economy (the private sector) must separate its finances from the public sector, starting by abandoning the use of the Government issued currency. The most effective way to do this is for the private sector to migrate asp to a proof-of-work, decentralized currency (2). FIAT currencies will then become a payment instrument and pricing mechanism mainly for the public sector. The private and public monetary units can then be traded to and from each other through traditional currency exchange mechanisms.

The argument has been and continues to be made ad nauseam defining Bitcoin as a commodity—the safest asset and store of value.

Yet, BTC, as a commodity only, fails to live up to its full potential as a viable solution to fix the world's money problem. The time has come to unleash Bitcoin's built-in currency mechanism.

For this to happen, we must disrupt and accelerate Bitcoin's adoption and dissemination timeline by rethinking the current mindset, action plan, and narrative—a paradigm shift is needed from Bitcoin’s first dimension to Bitcoin’s second dimension.

The beginning of Bitcoin’s Path To $1 Million

BTC is two-dimensional: Bitcoin’s first dimension is about BTC as a commodity. Bitcoin’s second dimension is both BTC as the safest digital asset there is, and The SAT as the currency that fixes the world's money problem.

The next level of Bitcoin's unstoppable march will be its adoption as the world's reserve currency. Its global acceptability, consensus, and trust will be incubated through ubiquitous dissemination, widespread deployment, and massive adoption.

Bitcoin’s first-dimension concepts, virtues, and principles of Decentralization, Proof of Work, Store of Value, Anti-Debasing, Anti-Inflationary, Self-Custody, A Trustless Environment, The Safest Commodity, Stack Them Up, The Truest of all Democracies, A Peaceful Revolution, The Perfect Mean of Exchange; A Lesser Risk than Gold, Stocks, Real Estate, etc., will all become the pillars, and the pre-requisites of Bitcoin‘s second dimension.

The Next Dimension: The case of the SAT as a currency

Defining The SAT as a currency requires first an analysis of what exactly supports the value of Post-Gold Standard FIAT Currencies.

Is it the Central Bank of each Country?

Let's use the United States monetary authority as an example. According to the FED (3), a nominal anchor is "...a variable--such as the price of a particular commodity, an exchange rate, or the money supply--that is thought to bear a stable relationship to the price level or the rate of inflation over some period of time..." there have been three prominent nominal anchors supporting the values of the world currencies of industrialized countries, namely: the gold standard, fixed exchange rates, and money supply targeting, and they all posed significant challenges and probed to be impractical when they were in use…” "...tying monetary policy to either of these three nominal anchors will not stabilize price stability or inflation..." "...Today, the nominal anchor in the United States is the Federal Open Market Committee's (FOMC) explicit objective of achieving inflation at the rate of 2 percent per year...."

The FED does not even bother to explain what supports the value of the U$D. It simply explains how it manages and supports the U$D value as follows:

1) It's Impractical and challenging to apply any of the historical nominal anchors: the gold standard, fixed exchange rates, and money supply targeting, to support the value of the U$D!
2) The nominal anchor of the U$D is a committee! (The FOMC) that has discretionary powers to manage monetary policy.
3) It describes the U$D value not in terms of what supports it but in terms of how it controls the U$D through Applied Economics for Society's Common Good (E.g., inflation, and unemployment).

Is it The Government?

Let's take the US as well as an example. Conventional wisdom is that the U$D —the world's reserve currency is backed by the full faith and credit of the United States.

The answer is no. The US Government does not have any money and hardly any gold reserves (U$D 11+ billion); it borrows daily to essentially roll over its existing debt (principal and interest) and cover its chronic budget deficit. So, if it's not the full faith and credit of the United States Government, what is it then? What about the full faith and credit of the private economy of the United States? What about the perception of strength and economic dominance (historical, present, and projected) of the United States Private enterprises? What about the United States being 4% of the world population and 25% of its GDP (caused essentially by the US private enterprises)?

So, what exactly supports the value of post-gold standard FIAT currencies?

The Private economy. In any given country, Private Enterprises do. In the case of the US, the private sector is the majority stakeholder in the economy, representing 75% of the GDP.

