Unstoppable Money Printer Meets Absolute Scarcity - Part II

The problem with trying to understand a phenomenon like Bitcoin is that our brains, and the economic models our brains have built, are creatures of an elastic world.

We live in a world of more.

If people want more corn, farmers plant more acres. If people want more houses, developers build more subdivisions. If people want more money, central banks print more of it. Everything has a supply curve that slopes gently upwards. If you push on it with enough demand, it will give. It will produce more. This is the fundamental assumption baked into nearly every aspect of our economic lives. And this is precisely why all the old maps lead us astray when we get to the edge of the Bitcoin world.

Bitcoin doesn't live in the world of more. It lives in the world of this many and no more. Its supply curve isn't a gentle slope; it's a sheer, unyielding cliff face. It’s a vertical line. It doesn't respond to price signals, to desperate demand, to government pleas, or to market manias. It responds to nothing but the unchangeable rhythm of its own code. To try and analyze Bitcoin with the tools of an elastic world is like trying to analyze a star with a stethoscope. You’re using the wrong instrument for the job.

The Collision Model

So, let's build a new instrument.

Let’s throw out the complex regressions and the historical analogies for a moment and go back to first principles.

Let’s create a model so simple it feels like something from a high school physics class. We’ll call it the Collision Model, because that’s what it’s designed to describe: the collision between two of the most powerful and opposing forces in the modern world.

The model has only two variables that truly matter. It’s a tug-of-war between a giant and a dwarf, and understanding them is the key to everything.

First, the Giant: The Global Monetary Premium

Our giant is the ghost we met in Part I.

It is the vast, restless sea of capital that was conjured into existence by decades of accommodative monetary policy. It is the difference between the quadrillion-dollar valuation of all the world’s assets and what those assets are actually worth based on their utility. It is, in short, a giant pool of money that isn’t looking for a return on capital, but a return of capital.

It’s not investing. It's hiding.

How do you measure a scared ghost?

It’s not easy, but we can give it some shape. Start with the world’s most foundational store-of-value asset: gold. The total market capitalization of gold is somewhere around $22 trillion. Of that, how much is used for industrial purposes or for making jewelry? The estimates vary, but it’s a fraction of the total. The rest, the vast majority, is just sitting in vaults. It doesn't generate cash flow. It doesn’t pay a dividend. It’s just a shiny, dense, and somewhat scarce rock that people trust not to have its supply massively inflated. That multi-trillion-dollar chunk of value above and beyond its utility is a pure monetary premium. It’s money that has parked itself in gold to escape the melting ice cube of fiat currency.

Now, apply that same logic everywhere else. Look at the real estate markets in prime global cities like London, Hong Kong, or New York. A tiny two-bedroom apartment costs millions of dollars not because it provides millions of dollars' worth of shelter, but because it’s a relatively scarce title deed in a desirable jurisdiction. It has become a financial instrument, a brick-and-mortar savings account.

Much of its price is a monetary premium. You could argue MOST of the value is the monetary premium these days.

Look at the stock market. For years, corporations have been buying back their own stock with cheap debt, reducing the number of shares outstanding and boosting their price. This isn't necessarily creating new value; it's just concentrating the ownership and turning equities into a scarce asset for all that QE money to chase. A portion of the S&P 500’s valuation is a monetary premium. It’s the price people are willing to pay just to have their money somewhere other than cash.

The Global Monetary Premium (GMP) is the sum of all these premiums. It’s the portion of the world's $1 quadrillion in assets that is being used not for productive purposes, but as a place to store wealth. It’s the gargantuan wave of capital, a force of virtually infinite elasticity, constantly searching for a better home, a more perfect container. For the purpose of our model, we don’t need a precise number for GMP​. What matters is its nature: it is vast, it is desperate, and it is orders of magnitude larger than the thing it is about to collide with.

Second, the Dwarf: The Quantity of Bitcoin

Our dwarf is Bitcoin.

Compared to the $1 quadrillion analog economy (and the 5x to 100x multiple of derivatives magically floating atop it) Bitcoin is an absolute spec of dust vs Mount Olympus.

For the purposes of our math here what matters is the denominator of the Bitcoin network: the number 21 million. That's it. That’s the entire variable.

BTC​=21,000,000.

