Bitcoin could break everything

Financial populism and loose monetary policy could combine to create the perfect storm as the US economy attempts to recover from the coronavirus.

  1. Huge drain on traditional economic activity. Finance will shift focus and capital away from traditional finance markets, which serve a purpose, in particular, the very important purpose of creating jobs and real wealth, if all the neoliberal economists are to be believed. Similarly, consumers may become more parsimonious as they stack money into Bitcoin. Less spending, less real investment, less jobs. This will provoke the Fed to increase QE and other stimuli. Inflation up, economic activity down. Vicous cycle.
  2. Increased polarization and tribalism. Right-wing politicians who extol Bitcoinism will begin accepting donations in Bitcoin or convert to Bitcoin. So will the toxic social media influencers who keep their audience fearful and outraged. Buying and holding Bitcoin is a way to support them, especially as they are canceled by Twitter or Facebook. Many on the left will persist in mocking Bitcoin, claiming it will crash, any day now, and this won’t help.
  3. Alliance between hostile nations and US Trumpists. Once the Bitcoin party gets started, it’s not unimaginable for Donald Trump Jr to say “Russia, if you’re listening, now would be a good time to put your national treasury into Bitcoin.” Russia would love this more than nothing else. Not only could they poison the US democracy, but destroy the economy. Trumpists, like Putin, resent the US role as a superpower, and blame our problems on the “globalists.” The fact that the US dollar denominates the majority of foreign reserves is seen as an extension of this globalism. What better way to diminish the US than devaluing US treasuries? Hostile nations could combine forces with US conservatives by joining the pile-in to push Bitcoin as a global reserve currency.
  4. Economic instability in the US and beyond the dollar is challenged. Over 60% of the foreign bank reserves are denominated in dollars. If the US can’t borrow by issuing treasuries anymore, the liberal era of debt-spending will be over. Suddenly, the national debt doomsday scenario that fiscal hawks have been predicting for decades becomes a self-fulfilling prophecy. This means our government basically ceases to function.
  5. Rearrangement of global alliance and emergence of new power players on the international stage. If nations like North Korea, Iran, Venezuela are all-in, they become allies to anyone else who is all-in. I wouldn’t even try to dare to speculate what would happen if the oil-producing nations found it more lucrative to ditch the petrodollar.
  6. Partisan groups leveraging economic power to spread disinformation. With a few billion dollars, you can set up a reddit or 4chan type social network with global reach, no censorship whatsoever, and use this to reach out to network with extremists or mercenary fake-news providers throughout the globe. Mechanical turks who are paid in Bitcoin could easily do a number of disinformation tasks. Such a network can be an initial testing ground for hyperpartisan news before plying it through the usual channels. Even here in the US, money can be used to buy or create media outlets that promote Bitcoin and anti-socialist narrative.
  7. Extremist groups and individuals suddenly having huge power and influence. I can’t imagine that the Proud Boys have a huge bank account today, but I could imagine the Proud Boys deciding to cash out to Bitcoin and take donations in Bitcoin before another 40X. This will apply to any groups who may have been forced into Bitcoin because they were unable to hold traditional bank accounts. If these guys are scary now, imagine them with millions of dollars. In addition, there’s probably quite a few racist incels living in their parents basements who have stacked up 10–20 bitcoins. If the price goes to $2 million, these people now have a bit of power. They can buy NBA teams or newspapers.
  8. Bitcoin becomes increasingly impossible to regulate without causing a civil war. Any attempts to tax, regulate, or somehow stymie the exponential price growth will be met with anger from people who have invested in it. Further, we know that Trumpism thrives on persecution — any attempt to stop a rush toward Bitcoin would be seen as statist attack on Bitcoin holders by a desperate state flailing to maintain power.
  9. Insane demand for energy. Around 900 Bitcoins are mined each day. At current mining rates, if we assume some free-market efficiency, a $2 Million Bitcoin this amounts to about $1.8 Billion of electricity burnt every day. Bitcoin advocates say some of this comes from renewable sources, but we won’t be able to build that many solar panels or wind turbines in the desert to do this in the near term. That’s well over half a trillion of electricity burnt and gone every year.
  10. Insane demand for computer chips. If the price spikes, it will become incredibly profitable for chipmakers to focus on mining hardware. Graphics cards are already skyrocketing.
  11. Increased inequality. While a hyperbitcoinization scenario with $2M Bitcoin would certainly create some millionaires who never would have otherwise been, it will mostly favor the already wealthy. The wealthy are risk-tolerant and can afford to drop $2,000,000 in a toy internet currency a few years back, and not fret too much if it never pans out. Most of us can’t risk that, now or in 2015. Tesla can risk $1.5 Billion, because they’re a wealthy company.
  12. Pandemic of anxiety, financial trauma and degradation of the traditional social contract surrounding the relationship work and money. Try to imagine the anxiety in a 18-month bull run. Try imagining sleeping, or putting your normal effort into work. The bull run won’t be straight up. Some people will buy heavy before panicking during a drop, dooming their families to destitution, while the neighbor next door will do the opposite for dumb luck. Either you’re exposed to Bitcoin, or you’re exposed to not having Bitcoin. Hackers will be everywhere. Home prowlers will come for your computer. Your passwords had better be secure, and you better not forget them or where you store them.
  13. Wall Street will co-opt the movement. Because of course they will. These are smart people, and they’ve been playing this game longer than anyone in crypto.



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