So, who's to say which payment instrument and pricing mechanism the majority stakeholder chooses to use?

Further, our Government, at present, the exclusive issuer and controller of our currency, is:

1) A non-productive minority stakeholder in the economy (<25%),
2) Heavily indebted and totally dependent on the private economy supporting it,
3) A reckless administrator that comingles its own inefficient and deficitary finances with the nation's payment instrument and pricing mechanism, its currency,
4) And in addition, it prints now inorganic currency without restraint, creating money that has not been earned/produced in the economy.

If FIAT currencies are not supported by any tangible value except for the perception of strength (historical, present, and projected) of the private economy of any given country, what then is what makes a currency work and be useful?

The three existential principles (Post-Gold Standard era) behind the widespread use of modern currencies are:

Acceptability:

The FIAT argument:
The implicit acceptance and widespread utilization of a given FIAT currency is no longer based on gold reserves but only directly proportional to the perceived long-term (historical, present, and future) strength of the country's private economy behind it.

The BTC counterargument:
The implicit acceptance and widespread utilization of BTC doesn't need to be based on U$D or Gold Reserves. Its perceived strength is directly proportional to how widespread and significant its utilization worldwide is.

Consensus:

The FIAT argument:
Widespread acceptance generates a universal tacit consensus to use - to a greater or lesser degree - certain FIAT currencies and not any others. If any of these currencies lose consensus; acceptability and trust are gone instantly.

The BTC counterargument:
A tacit consensus for the widespread acceptability of BTC is to be reached the moment it's no longer perceived as a safer asset only but as a safer pricing and better means of payment instrument as well.

Trust:

The FIAT argument:
Acceptability and consensus generate the necessary trust for any given FIAT currency to be globally accepted. In the absence of gold as the nominal anchor, it is the faith and trust on the perceived strength (historical, present, and projected) of the private economy of a nation what serves as nominal anchor.

The BTC counterargument:
Acceptability and consensus paired with a Non-Government, Decentralized, Self-Custodied currency will engender unassailable trust for BTC and its global acceptance. As a reserve currency of the world The SAT will be used in every aspect of the economy of all nations, this will create a virtuous circle of confidence and support for BTC as a commodity.

If FIAT currencies are not supported by any tangible value except for the perception of strength (historical, present, and projected) of the private economy of any given country, it's a natural evolution that the private sector adopts a currency, payment, and pricing mechanism that it feels comfortable and confident about.

Bitcoin as a two-dimensional identity — a commodity and a currency also implies a clear demarcation of what each of BTC's two sides is and what they aren't.

In The Bullish Case for Bitcoin, Vijay Boyapati brilliantly describes BTC as solving a game-theory problem, The Byzantine Generals Problem, which deals with the difficulty decentralized parties have in arriving at a consensus without relying on a trusted central party. In the BTC decentralized network, where no member can verify the identity of other members, how can members collectively agree on a certain truth? BTC’s Byzantine Fault Tolerance-based proof-of-work protocols purport to provide “absolute finality” to this issue. Boyapati further describes BTC's dissemination and adoption rate through The Gartner Hype Cycle, a graphic and conceptual representation of the maturity, adoption, and social application of specific emerging technologies. Finally, Boyapati foresees Bitcoin’s ultimate triumph and dominance through a game-theory situation called Nash Equilibrium, presenting it as an analogy between the moment in which a player will continue with their chosen strategy, having no incentive to deviate from it, after taking into consideration the opponent's strategy and the inflection point at which societies will converge and reach consensus about BTC as a single store of value (4) (5) (6) (7) (8) & (9).

Boyapati's accurate description of BTC as a technologically driven commodity whose dissemination and adoption rate can be predicted through game theory and math, accurately describes BTC’s first-dimension premise as a digital commodity, and a technological play. Bitcoin’s second-dimension requires an additional perspective though. Post-Gold Standard currencies are not driven by technological adoption cycles. They are widely used by the population and enterprises because of subsistential, utilitarian and pragmatic reasons.

Why?