The simplicity is the point.

This number is not an estimate. It's not a target. It's a law. In a world of slippery, unknowable economic variables, it is a point of absolute certainty. It is the immovable object. Do you know how rare absolute clarity is? About as rare as absolute scarcity! That's the power of Bitcoin.

The supply of U.S. dollars is a mystery; the Federal Reserve’s own reports on the M2 money supply are a funhouse mirror of changing definitions and statistical fog.

The supply of gold is an estimate based on geological surveys and mining reports. We’ve been mining it for thousands of years, have no real idea exactly how much has been unearthed, where it is, or in what condition.

The supply of Bitcoin is 21 million.

You can verify it yourself by running a node on a cheap laptop.

You’d need to spend trillions of dollars per year assessing and appraising the global gold. That's a growth kill shot. If we tried to build our monetary base atop it the economic gains from technology and skill upgrades would be offset by “gold operating costs”.

This is what makes Bitcoin so different. Digital wealth free from analog friction and murkiness. It is entirely transparent about what matters: supply, condition and rate of issuance. It’s also perfectly insensitive to demand. It is the first asset in human history where the "flow" will, with mathematical certainty, fall to zero. The Stock-to-Flow ratio we kept yapping about in Part I won't just get high; it will go full Buzz Lightyear and go to infinity. An infinite S2F ratio is a fancy way of saying the supply is fixed. Forever. It represents a discovery on par with the discovery of zero in mathematics: the discovery of absolute scarcity in economics.

The Collision: The Model Itself

Now, let's crash the giant into the dwarf.

(I love my job)

The logic of the Collision Model is brutally simple. The price of Bitcoin is the mechanism through which the market reconciles these two forces. It is the shock absorber. The market capitalization of Bitcoin is simply its price multiplied by the number of coins (Pbtc​×Qbtc​). This market cap must, over time, grow to absorb some percentage of the Global Monetary Premium that is seeking a new home.

We can express this as a function:

\(BTC​=f(Qbtc​MGP​​)\)

Let’s break down what this means in plain English.

The price of one Bitcoin is a function of how much of the world’s monetary premium decides it wants to be stored in the Bitcoin network, divided by the fixed number of coins.

The denominator, Qbtc​, is fixed at 21 million. It cannot change. That means the only way for the Bitcoin network to absorb more of the world’s monetary energy (MGP​) is for the price (BTC​) to rise. There is no other release valve.

The price must do all the work.

This is the core of the model. It re-frames the question entirely.

People who ask, "What is the right price for Bitcoin?" are asking the wrong question. It's like asking "What is the right temperature for the sun?" The price is not an independent variable to be solved for; it is a dependent variable. It is the result. It is the meter on the side of the container, and the reading on that meter is determined entirely by how much liquid is being poured in.

Let’s visualize this, because a picture makes it shockingly clear.

In a standard supply and demand chart, the demand curve slopes down and the supply curve slopes up. Where they meet, you get a price. If demand increases (the curve shifts to the right), the price goes up, but so does the quantity supplied. The equilibrium point moves up and to the right.

Now, look at the chart for Bitcoin.

The demand curve is the same. It’s all the people and institutions in the world deciding they want to own some.

But the supply curve is a vertical line at Q=21,000,000.

Look what happens now when demand shifts to the right. The demand curve slides along the vertical supply line. The equilibrium point has nowhere to go but up. Price increases, but the quantity does not change. Every single dollar of new demand must be expressed as a higher price. It cannot be expressed, as it is with every other commodity, by creating more of the thing.

The story of Bitcoin adoption is the story of a relentless, multi-decade rightward shift of that demand curve. The demand curve is our giant, MGP​. It represents every pension fund that decides to allocate 1% of its portfolio, every insurance company looking for a better store of value than negative-yielding bonds, every tech billionaire hedging against fiat debasement, and eventually, every sovereign wealth fund seeking a neutral reserve asset.

As that demand curve shifts right, it scrapes its way up the sheer cliff face of the vertical supply curve. The price action it creates is not a smooth, orderly ascent. It’s a violent, lurching, heart-stopping climb. This is the collision. This is the model. It predicts that as long as the monetary premium exists and is searching for a home, and as long as Bitcoin is perceived as the safest home for it, the price has only one direction to travel in the long run. The journey will be volatile, but the destination is a mathematical consequence of the setup. It’s the irresistible force of inflating fiat money meeting the immovable object of fixed digital scarcity.

