I've had some thoughts recently about what it would actually take for the Final Parabola to happen, and how exactly it would play out. The pieces are starting to come together, and I will cover my new thoughts in this blog post.
When will Bitcoin go to infinity against the dollar?
There's a very simple process through which this would happen. Bitcoin will go to infinity against the dollar when you can spend Bitcoin practically everywhere, or to purchase pretty much anything you might need, without selling it for dollars first. This will happen when merchants believe Bitcoin is a form of money, or at least a store of value, and accept Bitcoin directly as payment. This would create 0 Bitcoin outflows and only inflows, quickly driving the price of Bitcoin to infinity against the dollar.
Upon further thought, I realized that this doesn't require people literally everywhere to accept Bitcoin as payment to occur. During the process of hyperbitcoinization, I believe a significant part of the world population will be completely left behind and lose all their wealth in Bitcoin terms. A shift to accepting Bitcoin as payment only needs to happen in some critical-mass region (ex: red America) in the world for hyperbitcoinization to effectievly occur, significantly reducing Bitcoin outflows and making the Bitcoin price go to effectively infinity in dollar terms. Such a process would likely be accompanied by a significant migration of Bitcoin millionaires back to such a region so that they can spend their newly created wealth in peace and in large amounts.
Another important realization is that once such a shift happens, wealth will become completely redistributed. The reason is because that previously, the billions of dollars of Bitcoin market cap are actually fake unspendable wealth, because you can't actually cash out all that Bitcoin to dollars to spend it (not enough bid liquidity). However, once people accept Bitcoin directly as payment, that "inflated Bitcoin bubble" will suddenly crystallize as real, spendable wealth - every last penny of it. Bitcoiners will suddenly gain, collectively, trillions of dollars of spendable wealth effectively overnight, that can be spent without reducing the Bitcoin price at all. Realistically, the entire crystallization process might take an year. But by the end of it, wealth will be COMPLETELY redistributed, and you won't need any dollar liquidity to spend your Bitcoin.
What will drive such a shift to widely accept Bitcoin as payment?
I believe the mindset shift will happen rather quickly. All it requires is for the general population to BELIEVE a new idea. There are many things that could trigger such a mindset shift. But once a critical mass adopts this mindset shift in terms of public opinion, the rest of the masses will quickly follow.
One event that could trigger such a mindset shift is Bitcoin reaching market-cap parity with physical gold. That could trigger a sudden narrative shift and realization that Bitcoin is the real deal. Suddenly, a wave of merchants adopting Bitcoin as payment takes hold, and the hyperbitcoinization process begins in earnest.
Conceptualizing what comes after significant merchant adoption
First, Bitcoin would begin to moon. As merchant adoption increases, outflows will decrease and the Bitcoin price will begin to rapidly climb.
As Bitcoin moons, everyone in the world will be asking questions. Demand will increase as people start to FOMO, and people both inside and outside (but predominantly inside) Bitcoin economies will start to sell their fiat currency for Bitcoin.
But it's not just fiat currency that will be sold for Bitcoin. People will take advantage of credit in an attempt to secure some physical Bitcoin while they can still use fiat currency to buy it. Credit cards will be maxed out and home equity will be tapped into with HELOCs. Brokerage accounts will be borrowed against. Personal loans will be taken out.
All kinds of assets will also be outright sold for Bitcoin. 401ks will be tapped. Stocks will be sold. Bonds will be sold. Investment houses will be sold. Bitcoin will moon even higher.
This process won't simply be limited to the US. This will begin to happen in economies all around the world - Europe. Asia. South America. Everyone around the world will be attempting to buy Bitcoin. Economies all around the world will suddenly switch to accepting Bitcoin as payment.
Once merchant adoption happens globally, the price of Bitcoin will SKYROCKET. Outflows will completely cease. Suddenly, overnight, Bitcoin will scream higher in price.
This is when the real frenzy starts. Countries will begin to issue debt in an attempt to buy Bitcoin and accumulate it in their treasuries. Instead of announcing Treasury buybacks, the US government may announce Bitcoin purchases, funded through debt and Federal Reserve money printing. Third-world countries will simply print currency like mad to purchase Bitcoin.
Up to this point, even as Bitcoin mooned, prices remained denominated in dollars and stayed stable. But as any and all people who own Bitcoin suddenly become millionaires, billionaires, and trillionaires, the wealth effect will become too powerful, and inflation will begin to kick in. Inflation will first kick in in earnest in early Bitcoin economies where practically every other common man and woman adopted Bitcoin early. As every such common man and woman becomes Bitcoin-rich (think every single person is a millionaire), prices will begin to climb higher in dollars. Real estate will go up. Rents will go up. Prices of services will go up. Wages will go up. Prices will go up. There could be anywhere from 100% to 1000% inflation, with inflation rates varying significantly across different kinds of goods and services. Specifically, consumer good price inflation will probably have the lowest inflation. However, prices will still be denominated in dollars, or fiat currency more generally. In non-Bitcoin economies, prices will still be stable. People everywhere will still accept fiat currency as payment.
