I enjoy thinking about how the next Bitcoin bull market could play out. I do mean a Bitcoin bull market, not a crypto bull market. Moving on from the 2017 ICO craze I think the next bull market will be driven primarily by Bitcoin.

Why think about a bull market now, don’t you know we’re stuck in the doldrums?  

I think that it’s really important to consider how a Bitcoin bull market could play out so that we can prepare to sell into it. If you’re like me and you’ve just held on through two years of demoralizing bullshit, you probably never want to do that again. I’m preparing now so that once prices achieve orbit I can remain cool headed and follow the plan even as the market goes parabolic.

What I think the next bull market might look like 

Mostly this: Bitcoin’s role as digital gold / store of value / hard money / deflationary asset is going to dominate. Especially as we see more QE (Unlimited QE!!!) bailouts, fiscal stimulus, spending, etc. I think that an increasing percentage of the world’s population is going to look to Bitcoin as a hedge against inflation (especially those who don’t have easy access to dollars).

Now… This demand for Bitcoin as an inflation hedge might not actually be so great in the United States. Already we’re seeing a strong dollar and a number of very smart people have said that the dollar is likely to remain strong for the foreseeable future. If you’re interested in why, this is what they say.

  • The United States is printing tons, the rest of the world is too. Widespread printing means that the dollar stays strong because it’s the least shitty turd in the pot.
  • There is massive dollar denominated debt outside of the USA. Corporations and governments need dollars to service that debt = demand for dollars.
  • There isn’t a good alternative to the dollar. The closest competitor would be the Euro but there’s a non-zero chance the Euro won’t even be around in a few years. If not the Euro then what? Japanese Yen, anyone? Can I interest you in some Pesos?

A strong dollar would apparently diminish the narrative of Bitcoin as a hedge, and that’s probably true to some extent for Americans and other citizens of this fine planet who have easy access to dollars. However, while first world countries might have lots of speculators, they’re not where I would look for people who need Bitcoin, DeFi, etc. As an American or European, you already have access to pretty good, reliable banking infrastructure. What about the Russians, Thai, Mexicans, Turkish, Indians, etc. I think citizens of these countries are the ones who will begin buying Bitcoin as their fiat currencies break down and they find it hard to source dollars.

It won’t take much buying pressure. Bitcoin is a small asset and it responds to small demand (relative to the stock market or gold) so that $20,000 is well within reason if millions of people are buying at the same time. Once we move past the old ATH the speculators will return. Retail will come in, Bitcoin will be on the nightly news, institutions will join the party and as we’ve seen with previous right translated bull markets, the cycle will build on itself and before you know it we’re at a Bitcoin price that previously seemed silly (admittedly in inflated dollars).

How the bull market might accelerate 

What I just laid out is my general idea of how the bull market will reach $20,000. This is what I think the later stages may look like.

  • Traditional fiat currencies are failing, entire countries are insolvent, central banks have exhausted their reserves and are powerless to wipe their own asses. Abandon ship! As millions of people sign up for exchanges a narrative will form that Bitcoin is going to become the world’s new reserve currency. Buy it now and quick!
  • Several central banks will admit to owning Bitcoin / looking for ways to peg their currency to Bitcoin. I expect these to be the central banks of countries that Americans can’t poke their fatty sausage fingers at on a map. Ecuador, Ukraine, Bolivia, etc. I have no idea which ones, it doesn’t matter. What matters is that even just the suggestion that a central bank is playing with Bitcoin, any central bank, will bring legitimacy and new investors (speculators?) to the market.
  • Inflation in first world countries. Not hyper inflation, but not 2% inflation either. Enough inflation that people will notice it and they begin to question the “wisdom” of the Fed’s monetary policy. Possibly, maybe just maybe, the denizens of the first world might ponder whether a mathematically-guaranteed borderless immutable digital currency might have some advantage over a dollar governed by a cabal of self-serving old white dudes.

Why I will be selling into this madness, just as everyone and their grandma is signing up for Coinbase 

I will be selling because it is my firm belief that no matter how dark things may look, the dollar is not going to fail (or hyperinflate) and Bitcoin is not ready to be the world’s reserve currency yet.

