I believe bitcoin is on a path to infinity dollars. I believe this because I believe bitcoin has undeniable merits and the dollar has undeniable flaws. I’m not at all certain, however, and I rather doubt, that bitcoin will replace the dollar (though it might destroy it).

Note: I won’t discuss the drawbacks of bitcoin here. There are plenty, but if you watch normie media, they’re all you hear about. I’m not pretending they don’t exist, but spending time on them here would be redundant for my intended audience.

Bitcoin’s merits

Bitcoin is scarce. Only 21 million units will ever exist. You might think this will change one day. I can’t rule out the possibility, but I’ll reduce my estimate of bitcoin’s eventual value in proportion to the likelihood of the cap being abandoned. For the foreseeable future, there’s basically no chance the cap is going anywhere, so bitcoin is scarce.

To have monetary value, a thing needs to be scarce. It’s the law of supply and demand: as supply goes up (assuming constant demand), value drops. Of course, supply alone isn’t enough to create value. So whence the demand for bitcoin?

Capped supply creates demand. There aren’t many supply-capped assets out there—certainly the dollar isn’t—so when one comes along, people find it attractive. But that’s a bit circular. Where does the demand that doesn’t reference supply come from?

Bitcoin has a few highly intriguing features. It’s a bearer asset. Outside of cash, gold, precious gems and a few exotic bond issues, this is rare. That’s in part because people don’t want to have to guard their own wealth (this is an admitted drawback of bitcoin), but also because governments and the banks that own them don’t like bearer assets. They like assets to be custodied by banks, where they can be tracked and, if needed desired, confiscated without risk of bloodshed.

Bitcoin has some decided advantages over these other bearer assets. It’s digital, meaning inconvenient physical properties don’t scale with its value. $100 in bitcoin is a USB stick, or a stip of paper, or 12 painstakingly memorized words. Same with $500 million in bitcoin. The latter sum in cash weighs thousands of pounds. Gold and gems have the same problem, though at least these can’t rot or be devoured by pests, like cash (or bearer bonds).

But I don’t need to cross a hostile border with all my family’s assets locked in my head in the form of “apart because noodle rival hungry car cruel scene aisle sample debris what,” you might protest. First, I’m happy to hear that. Second, you don’t until you do.

Bitcoin is good at crossing small, treacherous distances like the borders between warzones and refuges securely. It’s also good at crossing arbitrary distances quickly—and securely. It’s common to complain about bitcoin transaction times, and it’s certainly tedious waiting an hour or more for your send to get confirmations. But you can send that bitcoin to another continent exactly as fast and with exactly as much or as little hassle as you can send it to the next room. That’s not the case with gold or cash or diamonds.

It’s especially not the case if you want to transfer value to someone the authorities don’t like. How are you, as an American, going to get $2,000,000 to someone in Venezuela, or Iran, or North Korea? (For the sake of argument, pretend you really want to do this.) Are you going to send a pallet of cash … by boat? Plane? You either need to have insane action movie tactical chops, or to pay off a lot of law enforcement, or … something. I don’t know how one smuggles things across these borders. I do know how to get bitcoin to anyone on earth though, if I have their address. I send it the same way I would to a friend or family member. Nothing can stop me. They can punish me after the fact, but if I want to beam a few grand to a sanctioned Sudanese warlord, bitcoin wont’ give me any problems.

Which brings us to the most intriguing feature of bitcoin. It’s permissionless, which is subtly different from saying it’s decentralized, but the two are functionally inseperable. What they add up to is: bitcoin is not controlled by anybody.

It doesn’t matter if China, the CIA, Brazil, Israel, Citibank, Taiwan, American Express, Singapore, the Navy, Taylor Swift, California, MI6 and Sauron all agree that you specifically Must Be Stopped. No power or coalition of powers on earth can keep you from using bitcoin so long as you enjoy physical freedom and an internet connection. No government or military or junta or cartel has ever stopped a bitcoin transaction in its tracks, or forcibly reverted one. The CEO of bitcoin can’t even stop a bitcoin transaction: there is no CEO of bitcoin. The protocol has no master.

These factors, taken together, lead me to believe that bitcoin is extraordinarily valuable. Before bitcoin, no other asset exhibited all these traits. Nothing invented after bitcoin combines these traits as well or as credibly as bitcoin. To see why these traits are so attractive, let’s contrast them to the dollar.

The dollar’s flaws

The dollar is the best at being what it is: a fiat currency. It has only existed in its current form for a little over 50 years. Prior to 1971, the dollar was nominally backed by gold. You could characterize the Nixon shock as abandoning pretence, rather than fundamentally changing the nature of the currency; you could interrogate to what extent gold backing had ever been real, as opposed to pretence. This might be informative, I haven’t really done it. But the post-1971 dollar remains a radical experiment in any case: a currency that disavows any gold or silver backing whatsoever, however fictitious. This sort of thing has historically been a desperate war-that-you’re-losing-time measure.