The frenzy to buy Bitcoin will continue to grow stronger every day. We will reach a point where every single man and woman, every company, every household, every government, every retirement fund, every organization of any kind on the planet will be selling their fiat currency to buy Bitcoin. At this point, literally no one will hold fiat currency. At the first chance they get, they will sell their fiat currency for Bitcoin. Fiat currency will only be used as a medium of exchange. The moment someone gets a hold of it, it will be spent or sold for Bitcoin. Bitcoin's price is essentially infinity in all fiat currencies all around the world, and Bitcoin is not only accepted but widely adopted or even preferentially requested as payment globally.
At this point, inflation will not only be limited to the earliest Bitcoin economies. As Bitcoin literally goes to infinity in fiat terms, many economies that adopted Bitcoin will experience wealth effects and begin to see inflation. Fiat wealth will spill over everywhere due to the Bitcoin bubble effect. However, wealth will be redistributed very unevenly, with earlier Bitcoin adopters becoming significantly wealthier, but late adopters having to work for their Bitcoin. Additionally, early Bitcoin economies will be significantly wealthier than late Bitcoin economies.
The earliest Bitcoin economies will be incredibly wealthy at this point. Inflation is picking up globally, but these economies see ridiculous levels of inflation; 1000% consumer price inflation, 2000% wage inflation, etc. There will be huge inflows of people moving to Bitcoin economies to earn the significantly higher wages. Fiat currency still circulates worldwide but is rarely used in these early Bitcoin economies.
At some point, the earliest Bitcoin economies will begin to completely cease to use fiat currency. The first step will be for businesses to cease accepting fiat currency as payment. Subsequently, employees will demand payment in Bitcoin. Companies will stop holding fiat currency. Households will stop holding fiat currency. Rents will be paid in Bitcoin. Eventually, Bitcoin will be the only money in circulation in these Bitcoin economies. However, prices will still be widely denominated in dollars.
As Bitcoin reaches multiple billions of dollars per coin, wealth effects will be extremely strong worldwide, and the Weimar Republic levels of fiat inflation that began in the earliest Bitcoin economies will start to kick in worldwide. Price stability will begin to become an issue as the high inflation that begins to kick off in poorer, late Bitcoin economies circles back to early Bitcoin economies. Prices will start to climb higher everyday.
At some point, the earliest Bitcoin economies will begin to not only cease to use fiat currency as a medium of exchange, but also as a unit of account. People will begin to quote prices in Bitcoin for goods such as real estate or cars. Wages will start to become denominated in Bitcoin. Consumer goods will eventually be priced in Bitcoin. Such prices will fluctuate, but so long as they fluctuate less frequently and to a lesser degree than fiat prices, they will become widely adopted.
As fiat inflation becomes untenable worldwide, eventually this process will occur in more economies around the world. Slowly but surely, more and more prices will become denominated in Bitcoin. Exports will become denominated in Bitcoin. Prices will continue to fluctuate, but less frequently than fiat prices.
At this point, Bitcoin supply has become very widely distributed, but very unevenly. While wealthy people in early Bitcoin economies may often own 1 or 0.1 Bitcoins, the wealthy class in poor countries will only own 0.01 or 0.001 Bitcoins. Middle classes worldwide will likely denominate their wealth in sats, and in the most laggard Bitcoin economies, the majority of the population may only have perhaps 10,000 sats of Bitcoin, with the poorest owning only 100 sats. While prices will be denominated in whole sats in early Bitcoin economies, late Bitcoin economies may eventually have to create smaller denominations than sats by splitting sats on L2s.
One by one, economies worldwide will begin to discard fiat currencies entirely and do all commerce in Bitcoin. Prices worldwide will be denominated in Bitcoin, and begin to stabilize. Society and civilization will be completely transformed in ways I can't yet imagine. The world will be on a Bitcoin standard. The Final Parabola will be complete.
How long would it take for hyperbitcoinization to kick off?
It is unknown how long it would take for this process to kick off. As I said above, if Bitcoin reaching market-cap parity with gold is what sets off this process, it could start in earnest two cycles from today. At today's gold price, it would require Bitcoin to reach a price of 629,000 dollars per Bitcoin. That is a very high price but could be reached within two cycles.
It's also possible that this process could kick off during the coming cycle, driven by nothing other than public opinion. El Salvador and Microstrategy will be huge success stories and near peak euphoria, we could see a wave of emulation, which could trigger a wave of merchant adoption.
Bitcoin will almost certainly be attacked
Currently, the US dollar is the only thing serving as legal tender in the USA. There will be a concerted effort by international capitalistic forces to suppress Bitcoin, and outlaw it from being used as legal tender.
If that doesn't work, Bitcoin in brokerages and US crypto exchanges will likely be seized.
Another scenario is that Internet infrastructure itself, which is NOT decentralized, will be attacked, and a new centralized CDBC-esque money introduced, to attempt to block off huge swaths of the Western economy from Bitcoin. I'm not sure how well this will work, but it will almost certainly create lots of enemies, since much as the fiasco going on in Israel today, the international capital bankers will be picking fights with the entire world in an attempt to maintain their grip on power.
Bitcoin is essentially an attempt by the people to establish their own form of money, and thus, will not be allowed to roam free in the domain of the international capitalists if they can help it.