  • The network effect of Bitcoin is not large enough. There aren’t enough people using Bitcoin and there just isn’t sufficient infrastructure to allow it (yet) to act as a reliable reserve currency. The crypto community need more time. Bitcoin is growing fast and I think it will get there, but I don’t think that we’ll get there before the peak of the next cycle.
  • I don’t think Bitcoin is secure enough to act as the world’s reserve currency. Mining is still too centralized in China and a few other locations. We need more decentralized mining, or at the very least we need to make damn sure that if the Chinese government goes rogue they can’t force mining operators to perform a 51% attack. Mining is already decentralizing at an increasing pace and I would expect that within the next 3 to 5 years we can confidently say that no one country overwhelmingly controls Bitcoin.
  • Bitcoin is too damn volatile. I know the Morpheus meme about not needing to sell sats, but until you can actually spend this stuff at any grocery store, or at the very least buy a car with it, I can’t imagine people hodling Bitcoin indefinitely. I like Bitcoin, I like eating breakfast more. Also, this last crypto bear market forced capitulation upon (supposedly) committed crypto believers. What will happen to the bull market maniacs after Bitcoin retraces 80% from its new ATH? What happens when it retraces 50% in a fucking day! Until the volatility evens out I find it very, very hard to believe Bitcoin will be able to act as a reserve currency.

So it is my opinion that we’ll see massive overvaluations in Bitcoin and then, like any other parabolic bull market, it will collapse. In the aftermath what we’ll find is this.

  • Many fiat currencies have failed, things are fucked but generally the dollar is OK (the implication being that selling Bitcoin for dollars near the peak is not going to lead to you losing all your money as the dollar blows up).
  • Dollar inflation will be higher than normal however, it won’t be quite so dire as it may have looked during the peak mania phase of the Bitcoin bull market. Americans will not be taking their wheelbarrows of cash to Trader Joe’s. The Fed will conjure its black magic, the POTUS will do this or that, steps will be taken to keep the dollar relatively safe.
  • In regard to the central banks who have announced that they’re working with Bitcoin, I think what we’ll find is that their idea of “working with” isn’t what we all had in mind. An analogy could be drawn to the long ago announcement that Amex was working with Ripple. To the moon! A few years later what has come of that? Who was expecting $0.12 XRP again?

So there will be a peak in the bull market, driven by these narratives, then comes the crash. Hopes will be dashed, dreams destroyed and Bitcoin will (probably) do its thing and retrace 80% just like in previous bear markets. But none of this will concern me, and hopefully you either, as we will have sold into the rising bull market and taken our profits. Hoorah!

All things come to an end, like this article 

There it is, my theory of how the next bull market will play out. I think about bull markets a lot because I recognize that selling into them, taking profits, will in the madness of the moment be very, very difficult to do. It will feel like insanity to sell the world’s next reserve currency in order to get some fiat which is either going to collapse or inflate out of existence. But I do believe, quite strongly believe, that selling is the right thing to do. Could Bitcoin become a reserve currency for the world? Sure. But I think that’s far less likely than another protracted bear market, something I would prefer to have nothing to do with.


A few other narratives that may play a secondary role in accelerating the bull market.

  • Bitcoin, or digital currencies in general, as more conducive to social distancing, not contaminated like cash.
  • Digital currencies as a way for governments to provide faster relief to citizens and businesses. Lower and middle class Americans get a $1,200 check but whoops, if you don’t have your bank account on file with the IRS (which most people don’t) you won’t get your check for (potentially) a month or two. It’s absolutely pathetic that we can film the movie Gangs of New York, find the Titanic, land a rocket on a little yellow square, build New York City, but it takes two fucking months to get someone money. We may see some demand from citizens for a digital currency which would raise awareness around Bitcoin. If UBI is instituted I would speculate it’s much, much more likely we’ll see serious talks of some CBDC.
  • Crypto as a way to get around currency controls. I think that this would require some fairly “major” country to enact currency controls for this narrative to have any weight. For example, if Nigeria puts in place currency controls (do they already have them?) nobody cares. But let’s say a country like Ireland or Israel or even Canada started restricting their citizens ability to go into the dollar or gold. That would be front page news and would easily drive the narrative to Bitcoin as it’s 10x easier to acquire than most other currencies/commodities.
  • Bitcoin as an asset unhindered by global disruptions. Bitcoin works whether the international order is humming or whether it’s anarchy. Compare that to gold where we saw major disruptions, broken contracts and all sorts of other shenanigans when brokers were unable to deliver physical gold because supply chain were breaking downs. Those in the know have said that this was a very, very big deal. Bitcoin doesn’t care, as long as the internet works it’s business as usual.
  • Bitcoin being used for the settlement of international trade. Take 15 minutes to learn about the Eurodollar mess we’re in now and then think about how much simpler the system would be if Bitcoin was used (even partially) instead of dollars.

The water lily analogy has its stem in The Slight Edgean excellent book I would recommend to anyone. The premise is that even a doubling of progress leads to only marginal improvements in the beginning. The water lily doubles its covering of a pond for many days in a row, and for many days in a row the progress does not seem great. Then the lily reaches the breakout point and within a few days it goes from covering only a corner of the pond, to all of it. A comparison to Bitcoin, and more broadly the entire crypto ecosystem, is imminent. Forget about a price for a moment, when you focus on the fundamentals you can see the growth.

