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Hyperbitcoinization: The End Of Fiat Currency, $100M Bitcoin?

Hyperbitcoinization: The End Of Fiat Currency, $100M Bitcoin?

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Hyperbitcoinization is defined Bitcoin commentator ObiWan Kenobit as “a theoretical state wherein Bitcoin displaces legacy currencies and becomes the dominant if not only method to exchange value”. Hyperbitcoinization was first discussed by Nakamoto Institute founder Daniel Kraswisz in 2014, and ObiWan Kenobit thinks it could lead to Bitcoin prices as high as USD 100 million per coin.

Essentially, hyperbitcoinization believers argue that Bitcoin is superior to fiat currency, and the demonetization of fiat as Bitcoin rises to dominance is inevitable. This is because Bitcoin is non-inflationary: it has a fixed maximum supply of 21 million coins, unlike fiat currencies which can be printed at will by central banks. Money printing and the associated hyperinflation has led to the collapse of Zimbabwe’s native fiat currency and currently, Venezuela and Iran are on track to similar fiat currency collapses. Even the most powerful fiat currency, the USD, experiences constant inflation from money printing.

Also, Bitcoin gives power over money back to the people. Bitcoin is decentralized, so no centralized authority can stop Bitcoin transactions. This is much more ideal than the current fiat system where money can easily be frozen and confiscated by banks and the government. Additionally, Bitcoin is borderless, breaking the current paradigm where citizens use their local government-backed fiat currency. Bitcoin is designed to work seamlessly as a global currency.

Due to these advantages, hyperbitcoinization believers think that Bitcoin adoption will steadily grow and eventually, it will cost people more money to reject Bitcoin than to accept Bitcoin. This will be the tipping point that leads to rapid adoption and the replacement of fiat with Bitcoin.

ObiWan Kenobit describes the evolution towards hyperbitcoinization in three phases: equilibration, nucleation, and crystallization, which is the same theory behind the growth of crystals. Equilibration was during the early days of Bitcoin when it first gained monetary value, and innovators and miners dominated the field. Currently, we are in the nucleation phase, which involves engineers, exchanges, wallets, and mining pools. Nucleation has a high energy barrier and many factors are needed for crystallization.

The latter parts of nucleation are defined by increasing trading activity, increasing practical uses, fiat onramps, and custodial solutions. During crystallization, Bitcoin will grow exponentially until it becomes the dominant global currency, and this phase will be defined by institutions, banks, and governments adopting Bitcoin. It can be argued that crystallization has already begun.

ObiWan Kenobit argues that Bitcoin will hit USD 100 million, based on a rough calculation that total money supply is USD 1.8 quadrillion and there are a total of 16.8 million accessible Bitcoins, since millions of Bitcoins have been presumed lost. In a recent article on BitcoinNews, this topic was explored, and it was found that there is roughly USD 90 trillion of real money in the world, which would lead to a Bitcoin price near USD 5 million in the event of fiat being extinguished. The 1.8 quadrillion figure is from including government debts, real-estate, and derivatives in the total amount of money, which isn’t accurate.

If hyperbitcoinization does occur then fiat would lose most of its value, so perhaps Bitcoin would hit USD 100 million or even orders of magnitude more than that. If fixed relative to 2018 valuations and ignoring all future fiat inflation, then Bitcoin is unlikely to get much higher than USD 5 million, since at that point Bitcoin’s market cap would include all of the real money in the world.


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