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Did We Enter The Hyperbitcoinization Era?

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Hyperbitcoinization is not a new theory, as it was coined in 2014 by Daniel Krawisz in his Satoshi Nakamoto Institute article.

Hyperbitcoinization is a voluntary transition from an inferior currency to a superior one, and its adoption is a series of individual acts of entrepreneurship rather than a single monopolist that games the system.

— Daniel Krawisz, 2014

It has been trending since Bitcoin hit the $1 trillion market capitalization, which is an aggressive milestone by the largest crypto in the world, considering its journey span so far. The adoption of Bitcoin has been pretty steady and fast, as most countries want to be a part of this financial internet revolution.

Nevertheless, as we are moving towards replenishing Bitcoin, which is finite, and the hue and cry soared high as around 89% of the Bitcoin have already been mined, leaving 10% only.

Let’s understand the concept first and what this all means for us as an investor/member of society.

To simplify Krawisz’s definition, Hyperbitcoinization is the domination of Bitcoin where its value appreciates, leading to high adoption and finally in the process of it becoming the hardest form of money itself.

There have been financial experiments to other historical storage of value, even before fiat.


Its been just a decade since Bitcoin has been out there, dominating the world in terms of financial innovation. Bitcoin has been the epitome of technological disruption that can shape the world’s economy for years to come.

Bitcoin is the only form of money that can be audited at any time by anyone due to its transferability quotient. The unique part is that Bitcoin operations are governed by a technology called blockchain and not humans. So, it can never be manipulated by an external force or a third party.

The technical explanation for the above is that the node operators running in the Bitcoin network are decentralized across the globe, and the second reason is that the protocols are unalterable. Hence, there is no way to alter the total supply of Bitcoin which is 21 million, of which 18.6 million has already been mined, as discussed before. The scarcity is one of the reasons the demand is ever-increasing. Bitcoin is considered a store of value and has gone up to secure the 6th position as the top asset by market cap.
Also, every four years, Bitcoin halving takes place where the mining reward is cut in half, which also causes programmatic entrenchment into the financial system.

Volatile – a Feature, not a Bug

Volatility is sort of a boon for Bitcoin investors, as they can get good RoI based on the market fluctuations. Volatility as a feature was first introduced by Saifedean Ammous in his book titled “The Bitcoin Standard”, but was later visualized by a dutch quant investor going by the pseudonymous name Plan B.

The four-year cycles are discussed in the chart below, the blow-off tops overrunning the stock-flow price function, and, most importantly, exponentially growing network effect when viewed on a logarithmic chart.

Visualizing 4-year cycles with PlanB’s Stock to Flow model

Escape Velocity

These prices cycles continue until they break the stock to flow (S2F) model to the upside, and this concept is known as ‘Escape velocity’. This happens for two reasons – USD hyperinflates causing Bitcoin to be measured in a less scarce unit and more market participants discovering the model leading them to front-run it.

This will impact the price, and people tend to do due diligence when they enter the multi-trillion dollar market cap range realizing its superiority.

S-Curve adoption chart has been applied to various aspects of society, but maybe not in monetary aspect. Here’s the S-Curve adoption chart for Bitcoin –

If we were to assume Hyperbitcoinization occurrence, the only way to determine the price in dollars is

∞ (Dollars) / 21,000,000 (Bitcoins)

The value of bitcoin can be determined by

  • Wealth distribution
  • Not enough single coins for, let’s say, 46 million millionaires in the world to own 1 Bitcoin individually

From an investor’s point of view, if we want to put value to a business, we track the record of free cash flows, which we predict for the future. Then we compare those future cash flows prediction to the current value, assuming that the measuring stick is constant, which in this case is USD.

Considering the current company bailouts, the need to generate free cash flows will certainly be a revolutionary step for financial capitalism.

Scarcity Benefit

The scarce nature of Bitcoin benefits not only the investors but also the commoners of society.

Here’s how!

One needs to invest their money into assets that appreciate against dollars and not only expect a return on the money. In the Bitcoin era, we do not have to search for places to deploy cash to beat inflation but just try to preserve it. The interesting fact is that Bitcoin was first adopted in countries with hyperinflating currencies overseas, which was a strategic way of protecting their wealth.

So the early adopters will benefit most from this monetary system. The large governments will be the late adopters, which will eventually make BTC the greatest mode of wealth transfer ever recalled in history.

Bitcoin Regulation

Most governments, including the Indian government, have not been very keen on embracing Bitcoin, as they come up with bills and drafts to ban the greatest innovation in the history of finance. But the decentralization, its large network, and its technology are some of the basic reasons which indicate a low possibility of a complete shutdown.

Most of the Bitcoiners being hodlers raises its worth counterintuitively. People are so into Bitcoin (the ones who understand the technology) that they might as well leave the country not embracing it. The unavoidable fact is that it can lead to a huge economic revolution as well. Positive regulations are the real way to go about it.

To conclude, Bitcoin has to be embraced by the world, someday or the other. The ones fighting against it are just delaying the inevitable. This monetary revolution will usher in a new paradigm of self-sovereignty and economic empowerment.

This blog was originally published here
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