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Bitcoin, Gold, Silver and Ampleforth

A PATH TO BUILDING A FORTUNE IN AN ERA OF HYPERINFLATION

TLDR Summary: Dollar hyperinflation raises concerns about the global economy and the role of cryptocurrencies. Future projections suggest that cryptocurrencies may surpass the combined market capitalization of gold and silver, with bitcoin accounting for a significant portion. Stablecoins, including Ampleforth, are predicted to represent a fifth of bitcoin’s market capitalization. In this context, innovative projects like Ampleforth aim to provide an inflation-resistant stablecoin. These projects leverage Chainlink Oracle technology to adjust token supply based on external factors, ensuring stability amid market volatility. However, it is important to note that these projections are based on assumptions and estimations, subject to market fluctuations. The value distribution among assets is also expected to change, with gold, silver, bitcoin, and Ampleforth potentially experiencing significant increases. Nonetheless, these projections should be approached with caution as actual values may vary due to various factors and market dynamics.

Welcome to Cryptofolio’s Guide to Building a Fortune, where we explore the power of small investments and the journey towards wealth creation. In this empowering blog series, we unravel the secrets of accumulating riches one step at a time. Whether you are a beginner or seasoned investor, our series will equip you with valuable insights and strategies to make your money work for you.

Let’s begin by estimating the total global assets from various sources. According to Savalis research estimates, and taking into account data from the Bank of International Settlements on OTC derivatives, the dollar-denominated assets’ market capitalization is estimated to be $1,260 trillion.

Now, let’s delve into estimating the total money supply based on the properties of money discussed in a previous video. We consider gold, silver, bitcoin, and other cryptocurrencies as part of the money supply. The total money supply is estimated at $82.6 trillion. Breaking it down further, the total gold market capitalization is approximately $12.9 trillion, silver market capitalization is $1.3 trillion, and crypto market capitalization is $1.1 trillion. Therefore, there is roughly $97.9 trillion worth of money in circulation against a backdrop of $1,260 trillion worth of assets, including OTC derivatives.

Now, let’s project the changes in the money supply following a potential dollar hyperinflation event. The chart depicting the dollar supply shows exponential growth. With increasing interest rates, the budget deficit will continue to expand, leading to a need for raising debt ceilings to meet the deficits. Consequently, the supply of dollars will have to keep increasing. This trajectory ultimately points towards hyperinflation, while bitcoin’s supply remains limited at 21 million coins.

As the supply of Dollar in the system is on a continuous rise Bitcoin emerges as a superior form of money in this scenario. As the supply of the US dollar continues to rise, concerns about inflation and the stability of traditional fiat currencies have heightened. In this scenario, Bitcoin, the pioneering cryptocurrency, emerges as a superior form of money. Its decentralized nature, limited supply, and potential to act as a hedge against inflation position it as an attractive alternative. If the dollar experiences hyperinflation, bitcoin may replace it as the natural global reserve currency. While the total money supply of $97.9 trillion may remain relatively unchanged, fiat currencies worldwide would likely suffer a significant loss in value. This implies that assets such as gold, silver, bitcoin, and other cryptocurrencies, including stablecoins, would need to be utilized for exchanging the remaining $1,260 trillion worth of assets. The market capitalization of fiat money could potentially decrease to approximately one-tenth of its current value, amounting to around $8.3 trillion in today’s terms. This substantial decline reflects the potential impact of hyperinflation on fiat currencies.

In a hypothetical scenario, the market capitalization of silver could potentially equal that of gold, based on their historical ratio of one-to-ten. As there is around 10 times silver than there is gold in terms of weight the market capitalisation of silver can approximately the same. The market capitalization of cryptocurrencies, especially bitcoin, may surpass or at least be equal to the combined market capitalization of gold and silver. This change is attributed to the superior portability and divisibility of cryptocurrencies compared to precious metals. Currently, bitcoin holds nearly 50% of the total cryptocurrency market capitalization, and this dominance trend may continue in the future. Additionally, stablecoins, such as USDT, Ampleforth, and others, are expected to maintain a significant portion of the market capitalization relative to bitcoin. As the values of bitcoin and other cryptocurrencies are prone to significant fluctuations, there is a growing demand for an inflation-resistant stablecoin that can provide stability in volatile markets for day-to-day transactions.

