tl;dr: With dollars flooding the stock market, companies move into Bitcoin. A death spiral?

It gives me no great joy to think about this topic. But, at the same time, I can’t deny what I think I see happening.

Approximately 40% of all dollars ever created have been created since March 2020.

And where has the bulk of that money gone?

Into the stock market and, in particular, to stocks like the FAANGs, Microsoft, and, of course, Tesla.

Now, these companies are flush with cash and, as Ray Dalio says, “cash is trash.”

Which is why it came as no surprise to me when Elon Musk announced that Tesla had purchased $1.5 billion of Bitcoin.

He had been telegraphing the move on Twitter for a few weeks, so if you were watching, you had a pretty good sense that he was moving in that direction (even with the Dogecoin “head fake.”)

Now that Musk has done it, I expect the Bitcoin floodgates to open even wider (they already have) and when Ray Dalio adds that “Bitcoin is one hell of an invention”, it’s clearly becoming more and more acceptable and even considered “smart” for companies to hold Bitcoin on their balance sheets.

There is an issue, of course, as Dalio points out:

Rather than it being far-fetched that the government would invade the privacy and/or prevent the use of Bitcoin (and its competitors) it seems to me that the more successful it is the more likely these possibilities would be.

There is no doubt in my mind that the government can make the use of Bitcoin more difficult, but I wonder a few things.

• Has Tesla’s purchased put Bitcoin “over the chasm” and there will be too many companies that follow? In other words, is the momentum too great?
• If the government bans it, won’t that just lead to a Bitcoin black market like every other country where this has happened?

When all is said and done, it just feels like the legacy of 2020 could be that

1. the Fed printed a bunch of dollars to save the stock market
2. those dollars went into the biggest, richest companies
3. those rich companies were extra flush with cash and wanted to protect their assets
4. they allocated a portion of their cash to Bitcoin
5. others followed the “smart money” into Bitcoin
6. companies begin to trade in Bitcoin with each other or use it as collateral
7. Bitcoin eventually completely erodes the dollar’s global reserve status.

To be fair, this doesn’t happen overnight. The step from #6 to #7 may take 30 years (assuming we have that kind of time, i.e. climate change), but these things often happen in slow motion.

I suppose a question to think about is: What would be the indicators that the dollar has lost its status?

For example, when the price of oil is measured in Bitcoin alongside dollars?

Anyway, a post for another time.