The adoption and dissemination of all Post-Gold Standard FIAT currencies are driven by basic subsistential necessities in the daily lives of individuals, like paying for food, medicines, rent, etc. And existential mercantile requirements for businesses, like the need for a payment instrument and a pricing mechanism.

As an example, a worker's basic need to receive his salary to pay for his living expenses blunts any abstract technological adoption cycle. The same goes for the corporate world; any business owner needs a currency to operate her or his business.

The reasons why private citizens and corporations use FIAT currencies today are first and foremost existential in nature, to attend to their basic and essential needs; then pragmatic in terms of convenience, and the reason why they chose some currencies instead of others (E.g., the U$D) is the perception of the strength of the (private) economies behind them, which creates widespread acceptability, coupled with a general (tacit) consensus, both engendering a fragile trust (easily exchangeable if there's a safer alternative readily available in the economy).

Provided that a better and safer currency was available to them, Private Citizens and Corporations would switch the currency they use in a heartbeat if they became convinced:

1) That the new currency is a better/safer payment instrument,

And,

2) They were concerned enough that the currency in use, and the financial institutions holding them are way too risky.

How will Bitcoin reach its next level of massive adoption?

Bitcoin’s second-dimension requires a radical reframing and overhaul of the Bitcoin narrative. A paradigm shift, along the following new principles, narrative, and deployment strategy:

Bitcoin’s new dimension, new principles, and narrative:

• As we continue to "think of" and "treat" BTC as a commodity, we "think of" and "treat" SATS as a currency.

• We Stack BTCs, and we deploy SATs.

• We deploy SATs utilizing them as currency by Pricing, Buying, Spending, Paying, Collecting, Investing, and taking risks using SATS as a "means of payment."

• We Stack BTCs as a store of value mechanism and utilize SATS to fuel the economy, innovate, transact, and create profits.

• We protect our equity/assets through BTC against debasing and inflation from inorganic money recklessly printed by Governments. Yet, we realize that the SAT purchasing power will fluctuate, as it will be affected by the free market forces of supply and demand.

• BTC as a commodity is safer than Gold, Stocks, or Real Estate. Yet, we want Gold, Stocks, and Real Estate priced, bought, and sold in SATs.

The uncorking of Bitcoin's second function as a digital currency (a means of payment) is hiding in plain sight, already built in. E.g., if BTC reaches a value of $1Million, the SAT will have a value of 100 SATS X $1 (enough nominal value to be used as a pricing and payment instrument)

As the nominal value of a SAT grows out of its current infinitesimal level, Bitcoin's proportional increase in value into a very large number will sharply decrease its volatility. A sufficient decrease in volatility will enable the SAT as a pricing mechanism, hence a currency.

Bitcoin’s second-dimension is about measuring BTC as a safer asset than Gold, Stocks, or Real Estate and pricing while trading those assets in SATS. It's about encouraging those many who like to buy, sell, and hold Gold, Stocks, and Real Estate to price them in SATs as the reference value mechanism. In this second-dimension it’s not only about telling people to buy BTC instead of Stocks, Gold, or Real Estate but also about pricing and transacting them in SATS.

Top-Down Deployment, Bottoms-Up Capitalization, and a “Marshall” Bitcoin Plan:

Top-Down Bitcoin Deployment: Corporate adoption is the key to the ignition of Bitcoin as the world reserve currency:

As opposed to BTC’s grassroots deployment and evolution as an anti-inflationary and safer asset, BTC’s second-dimension is a top-down corporate deployment strategy. It is also about thinking globally and addressing vital underlying issues in the economies of developing nations.

It's all about forcefully campaigning to persuade the corporate world about BTC deployment. Widespread adoption at the corporate-level will create the necessary "cascade effect" to build the required consensus for BTC's collective acceptance in highly industrialized nations. Suppose global corporations were to price, invoice, and demand to be paid and, in turn, pay using BTC. Then they'll store their reserves and pay their employees in BTC as well.

