Is Bitcoin A Bubble At $8,000? How About At $1 Million, $10, Or even $100 Million?

Bitcoin is reported to have been in a bubble for nearly eight years and counting. It's a very elastic bubble, since it can go from a $1 bubble to an $8,000 bubble. Initially, when trading at fractions of a penny—where it took thousands of Bitcoin to buy the first pizza—it was largely seen as a novelty. I wasn't a participant, unfortunately, and wouldn't buy my first coin until 2014 when it was a mega-bubble at $618, down from super-mega-bubble at $1,000 at the end of 2013, igniting its biggest selloff ever by lots of deer-in-headlights who realized they're millionaires on a lark, a dare, true belief, or whatever. Just certainly not anything rational. That would be impossible, since it's a bubble, where mockery and derision is simply a priori, baked in the cake.

Because, it's not supposed to happen. No experts predicted it, unlike all the things the experts got completely right throughout human history:

  • They really shut down those Luddites at the dawn of the Industrial Revolution. No expert touted that people could lose jobs and that would be bad. In fact, they embraced the job and skill migration inherent in rapid industrial progress.
  • The first thing the experts did with the invention of the automobile was admonish and assure everyone that horses and buggies were done, obsolete, that the automobile was here to stay. The future.
  • When labor and money-saving appliances like washing machines, dishwashers, refrigerators, gas and electric ranges, and microwave ovens hit the marketplace, the experts were the first to assure the public that this was a completely normal, capitalist progression. Everyone should embrace all of it, now, no question about it. No concerns or troubling feelings expressed.
  • When computers came along, the first thing all the experts did was to line up and proclaim that this was solidly the future—a computer or two in every home. And, when it went from mainframes to personal computing, they especially embraced the decentralization and flowing down of digital power to the unit of the individual human being. They all said, to an expert, "It's best if individuals all figure this out on their own, chose their own values, and place their own bets." It's what they said. Trust me!
  • Then came the Internet and the Web. Once again, all the experts dismissed all doubt and instead, admonished looking to the future, banking heavily on its wide adoption, never looking back. None of them posed or raised cautionary or insurmountable problems or obstacles.

It's human nature to poo poo all that's new new. I've been doing it with hiphop and rap forever, and you can too—because its hiphop and rap. But the foregoing bullet list is merely a small sample of all that the anointed experts throughout ages of centralized hierarchical authority have mocked, derided, and dismissed in the service of the sovereign elite.

Understand it from their point of view. Life is short, they have their privileged positions of power and influence, plus taxing authority, and they have a lavish gala someplace, at least once per month. What's not to love? Why rock the damn boat? And hey, we can already show we care. What do you think charities and foundations are for?

Sovereigns need experts to hedge against rapid and revolutionary change, because whether it's religion, science, social evolution, or finance, the population gets to make its own excuses too. And if you're going to make excuses, play a victim, or whatever way you're going to complain about human progress, it's better to refer to an expert than to a King or a Queen—it sounds better; and almost, like being smart and discerning.

You're in charge of your own mind, dammit; you cited an expert!

Smart sovereigns and the smart experts in their service understand well that short of dictatorship, and with a modicum of free markets, they can't prevent any of this change long term. All this, then, is for the purpose of management, giving sovereign and staff time to understand it, chew on it, angle it, spin work out details, to eventually control it by embracing it and bringing it under its wing—to ultimately lend the impression that it was their idea in the first place, or at least by their encouragement; and taking credit is where their true and essential whoredom lies in modern Western democracy. Al Gore—who created the Internet after his dad created the highway system—the guy you'd have to invent if he didn't exist—is far too obvious to be considered masterful, but it's cute and strangely endearing.

Bless Al Gore's heart.

Bitcoin. $7,000, up to $8,000. The current range. When does the bubble you hear the pleas from the experts? Please, can't it pop, already? We're waiting.

Uh, they're conflating. The one who surprises me the most is Peter Schiff, who has a damn decent record in identifying bubbles that do pop, but this one is eight years in the making, from fractions of a single penny to now, $8,000, all while it properly tests highs and lows, trades in rational ranges up and down—nothing untoward for a technical chart analyst. It behaves like a market where it's tradable for the skilled, just like stocks, bonds, ETFs, options, futures, and derivatives.

So what gives? Well, let's continue with Schiff, call him an expert on bubbles, and let's grant he's good at them.

What's the fundamental element of a bubble? It's that financial instruments tied to a thing far outstrip its marketability when divorced from the relatively hard and labor-and-attention task of trading those markets: stock, bond, options, and futures markets. Let's just group it together and call it all "exchanges." One thing that falls outside of that a bit is real estate. But real estate is hybrid. It's both tangible and financial (like stock equities), and has a trading market by means of millions of agents that can find a market to get dressed up into and pump—as well as the fiat-based, inflationary money-creation loans so the printing presses can take a break...and those who package them into tradable financial instruments on exchanges. Another element is that real estate has inherent supply limitations called location location location...until another location gets built in the space of a new development or two or three over the next year, and we're still talking the neighborhood.

There's something to say about smart old dudes who bought land after land way back and sat on it. But now lets digress.

