If 60-80% of circulating supply is restricted, the price will simply go up to match the total value of goods being traded. It scales in proportion naturally as long as natural market forces are left alone.
Discussion
I think I get what happens to price relative to fiat, but my question was more about the potential for bitcoin to be a medium of exchange. There are hopes that MoE will catch on in a big way as part of the adoption cycle. If I understand it correctly, there would be less of it able to be used p2p which would therefore stifle adoption.
OK so there's two different scenarios that can play out...
In a hyperbitcoinized world, where fiat is basically worthless, 1 sat = 1 sat. If there simply isn't enough sats to go around, the price of goods being traded will go down naturally.
In the more likely scenario where bitcoin and fiat both exist, if fiat is the dominant currency, price of bitcoin will rise (what we are seeing today). If bitcoin flips fiat and isndominant, bitcoin will continue to rise, albeit slower, and price of goods (denominated in sats) will likely start to fall.