E.g., if enough CEOs, like Apple’s Tim Cook, can be persuaded that, at present, the monetary instruments and the institutions holding them are too risky, and instead self-custody of its nearly $300 Billion in liquid assets is a safer option, then the cascade effect will begin in earnest. If next, Apple’s CEO were to ask Samsung's CEO to pay directly in SATs, who's to tell them how they chose to transact with each other? Or what about if Michael Saylor, in addition to hoarding BTC’s at MicroStrategy also begins to invest, spend, collect, pay and be paid in SATS during the ordinary course of business and encourages every business person out there to do the same. That's it. Game, Set, and Match, the Bitcoin peaceful revolution, will be underway. The world's economy thrives through the risks that entrepreneurs take everyday. Bitcoin’s second-dimension encourages taking risks, investing, and operating the global economy using BTC as its reserve currency.

Bitcoin’s additional dimension is about every Bitcoiner pro-actively spreading the SAT as a currency gospel. It’s about convincing all entrepreneurs that a SAT is a far safer and better currency than any FIAT currency in existence.

Bottoms-Up Bitcoin Capitalization: Bitcoin’s second-dimension is about provoking NASH EQUILIBRIUM (not waiting for it to happen):

How difficult is to persuade the majority of current BTC holders that their BTCs are worth at least $1 Million each? BTC holders need to be persuaded that they hold the key to unlock the SAT as a currency. That the SAT as the world’s reserve currency will be the support column of BTC’s value. A $1 Million BTC will translate into a 100 SAT X $1 exchange rate, enough nominal value for the SAT to function as a pricing and payment mechanism. A $1Million BTC will be far less volatile, cementing the SAT as a currency.

BTC’s second-dimension is not about a supposed adoption cycle yet to happen. Neither is it about a BTC price increase due to a demand explosion and scarcity sometime in the future. It’s about the absolute conviction from every BTC holder about a $1Million price per BTC, expressed through a refusal to sell. BTC reaching in rapid fashion its fair present value is the catalyst for The SAT to become overnight the world’s reserve currency. The message to every BTC holder is: Do not sell. Under no circumstance part ways with your Bitcoin. Each BTC you’re holding is worth (at least) $1 Million Today!

The world is at present in desperate need of a decentralized, honest, proof-of-work currency. If BTC achieves its real and fair value in short order, the SAT will instantaneously become not only a viable currency but the right solution at the right time. All it takes is to persuade a large enough group of Bitcoiners that their BTC’s are worth $1Million today! And to convince them that they hold the key to unlock Bitcoin's built-in currency mechanism. The argument is straight forward, the need to replace the world reserve currency is now.

The world can't wait for a technological adoption cycle. The FIAT currency system poses an ever-increasing risk to the whole world economy. A paradigm shift from FIAT currencies to the SAT needs to be provoked, accelerated, and forced (via free market forces) without further delay.

Bitcoins second-dimension is about accelerating The Gartner-Hype Cycle adoption rate and reaching the Nash Equilibrium now!

So, BTC’s second-dimension is about generating a “wave” of momentum and consensus about $1 Million being the true value of BTC today. A $1 Million per Bitcoin value equates to 100 SATS X 1U$D. An ultimate target of $10 Million per bitcoin equates to 10 SAT X 1U$D.

The lack of Credit & Working Capital issue: The Third World’s broken FIAT currencies are only part of the problem these economies face. Replacing the currency only, does not solve a much more acute and paralyzing crisis: All Third World Private Enterprises need credit and working capital. In order for BTC to become the World Reserve Currency, this existential necessity needs to be addressed and solved.

The private economies are today, the engines of the world's prosperity. Private enterprises and entrepreneurs are the key to the future progress of developing nations. Without solving the local entrepreneurs' absolute lack of credit and access to capital in developing countries, simply replacing a corrupt FIAT currency with BTC is not sufficient to reach regional consensus and acceptability of BTC as a currency. Entrepreneurs and Private Enterprise are trapped in economies that operate with useless currencies. Their financial results are year after year "wiped-out" by chronic hyperinflation and devastating devaluations. In the absence of profits or real disposable income, no savings, neither real capital growth exist in these countries. Local entrepreneurs and enterprises need fresh new (honest) money to invest and grow. Whether in Africa, Asia, or Latin America, there's a new generation of "wired," "connected," and "tech- savvy" entrepreneurs that hold in their hands the future and progress of their countries.

