The social consequences of Bitcoin at a million dollars (and at 10 million)

For a few weeks now, apart from a few dips (like right now, as I write this post),  Bitcoin, the queen of cryptocurrencies, seems to have consolidated at the $100k mark. Not bad, considering that exactly 2 years ago it was just over 22k. That’s roughly +400%. And if we go back 5 years, it’s +900%

And now? Obviously nobody has a crystal ball. It could crash, as it has done several times in its short history. Or it could gallop at full speed across green prairies.

In the first scenario, some would be licking their wounds or regretting a dream of wealth gone up in smoke, and many others would be congratulating themselves on a narrow escape. Yes, because in recent months many people, watching the sector’s tumultuous growth, have been wondering whether they were wrong not to believe in it, fearing the famous brother-in-law and next-door-neighbor effect we talked about a few weeks ago. Instead,  a crash would be a narrow escape and would give them the chance to indulge in the most classic I told you so.. come on, it was obvious it was all hot air, a colossal Ponzi scheme.

Either way, nothing would change: a few who did a timely hit-and-run would be a bit richer, a few would be licking their wounds, but basically nothing really new under the sun.  

But in the second scenario? Much more interesting. And here we get straight to the title of this post. After all, the 1 million dollar mark would mean +900%. A lot, a huge amount.. but that’s  exactly what it did over the past  five years.

Yes, because, to paraphrase the great J.M. Keynes (and his The Economic Consequences of the Peace), on the social consequences of Bitcoin at a million dollars (not to mention at 10 million), a few observations, with no claim to be exhaustive, can certainly be made.

Let’s start with the standard profile of the crypto investor. There are several structured studies (Morningstar, Science Direct, Harvard Business School) which, together with the answers  of the main generative AI engines, agree on some common features of the average crypto investor:

• Male, no doubt about it. For confirmation, just take a look at the forums and the self-styled gurus of the subject. We also saw it for ourselves, as we mentioned in last week’s post on the January 24 conference at the Politecnico di Milano;
• Young (27-45 years old). Needless to say, crypto is not an investment asset for boomers;
• Tech-savvy, that goes without saying;
• Medium-high level of education;
• Medium-high socioeconomic status;
• Risk-tolerant, at least more than average;
• Ideologically, leaning more towards libertarian than social values.

These sources focus on North America, but the features can mostly be applied to our country too. With, of course, the addition of fluent English, at least in writing. Web3 speaks English, and not being able to interact easily risks being a major limitation in terms of information.

The first observation is that the profile outlined above, with the only partial difference of age, represents the social group that is already dominant today, or at least a subset of it. So, again taking Bitcoin as an example, though the reasoning applies to other cryptos too, Bitcoin at a million dollars would essentially reward the social group at the top of the pyramid. As the saying goes, it never rains but it pours.

And here, before going any further, we need to go back to a concept we’ve expressed several times on this blog, which applies above all to Bitcoin. For technical reasons, partly by design and partly in practice, which we won’t go into here, the supply of Bitcoin, the free float, to use a somewhat loose term, is, if not decreasing, at least static. That is, the quantity of Bitcoin available on the market isn’t growing; in fact, in practice, it is shrinking or will end up shrinking. In this sense, Bitcoin is said to be deflationary, unlike traditional currencies (the so-called fiat currencies, dollar, euro, etc.) . But, be careful, it also means that if you want to buy Bitcoin, you have to buy it from those who already own it. And who owns it? The people at the top.

And that’s enough for this week. We’ll come back to the topic next week because there are more interesting observations to make.