Bitcoins, Sold Out

By 2034, it is expected that no one will be ready to sell any Bitcoin.

There is a small chance that at some point in the future, Bitcoins will not be available for sale. All the exchanges will run out of Bitcoins and no one will sell any Bitcoin. You can buy equities, real estate, or gold with money, but you might not be able to buy Bitcoins for money, because Bitcoin will become money.

As we had discussed before, money moves through four stages. First, it is a novelty, something unique, something interesting. People might buy a little bit. Something like a nice shell or a pet rock. But if the supply of that is low and the demand is high, it becomes a store of value.

You have some savings (monetary energy) and you want to hold it for the long term. You want to spend it in the future. People generally buy gold or real estate because gold and real estate are low in supply. However, gold and real estate cannot be used as money so people have to sell it for "money" to someone else and then spend the money they have. That might be Dollars, Euros, or some other currency.

No one keeps the currency for a long time because the currency keeps inflating and loses purchasing power over time. That's the reason why people buy real estate, gold, and equities in the first place.

You might be able to buy some Bitcoin today with dollars expecting the value of Bitcoin to go up. If Bitcoin goes up, you sell it for dollars and then spend the dollars. This is the only way because most of the people are selling their products and services for dollars. They are not expecting to be paid in Bitcoin.

But gradually, a lot of people take payments in dollars and then they save it in Bitcoin again. In such cases, if they are selling products and services, they might as well accept payments in Bitcoin if the buyer is ready to pay in Bitcoin. At some point in time, both payment options will co-exist. Today, many domain name marketplaces are already accepting payments in Bitcoin. (Like BrandBucket.com and SquadHelp.com).

The first stage of Bitcoin is novelty or collectible. The second stage of Bitcoin is a store of value like real estate. That's the stage it is in right now. Because Bitcoin is so volatile, people cannot use it for payments. However, in the future, a decade from now, if Bitcoin's price becomes stable, then Bitcoin can be used as a medium of exchange.

People will accept payments in Bitcoin and many will be ready to pay in Bitcoin. Once you have enough products and services that are being sold for Bitcoin (or Satoshis) then people need not convert Bitcoin into dollars and then pay the seller of goods and services.

The 4th stage of money is that it becomes a unit of account. Throughout the world, the price of goods and services is measured in dollars. We say that a home is $1m worth. When Bitcoin achieves maturity, it will become a unit of account. A house could be worth 1 Bitcoin (100m sats) or 0.2 Bitcoin (20,000,000 Sats).

My thesis is that the demand for real estate, gold, and equities as a store of value will go down. Simply because when people buy real estate to "grow their money" and not as an end user, there will be more houses created.

Real estate is a local market and not a global market. Local rules and regulations are complex and hard to keep up with. Property tax differs a lot from country to country. People buy it anyway because they do not trust Bitcoin yet and they do not know where else to deploy their savings.

When people get more confidence in Bitcoin, the capital will come into Bitcoin. Gary Cardone, a real estate businessman and social media influencer recently announced that he sold his $2.5m property to buy Bitcoins. It is starting to happen already, very slowly. Real estate prices could crash when that happens at scale.

Gold might not keep appreciating as it has been because gold cannot be used for payments anymore. Equities and stocks might not be able to give the kind of returns that Bitcoin gives. Companies will be able to attract capital only when the companies can grow faster than Bitcoin.

As more and more people use Bitcoin as their long-term store of value, the value of Bitcoin as a payment system will go up.

When people earn in Bitcoin, they don't need to deploy that "money" into real estate, gold, or equities because Bitcoin is a deflationary currency. Hence it is also an asset. People will buy homes because they want a roof over their heads, but not as a savings vehicle.

If this happens as I mentioned, then Bitcoin will not be available for sale anymore. Anyone who has Bitcoin will not be ready to sell it to you for any currency because the value of the currency is not high enough. The value of the local currency is not high enough because most people want to sell their products and services for Bitcoin and not for any other currency.

The value of any currency or money comes from how many people are ready to accept it in exchange for real-world goods and services. Money itself doesn't have any value, it is valuable only when people accept it for goods and services. What we want is not money, what we want is goods and services.

There is a model called HODL Model which was designed by the user

Root

According to this model, the illiquid supply has changed its path in the curve. Anyone who is not ready to sell more than 25% of their Bitcoins no matter how much the price of Bitcoins goes up, they are part of the illiquid supply. As the illiquid supply goes up, and because this cohort of people believe that the price of Bitcoins will keep going up forever, it is expected that we will reach a point by the 6th or 7th halving that no Bitcoins will be available for sale.

Another interesting thing that is happening is that since 2020, the Bitcoin balance on exchanges has been going down. Until 2020, old holders were depositing Bitcoins on exchanges to sell them for a profit. Since then people have been buying Bitcoins and putting them in cold storage for their future.

Bitcoins are also getting distributed more evenly as more and more people want to own it. The number of wallets that owns < 10 Bitcoins is increasing over time. This data is from the blockchain analytics company called glassnode.

When Bitcoins become the world’s primary currency, no one would want to sell it for any other currency. This phenomenon is called Hyperbitcoinization and might happen more quickly than most people think. It might or might not happen, but if it happens, you have to have some sats with you. Let's wait and see.