Liquidity with a Fixed Supply Currency

Can enough liquidity be created for a fixed supply currency for it to be a truly effective store of value and still act as a currency? Does the fixed supply nature inherently mean that usage can not be widespread enough for critical mass to be reached? Is there a concept of a critical mass with a currency (i.e. being a reserve currency) and what does that look like for a digital currency?

Gold ends up being the store of value and fungible payment method when things are going wrong. This is because gold is trust-less, I don’t need to believe you or whoever denominates the gold to know it has value. As long as I can validate that it is real gold, I can do whatever I want with it. Paper (or fiat) money, as most readers know, is just a promise to pay based on an organization’s (typically a government’s) ability to back the transaction based on some sort of reserve. Paper currencies eventually always go through cycles of inflation as there is always a need to give more money to people and printing currency (or buying and holding debt denominated in that currency indefinitely) is the easiest way to do that.

Turning our attention to Bitcoin:

Will all of the large holders of BTC make large-scale liquidity impossible? At the end of the day, just like with fiat currencies there are major corporations, wealthy individuals, banks, and governments that hold tremendous amounts of the supply. There’s then a larger group that holds a bit of wealth, like the upper middle class of society. And finally there’s a majority that hold little to nothing. The fiat currencies flow, just like how a fixed supply currency can flow albeit slower by design.

A more efficient M1 money supply.

In the BTC paradigm there are 100 million Satoshi per Bitcoin and 21 million total supply of Bitcoin. Even just using round numbers for ease a $1 million Bitcoin price means about a $0.01 per Satoshi, all making up a $21 trillion asset class. This actually becomes an asset class with enough volume for a global market, and one that can’t be cut or sanctioned because of something you say or do. Governments have found ways to expropriate large amounts of wealth from their citizens, especially in times of great conflict. While the general attitude against risk right now has brought down most “risk on”…

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