We have yet to see what will happen. Interestingly, the dollar hasn’t collapsed. It remains the day-to-day means of exchange, and people are broadly okay with that. But it has collapsed in value. $100 in 1971 purchasing power is worth just just $13 today, according to the CPI. In other words, money saved over that period would have lost 87% of its value, unless it earned interest. But the CPI shouldn’t be trusted. Let’s look at gold, the ostensible backing of the pre-1971 dollar. A Troy ounce has gone from $37.50 at the beginning of that year to $2,766 at the time of writing. An what asset hasn’t risen thousands of percent? Stocks and real estate have similarly ballooned.

When everything—groceries, equities, land, commodities—rockets in price, is it an Economic Miracle? A Golden Bull Market in Everything? Or is it an artifact of how prices are measured? Is the denominator becoming worthless? The dollar is collapsing, but it’s a managed collapse that’s designed to go on forever, slowly.

The reason this is happening is that unlike bitcoin, the dollar supply isn’t capped. Our leaders print money at Weimar levels every time a “crisis” strikes, which is twice a decade, and to avoid any panic-inducing historical analogies, they give it a new boring name (Quantitative Easing) or make it sound like a gift (Stimulus).

Can this go one forever, slowly? Perhaps, if the tiniest modicum of discipline is imposed every once in a while. People will get used to paying $1000 for a loaf of bread, as long as it wasn’t $100 a week ago and $10 a week before that. As long as the trajectory to zero is managed, it doesn’t seem like that’s what’s happening. This might even be a sound way to manage an economy, if a bit of a dishonest and humiliating one.

But no one is imposing discipline or managing things soundly at the moment. We recently began spending more on interest payments on the national debt than we do on the military. the dollar is still backed by something: the “full faith and credit” of the U.S., which is a pleasant euphemism for “hyperviolence.” But if we can’t afford to service our debt—and especially if we can’t maintain our machinery of hyperviolence—it’s just a lot of paper.

Except that it isn’t so much paper anymore. As I mentioned, governments and banks (which aren’t easy to disentangle from each other) don’t like bearer assets. Cash in particular is all but illegal for conducting business. You may accept cash from customers, provided you immediately deposit it in a bank.

In banks, funds can be monitored and traced at all times. The reason it’s important to give the government this ability is that untraced money could fund drugs and human trafficking and other crime. And if you believe that’s the real reason governments wants to be able to track all financial flows at all times, you believe the NSA needs to track all communications to stop terrorism.

In its modern, digital, heavily “regulated” form, the dollar has become an instrument for surveillance and control that would have made Stalin blush. And it’s created a whole new enforcement mechanism for unelected members of the federal bureaucracy who want to punish undesirables.

Say someone is doing something legal, but you don’t like it. Say, for example, they’ve founded a company dealing in cryptocurrency. In theory, there’s very little you can do as an employee of the CFPB. Law enforcement can’t charge them if they haven’t broken any laws, and even if they did, there’s a reasonably independent court system that’s likely to throw it out. And even if you get through the whole due process ordeal—can you believe you have to present charges and evidence, and then they get to defend themselves, they even get a lawyer, and don’t get me started on the jury—well then there’s rules about how heinously they can be punished.

What a drag. Wouldn’t it be better if you could just shut off their ability to function in the world, instantly, by fiat (heh), with no recourse? Luckily, you can! Just designate this person “risky” (if working in a disfavored industry) or “politically exposed” (if not supporting the ruling party) and watch all the banks refuse to open accounts with them. All of a sudden they have to operate in cash, which is for all intents and purposes illegal, and makes them vulnerable to crime. And there’s nothing they can do! Appeal? Appeal what? There was no conviction, there weren’t even charges.

Hard to see why anyone would look for alternatives when this is how their currency works.

So what?

Am I suggesting, then, that bitcoin replaces the dollar? I don’t see it. Perhaps I lack imagination, but speaking from theory and experience, bad money drives out good. There’s a cute idea among libertarians that people will use durable, valuable money for day-to-day exchange because it’s better than the rapidly depreciating funny money.

Why would anyone do that? If your dollars are going to be worth half as much in ten years, and your bitcoin 10 or 100 times more, you’re going to … what? Spend the bitcoin and save the dollar?

I can imagine a breaking point at which the dollar hyperinflates into dust and people turn to bitcoin as the only obvious alternative. But I’m not sure what probability to assign to it. It feels well under 50%.

Does that mean the dollar is forever? I doubt it. And I imagine bitcoin will receive favorable mention in the dollar’s autopsy report. But I’m not sure bitcoin is even a currency.

It’s almost never been used as money by any significant group of people, and it may never be. That’s alright. No one tries to buy things with Apple stock. Doesn’t make it worthless.

Eventually people will settle on a category for bitcoin. It will cease to be a distrurbing chimera that makes them talk in circles about whether it’s more like a stock or a currency. It’s pretty obviously neither, and while I’m curious about the eventual taxonomy, I can wait to find out. For now, all I know is I want to own a very great deal of it, whatever it is. I don’t plan to “sell for dollars” at some point, except perhaps as a bridge to a house or an island or a moon fortress—or in case of emergency.

Bitcoin is a better asset than the dollar. Measured in dollar terms, it’s going to … I don’t know what number. An absurd one. The trend—probably asymptotic—is towards infinity. I expect another sickening 80% drawdown or two on the way, but that’s nothing new.

Will delete if wrong.