The price is just the scoreboard for that epic contest.

This framework allows us to finally see Bitcoin not as a stock to be picked, or a company to be analyzed on its earnings, but as a monetary black hole. Its gravity is its absolute scarcity. As the financial universe around it becomes more chaotic and inflated, more and more energy (capital) is inevitably drawn towards its event horizon. The Collision Model gives us the physics to understand why. The next step is to use that physics to describe what the process actually looks like for the people living through it.

(Did I mention how much I love my job?)

Analysis: The Phases of Global Adoption

Life can be ugly sometimes. In contrast, a physics model is a clean and beautiful thing. It describes the forces, it gives you the equation, and it predicts a result with a kind of sterile elegance. The Collision Model tells us that a vast, elastic force of monetary energy will be inexorably drawn to a small, perfectly inelastic container, and that the price of the container must rise to accommodate it. It’s neat. It’s logical. But it leaves out the most important part of the story: what it feels like to be standing on the ground when the collision happens.

The transfer of the global monetary premium from a hundred different leaky buckets into one perfectly sealed vessel is not a single event. It’s not an orderly procession. It’s a messy, chaotic, and deeply human process that unfolds over decades.

It’s a story in four acts, a slow-motion rewiring of the entire global financial system and the human psychology that underpins it. To understand the consequences of the model, we have to walk through the phases of the adoption, from the violent birth pangs of a new money to the quiet stability of its maturity.

Phase 1: The Bar Fight

The first phase is the one we’ve been living through for more than a decade. It is the price discovery of a new monetary good, and it looks less like a scientific process and more like a chaotic bar fight in the dark. This is the period of maximum confusion, maximum volatility, and maximum opportunity.

It begins with the outliers.

The cryptographers, the cypherpunks, the weirdos in the forums who saw the signal when everyone else saw noise. They aren't buying an asset. They are participating in an idea. The price is measured in cents, then dollars. The stakes are low. And then the first wave of real capital arrives: tech-savvy early adopters, libertarians who have been waiting for this their whole lives. The price lurches from $10 to $100 to $1,000.

And the fight begins. The fun, too

In one corner, you have the incumbents. The entire apparatus of the legacy financial world, from central bankers to talking heads on financial television.

They look at this thing and see nothing of value. It has no earnings, no cash flow, no CEO, no headquarters. It is backed by nothing. They declare it a bubble, a Ponzi scheme, a tool for criminals. They are not necessarily stupid or malicious; they are simply using the old maps. They are running their stethoscopes over a star and hearing nothing. Every time the price crashes they feel vindicated. "We told you so!" they say, as the obituaries are written for the hundredth time.

In the other corner, you have the believers.

They see the crashes not as death throes, but as stress tests. Every time the network survives a brutal sell-off, every time it keeps producing blocks every ten minutes, every time it shrugs off another "ban" from another country, it gets stronger. Its immune system toughens. They aren’t measuring it in dollars; they are measuring its resilience. They are the ones who understand the vertical supply curve. They know that after the crash, there isn’t more of the asset to be flushed out. There is only the same fixed supply, now held by people with stronger convictions.

They are the buyers in the panic.

This conflict creates the signature volatility of the first phase. The price action becomes a kind of psychological warfare. Parabolic advances, fueled by the fear of missing out (FOMO), suck in waves of new, weak-handed speculators. These are followed by gut-wrenching corrections, fueled by fear, uncertainty, and doubt (FUD), which shake those same people out, transferring their coins to the long-term holders.

Lather, rinse, repeat. Tribes of people caught in FOMO and FUD loops.

The price itself becomes the single most effective marketing tool. Nothing grabs attention like a 1,000% gain. Every news report, even the skeptical ones, serves as an advertisement. It plants a seed of curiosity in millions of minds. Most will dismiss it.

But some will start asking questions.

Where does money come from and what does monetary policy do to our purchasing power over time?

They will read the white paper.

They will listen to the podcasts.

They will run a node.

