Gradually, Then Suddenly (2019)
How did you go bankrupt?
Two ways. Gradually, then suddenly.
- Ernest Hemingway, The Sun Also Rises
Gradually, then suddenly, is also the way:
government-backed currencies hyperinflate
people come to understand Bitcoin
Bitcoin Is Money
Bitcoin has become money to the author. It was a slow process, but it began by asking the question:
What Is Money? Why do people exchange their hard-earned real-world value for this piece of paper (or digital representation)?
The path first started by understanding why gold was money and the properties that made something a better or worse form of money.
Consider Bitcoin relative to gold and the dollar financial system.
What makes something money is not absolutism; it is always relative value - the choice between storing value in one medium vs. another.
Borrowed Time
After working in finance throughout the financial crisis, the author only understood what happened then ten years later.
The principal conclusion is that the financial system was leveraged approximately 150-to-1, only enabled due to central bank policy, which consistently prevented system-wide deleveraging over three decades.
The solution - quantitative easing - merely caused an unsustainable credit system to metastasize over the next ten years, making future quantitative easing inevitable.
Therefore, the existing financial system is living on borrowed time.
QE Infinity - Central Bank Balance Sheets in trillions of dollars, September 2009 vs September 2022
Hyperinflation - Emerging Market Currencies valued in USD, January 2009 vs. January 2023
Game Theory
Then, the author eventually figured out Bitcoin. The ultimate conclusion:
a global network of rational economic actors operating within a voluntary, opt-in currency system would never collectively form a consensus to debase the currency they have all independently and voluntarily determined to use as a store of wealth.
It's not just code that dictates there will ever be 21 million bitcoin - it's the game theory surrounding much of our daily lives.
That can't be understood overnight by any individual.
It is a reality that is reinforced and strengthened over time by reading more and seeing it repeatedly work, every 10 minutes.
The Future
Bitcoin exists as a solution to the money problem we have today. When trying to understand Bitcoin, start with gold, the dollar, the Federal Reserve, quantitative easing, and why Bitcoin's supply is fixed.
If you believe the deterioration of local currencies in Turkey, Argentina, or Venezuela could never happen to the U.S. dollar or your local economy, you haven't studied history.
When the money supply is manipulated, it distorts global pricing mechanisms which then communicates inaccurate information throughout the world economy.
Massive imbalances are created when this is sustained for over 30-40 years.
Because Bitcoin's supply is fixed and cannot be manipulated, it will eventually become the most reliable pricing mechanism in the world.
Today's volatility is nothing more than the logical path of price discovery, bubbles, leverage, and manipulation as adoption increases by orders of magnitude.
See the gold price during the german hyperinflation:
A chart showing the price appreciation of gold and its insane volatility in percentage terms during the Weimar hyperinflation
— originally posted on 2 minute bitcoin https://2minutebitcoin.org and https://www.2minutebitcoin.org/blog/gradually-then-suddenly-bitcoin
Original Author: Parker Lewis
Original Word Count: 1385
Original Posted Date: July 26, 2019
Original Source: https://nakamotoinstitute.org/mempool/gradually-then-suddenly/
Good money drives out the bad. Through game theory, Bitcoin adoption, appreciation and weak currency crisis’ will be caused by greedy investors that individually pursue their self-interest.