  • In Hong Kong, for instance, we just witnessed more trading on Local Bitcoins than at the height of the previous bull market.
  • Record levels of Bitcoin trading in countries like Argentina and Turkey.
  • The amount of money locked up in DeFi has doubled since the beginning of the year.
  • And so forth… Crypto is clearly growing, but how long might it take?

Doubling Our Way to Mass Adoption

Let’s say, generously, that there are a million active Bitcoin addresses. If you double that to two million it’s still 0.03% of the world’s population. Insignificant. Double it to four million and now it’s 0.06%. A bit better, sure, but still just the guts of a splattered fly on the economy’s windshield.

So Bitcoin doubles for years and the progress seems slight, few pay much attention. But what most don’t realize is that Bitcoin is a water lily, moving inexorably towards the breakout. Speaking practically, the way I see this happening is word of mouth. If one person in Argentina tells their friend about Bitcoin and that friend creates a wallet and acquires some, Bitcoin usage has doubled (in regards to our micro-example). Now imagine both those people convince a person to get some coin. We’ve gone from two to four. And then… You see where this is going. The doubling effect of people convincing other people, this is where the power of a movement makes itself seen. It will get easier over time.

When you just have one crackpot friend telling you to buy magic internet money it’s easy to ignore them. When half the people you know are buying Bitcoin the temptation to jump in will be much stronger. That tipping point, the accelerating network effect the world over, is how Bitcoin could make its mark on the world.

Tl;dr – Focus on the fundamentals. Things (like Bitcoin) can double in usage/adoption/price/public perception for a long, long time without making much impact. However, once the tipping point is reached just a few more doubling events can lead to massive, disproportionate progress.

Credit where it’s due, the phrase “mercenaries vs. missionaries” comes from the formidable Ryan Selkis. Maybe he borrowed it from someone else, I can’t say. In any case, it’s a great way to express an idea that occurred to me a month or two ago. Let’s have a look.

The Problem with Ripple

Ripple (the company) is hiring a bunch of mercenaries to work on their project. A mercenary is a homo sapien whose allegiance is to the dollar not the project. Not that I’m friends with many mercenaries, but I speculate they rarely feel much love for the cause. Let a check bounce and see how long they stick around.

So we see Ripple dishing out $100 million to get XRP integrated into video games, on the smaller side we see a $1.5 million investment into Coinme, more recently, and this is the one that really made me think, they’ve bought Logos Network and tasked them with creating a DeFi ecosystem based on XRP. How artificial!

The real DeFi movement, the one happening on Ethereum, is driven by passion. Sure, loads of projects are taking in funding but there are also thousands of talented developers volunteering their time to build out the space. Also, the companies getting funded, they’re getting that cash because they have an innovative idea that could make DeFi better. That’s the opposite of this XRP DeFi deal where Logos Network was working on something else, then Ripple bought their souls, and now they have to work on what will benefit XRP.

That’s not to say none of this works out for Ripple. When you throw $500 million (that’s half a billion) at a problem you generally tend to get a few solutions. And, ironically, I actually have a stake in XRP and will materially benefit if it takes off. Yet… To me it feels like it’s all wrong: people should work on a project because they’re passionate about it, not because their paycheck demands it.

The Holy Writ of Bitcoin and Ethereum

More than anywhere else in crypto we see a fantastic community of missionaries contributing to these two projects. Thousands of passionate people who believe so deeply in the ultimate success and benevolence of these currencies that they’ll give up their weekends in order to debug code. Or whatever programmers do, I’m not one myself. There is money of course, but nobody is handing out $100 million grants the likes of Ripple’s offerings.

So now, the final point. What has become clear in the last year or so is that the best technology does not guarantee success. Bitcoin, by a huge margin, is the largest crypto even though fees are high and transaction are slow. In terms of developer activity and Dapps being built, Ethereum decimates the competition even though it can’t clear 20 TPS. There are a dozen viable competitors for the top spots, all with ostensibly better technology, but where are they now?

What Bitcoin and Ethereum have are huge communities and this, I believe, is perhaps the best predictor of a project’s eventual success. Imagine you have to move to a new town and you have two choices.

  1. The town with a thriving community and abundant social resources, but the internet is slow and the power goes out sometimes.
  2. The high-tech town with fiber optic and reliable infrastructure, but only a few people live there and they don’t talk to each other.

Which one would you choose? In deciding which projects I’d like to be affiliated with, it’s pretty clear to me what matters most. I’m with the missionaries.