A tiny fraction of the world starts to get it. The demand curve shifts infinitesimally to the right. And because the supply curve is a vertical wall, that tiny shift results in another violent lurch upwards in price. This is the engine of adoption: a chaotic, volatile feedback loop where price drives awareness, and awareness drives price. This bar fight is the necessary, brutal, and unavoidable first step in a planetary negotiation about what money is.

Phase 2: The Great Wealth Transfer

The second phase unfolds quietly, in the background of the noisy bar fight.

I think it's happening right now.

While the world is mesmerized by the daily price swings, something far more significant is happening: the single largest and fastest wealth transfer in human history.

This transfer is not based on force or conquest. It is based on foresight. It is a redistribution of wealth from those who are late to understand a new monetary paradigm to those who are early. The winners are not, at first, the financial elite. They are the outsiders. The software developer who mined a few coins on his laptop in 2010. The Argentinian trying to protect her family’s savings from hyperinflation. The millennial who opted out of a stock market they felt was rigged and put their modest savings into this strange internet money instead.

As the monetary premium begins its slow migration, it must find a seller. Who is selling? In the early days, it’s other early adopters. But as the asset grows, the sellers become the holders of traditional assets. Imagine a sovereign wealth fund decides it needs a 1% allocation. That’s billions of dollars. To buy that much Bitcoin, it has to bid up the price until it finds someone willing to part with it. Who is that person? It might be the early adopter, who is now a multi-millionaire, and who sells a fraction of a coin to buy a house.

Now, think about the person selling the house.

They trade their physical, tangible asset—their real estate—for cash. They feel good; they got a great price for their home. The early Bitcoin adopter also feels good; they turned some of their digital holdings into a place to live. But the transaction has a hidden, brutal asymmetry. The person who sold the house now holds a depreciating asset (cash) or will roll it into another asset (stocks, bonds) whose monetary premium is in the process of bleeding out. The person who sold the Bitcoin still holds the vast majority of their wealth in the asset that is absorbing all that fleeing premium.

Do you see what’s happening?

Scale this up over years and across the entire globe. It is a slow, relentless, and perfectly peaceful transfer of purchasing power. Those who hold the old, leaky stores of value will find themselves having to sell more and more of their assets to acquire a smaller and smaller piece of the new monetary good.

The thing they want to buy is getting progressively more expensive, while at the same time, the things they are trying to sell are getting less valuable.

Over-valued real estate, inflated stocks, negative-yielding bonds, and fiat currency itself are financial cancer, in effect. The latecomer who decides they need to own Bitcoin in the year 2030 will be trading their entire house for what would have been a handful of satoshis a decade earlier. They won't have been robbed. They will simply be paying the price for being late to understand the physics of the Collision Model.

This is the silent, world-altering consequence of a perfectly inelastic asset monetizing.

This is bitcoinization. For some this is the start of the fun part. For most, this is where the trouble comes.

Phase 3: The Great Stripping

This will be peak pain for most of society.

As Bitcoin’s role as the primary store of value solidifies, the ghost of the monetary premium begins to be exorcised from all the other assets it once haunted.

This is the great repricing. This is for most people, sadly, going to be a calamitous event do to underexposure to BTC across their portfolio.

Assets don’t crash to zero; they simply fall back to their fundamental utility value. The monetary blanket that kept them artificially warm is pulled away, and they are left to stand on their own economic merits.

Real Estate: A house in a desirable city is still a wonderful thing to own. But its price will once again be tethered to reality. Its value will be a function of the rent it can generate, the quality of its construction, its proximity to good schools and jobs. The idea of buying a tiny apartment for millions of dollars solely as a place to park capital will seem insane. The multi-trillion-dollar monetary premium currently embedded in global real estate will be stripped out and will have already fled to the superior store of value, Bitcoin.

Gold: The king is dead. For 5,000 years, gold was the best monetary technology humanity had. Its hardness, its scarcity, its durability made it the apex predator of money. But it is an analog solution in a digital world. Its supply is not fixed. Its verification is cumbersome. Its transport is a massive security operation. Bitcoin is scarcer, more divisible, more portable, and easier to verify. The capital that sits in gold ETFs and central bank vaults as a hedge against monetary chaos will migrate to the more efficient solution. Gold’s price will fall until it finds a floor based on its demand for jewelry and industrial applications. It will be a useful commodity, but its monetary soul will have been stripped away.