A "Marshall Bitcoin Plan" is needed to address the local entrepreneurs' lack of capital and credit. Solving this problem will cause widespread adoption in the third world. Naturally, its implementation cannot occur through useless and corrupt "Bretton Woods" FIAT government-centric institutions (like the World Bank, IMF, BID, etc.) but through a non-for-profit privately driven organization that implements SATS funding plans like the proven micro-lending programs in developing countries. Otherwise, replacing FIAT currencies in non-industrialized countries will be pointless without solving the private enterprise's total lack of access to capital or credit issues.

In the final analysis, Bitcoin’s second-dimension is about unleashing its built-in currency component. Bitcoin has two dimensions and should be described and defended as such. BTC is the safest commodity/store of value, while the decentralized, proof-of-work SAT is the best currency ever created.

Declaration:
All FIAT currencies' foundations are crumbling.

How so?

Wasteful public spending creating an ever-increasing fiscal overdraft is possible simply because governments can borrow recklessly against our future by issuing debt they cannot repay while printing inorganic money without restraint.

These enormous piles of artificial money flooding our economy create all kinds of inflationary pressures and pricing bubbles that, in turn, erode our purchasing power, wipe out an ever-increasing slice of "the value of our work," and permanently place the world’s financial system just one step away from total meltdown.

Hence, the now proven paradigm that as a truly decentralized and scarce asset earned only through proof-of-work, BTC is not only honest but safer as a "store of value" than any FIAT currency.

But the constant debasement of FIAT currencies poses another question: don't we need more than a safer asset/commodity/means of exchange to protect ourselves against the debasement of the FIAT currencies?

BTC has a second dimension, a built-in currency mechanism: The SAT. A decentralized, honest, proof-of work money that is the safest monetary unit ever created.

Given BTC's proven set virtues:

The Private sector is the majority stakeholder in the economy; our Government is a minority participant in the economy. What if the majority stakeholder asks the following question?

Has the Government lost the right of exclusivity to print money due to the reckless administration of its FIAT currency?

If so, who's to tell the majority stakeholder what "means of payment" it uses or accepts? Hence, the private economy can choose what monetary instrument to use, a much better one —Decentralized and Honest.

It only takes a few key large corporate players to start using The SAT, coupled with a large enough number of BTC holders realizing what the true and fair value of BTC is, as well as Bitcoiners to coalesce and address the lack of credit and capital in the third world, to trigger the replacement of FIAT currencies for the SAT as the brand-new world reserve currency; an honest, decentralized, state of the art, proof-of work, self-custody, payment, and pricing mechanism by and for the People.

[This is a guest post by Erasmus Cromwell-Smith. Opinions expressed are entirely his own and do not necessarily reflect those of Simply Bitcoin.]

Notes:

1) Losses not yet realized (unless, like SVB, they are forced to sell) because they are “Holding To Maturity” the US Treasuries. The world’s central banks cannot continue QT because the “paper” losses of the holders of artificially inflated in price treasuries will continue to increase.

(2) Any currency being printed by private individuals or organizations (e.g., Tether, USD Coin, Binance USD, etc.,) will inevitably fail. As in the “wild cats” banks era, the day will come when every holder would demand their $ or Euros back, and all the money would not be there. Greed and Corruption are part of human nature. The irony is that it is highly likely that the future world reserve digital currency will not require any reserves at all, just simply widespread acceptability, consensus, and trust. 

(3) https://www.federalreserve.gov/monetarypolicy/historical-approaches-to-monetary-policy.htm

(4) https://vijayboyapati.medium.com/the-bullish-case-for-bitcoin-6ecc8bdecc1
(5) https://en.wikipedia.org/wiki/Byzantine_fault

(6) https://www.gartner.com/en/documents/4016848

(7) https://en.wikipedia.org/wiki/Nash_equilibrium 

(8) https://en.wikipedia.org/wiki/Blockchain

9) https://river.com/learn/what-is-the-byzantine-generals-problem/