Tell me about the computer hardware bubble. How about the computer software bubble? The smartphone bubble? How about the apps bubble? What about the web services and SAS bubble? How about the internet bubble and the streaming bubble? How much more are you paying for less, for your computers, devices, software, apps and streaming services now delivering original content faster than we can binge watch it?

Or, is it really and truly that you're paying less in inflationary real dollars for more?

For that matter, we could talk about non-existent industrial machinery bubbles, appliance bubbles, automobile bubbles (excluding the Privileged and Politically Correct State of Tesla), and all sorts of others. Airline bubbles? You can fly faster, cheeper, safer: for less adjusted dollars than ever.

So what's the rub?

I'll tell you: deflation hedging inflation via technology and economies of scale as the saving grace primarily. Financial markets relying on inflation as its key raison d'etre secondarily. For the large part, financial markets exist as both a vital necessity and a whore of monetary inflation. Monetary inflation gives it a reason to exist and it gets to be huge and banking and globals and all et ceteras because it gets to offer a way where if you're loyal, not only will your money not lose value sitting there, you can make some money if you play along. Let's call it sophisticated, or modern bread and circuses...401(k) B&C.

Bitcoin and crypto offer a revolution in decentralization. So, then: whose bread? and whose circuses?

Understand where they're coming from. They're not people who believe in freedom or have any inkling of it. Live life at your own expense, take your own chances? Why go to the trouble? We can set you up in this complex array of instruments so that you feel smart and relieved when you believe you got your taxes right...and not only will you overcome the erosion of your money, you'll make some over time, too. 'Yes, we've given you complex ways to overcome us stealing value from you every day. Just hire a CPA.'

And it's not altogether a bad deal for the lazy who just can't be bothered to think about it. And the thing is, they ought not have to. Why spend so much time and energy and worry in your one and only life to overcome systemic government theft by fiat?

Why should prices rise? Think about that. Given the vast and amazing breadth of technological progress shouldn't prices go down—more and more for less and less? Well, indeed they should, and this is what the rise of Bitcoin actually exposes, fundamentally. Technology typically charts an alternative path, which is, more and more and more for about the same in real dollars. This is still deflationary when you integrate all the inputs to the final product.

More for less is deflationary—you tend to want to hold off, waiting for better deals, than spend it now because it's getting more worthless. ...So is way way more for the same...same psych. It's just different ways of presentation but in economic terms, it's deflationary: a good thing, in spite of what the experts tell you.

Crypto is deflationary simply because it can't be inflated; and it can't be inflated for structural reasons that were baked into the cake from the beginning, explicitly to overcome that by its very design. It's not a flaw, like the experts want you to believe. Rather, it's a fundamental and essential feature.

Let's do some maths.

Now that Bitcoin is at $8,000 per coin—still a long way off from a share of Buffett's Berkshire Hathaway stock at $272K ea.—where could it go and what's the psychology involved? One reason stocks split at times is that humans tend to think in terms of discreet shares where they have the capacity to buy some number of shares at a price that makes intuitive sense to them.

$20-50 per share is probably most people's sweet spot. So, in the equities world, stock get's to $100 per share, you can "split" and give all holders 2-1, and now the price per share is $50. It's not a half share. it's a whole share. Not too low, not too high...just right, Goldilocks...and it's called a share, which is very important. Bitcoin is a digital unit of exchange, currently trading as I write, at around $8,000 per coin, up over the last eight years from fractions of a single US Penny.

As such, many folks, understandably, think the market has passed them by. And many of these folks, a bit ignorant—with no help from The Experts—in the service of The Sovereigns to cure it—think that it takes $8,000 now to get into Bitcoin or crypto.

But in fact, Bitcoin, for example, is far more robust than United States Dollars, each divisible by 100 units, called a penny. How many units can a Bitcoin be divided into?

Yep, each Bitcoin is divisible by 100 Million "Satoshis." Doing the maths, at the current trading market of about $8,000 per bitcoin, a single Satoshi is worth USD $0.0000786021. Or, a single USD is worth 12,722 Satoshi = 0.00012722 Bitcoin (BTC). Doing more maths, 12,722 / 100 (pennies) = 127c. So, a single US penny is divisible by 127 Satoshis, the base unit of scale of Bitcoin.

How expensive does Bitcoin seem to you now?

So, what happens when we won’t even be talking about BitCOINS, we’ll be talking Satoshis, 1/100 millionth of a BITcoin, currently worth about 1/127th of a US penny?

…Let’s suppose that a Satoshi becomes worth the equivalent of 1 cent.

21 million Bitcoin x 100 million satoshis = 2.1+15 1-cent units, or 210,000,000,000,000 units worth 1c each. So that’s $21,000,000,000,000 market cap, divided by 21 million coins is $1 million per coin.

Now let’s suppose that a Satoshi becomes worth the equivalent of 10 cents.

21 million Bitcoin x 100 million satoshis = 2.1+15 10 cent units, 2,100,000,000,000,000. So that’s $210,000,000,000,000 market cap, divided by 21 million coins is $10 million per coin.

What if a Satoshi eventually equals a single USD? Go ahead and do the maths on your own. :)

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