Equities: The stock market will undergo a profound psychological shift. No longer will the S&P 500 be viewed as a catch-all savings vehicle to outrun inflation. Companies will be judged not on their ability to borrow cheap money and buy back their own stock, but on their ability to generate real profits in a deflationary environment. Price-to-earnings ratios will contract to more historically sober levels. The entire "There Is No Alternative" (TINA) trade, which pushed investors into stocks because bonds and cash yielded nothing, will be over. Investing will become about identifying and funding productive enterprise, not about finding the cleanest dirty shirt.

You can see why Wall St and the Elite’s they run money for don’t want to deal with the accountability of sound, scarce money.

This process will be brutal for those who have their wealth or their way of life tied up in these assets, believing their nominal value was real.

It will feel like a collapse for many.

But from a different perspective, it is a great cleansing. It is the restoration of price signals. It is the market finally being able to distinguish between what something is worth and what people were using it for.

Economies and systems in general work infinitely better when signals are allowed to move freely vs controlling them using monetary levers and other controls.

Phase 4: The New Quiet

After the chaos of the fight, the drama of the transfer, and the pain of the stripping, comes the final phase: the emergence of a new economic equilibrium.

Living in a world where the primary monetary asset is deflationary is an idea so alien to us it feels like science fiction.

We have been conditioned for a century to believe that a little bit of inflation is a good thing, that it "greases the wheels of the economy." But what it really does is incentivize debt and consumption and punish saving. A world on a Bitcoin standard would invert this logic entirely.

When your money is guaranteed to be worth more tomorrow than it is today, the incentive to save becomes immense.

Your savings account is no longer a melting ice cube; it’s a appreciating asset. This fosters a culture of low time preference. Suddenly we focus on the long term.

People would be more likely to save for a large purchase than to take out a loan for it.

Borrowing would become rare and serious.

You would only take on debt if you were supremely confident that the investment you were making with the borrowed funds would generate a return greater than the natural appreciation of the money itself. The culture of casual consumer debt would evaporate. Governments would face the same brutal calculus; deficit spending would become a suicidal act, as the real value of the debt would increase every single year.

Measured in satoshis (the smallest unit of a Bitcoin), the price of almost everything would constantly fall. This isn't a sign of economic depression; it is the natural dividend of human progress. As technology makes goods and services cheaper to produce, the savings are passed directly on to the consumer in the form of lower prices.

Your money’s purchasing power would consistently increase. That’s a good thing for most people in the economy except the ultra-consolidated Elite at the very top of the system.

These “elite” won’t be going poor, not remotely… but the aggregate wealth of the bottom 95% will rise considerably vs the so-called Masters of the Universe.

This is the end state predicted by the Collision Model.

It is a world remade.

It is quieter, more deliberate, and less frantic. It is a world that favors the saver over the debtor, the long-term planner over the short-term speculator. The journey to get there is a treacherous, multi-decade storm, one that will reshape fortunes and upend social orders. But it is the logical destination of a world that, after a century of experimenting with elastic, political money, rediscovers the power of absolute, mathematical scarcity.

The Good Guys Win, The End?

There’s a seduction to a clean story.

The idea of an unstoppable force of monetary energy meeting the immovable object of mathematical scarcity has the clean, satisfying click of a well-told fable. Newton’s cradle in economic form: energy in, energy out. A perfect, closed system. But the world is not a closed system. It’s a messy, sprawling, unpredictable place full of human beings who have a remarkable talent for gumming up the works of even the most elegant theories.

The Collision Model and the four phases of adoption it predicts are the story of what happens if the experiment is allowed to run in a lab.

The real world, however, is not a lab.

And in the real world, there are dragons. Any honest intellectual journey into the future of Bitcoin has to confront the very real, very powerful forces that could derail the train, break the model, and send our neat narrative spiraling into chaos.

A thesis that doesn't acknowledge its own mortality is not a thesis at all; it’s a religion.

Prepare yourself to take a hard look at the dragons in Part III.

Friends: in addition to the 17% discount for becoming annual paid members, we are excited to announce an additional 10% discount when paying with Bitcoin. Reach out to me, these discounts stack on top of each other!

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