Among the emerging options for an inflation-resistant stablecoin, Ampleforth and Spot Cash are gaining attention. Ampleforth’s algorithmic stability, pegged to the value of 2,019 Dollar, positions it as a potential leader in the inflation-resistant stablecoin market, with a projected market capitalization capture of 50% of the Total Stable coin market. The Cantillon Effect, which refers to the uneven distribution of benefits and costs resulting from changes in the money supply, comes into play here. According to this effect, the injection of new money into an economy does not affect all individuals and sectors equally. The recipients of the new money, such as banks or government entities, tend to benefit from increased purchasing power before prices of goods and services adjust. As a result, they can acquire resources and assets at existing prices, potentially leading to wealth accumulation. Ampleforth’s unique approach aims to defy the traditional Cantillon Effect by offering an inflation-resistant stablecoin. Through adjusting its supply based on demand, Ampleforth seeks to maintain a stable purchasing power. This innovative approach provides individuals and businesses with a predictable and stable medium of exchange, potentially mitigating the wealth redistribution effects associated with central bank-issued currencies. However, the success of Ampleforth in defying the Cantillon Effect relies on market dynamics and broader economic factors.

In the early days of Bitcoin, Satoshi Nakamoto, the anonymous creator, was asked about the total amount of tokens that can be created and the possibility of adjusting the limit based on the adoption of the system. Satoshi responded that there is no central authority, like a central bank or the Federal Reserve, to adjust the money supply as the user population grows. If there was a desire to actively manage the money supply and peg it to something, it could have been programmed into the rules. This acknowledgment by Satoshi highlights the potential for a mechanism to adjust token supply based on external factors. The advent of Chainlink Oracle technology and subsequent projects like Ampleforth have introduced innovative solutions to address this need. Chainlink Oracle acts as a bridge between blockchain networks and real-world data, providing reliable and tamper-proof data feeds. By leveraging Chainlink Oracle, projects like Ampleforth have programmed rules to peg their token supply to the value of $2,019. This approach enables an inflation-resistant stablecoin that adjusts its supply based on the value of the reference currency, ensuring stability amid market volatility. Through smart contracts and the integration of external data sources, these projects offer a clever way to manage token supply and maintain a desired peg to an external value. This innovative approach fosters transparency and trust in the process, ensuring that the token supply remains aligned with the intended value peg.

Looking into future projections for the value distribution of assets, several premises are considered. Cryptocurrencies, including bitcoin, are expected to surpass the combined market capitalization of gold and silver. Gold and silver are assumed to have equal market capitalization. Fiat currencies are projected to decrease to approximately one-tenth of their current value. Bitcoin’s market capitalization is estimated to constitute half of the total cryptocurrency market capitalization. Stablecoins, including USDT and Ampleforth, are predicted to represent one-fifth of bitcoin’s market capitalization. These assumptions serve as the foundation for calculations and future projections of the value distribution among different assets. However, it is essential to note that these projections are based on assumptions and estimations, and actual values may vary in practice.

In the event of dollar hyperinflation, the projected redistributed money supply could take the following form: fiat money value may decrease to $8.26 trillion or one tenth of the current market cap, while gold and silver, assumed to have equal market capitalization, would reach approximately $22.41 trillion each. Cryptocurrencies, including bitcoin and other crypto assets, are projected to have a combined market capitalization of $44.82 trillion. Summing up the values of fiat money, gold, silver, and cryptocurrencies, the total money supply would amount to $97.9 trillion, which aligns with the current total money supply including fiat currencies, gold, silver, and cryptocurrencies. It is important to remember that these projections are based on assumptions and estimations, and the actual redistributed money supply may vary depending on various factors and market dynamics.

Considering the future market capitalization of cryptocurrencies after dollar hyperinflation, the combined market capitalization of all cryptocurrencies is projected to be $44.82 trillion. Within this figure, bitcoin is expected to account for half of the total cryptocurrency market capitalization, estimated at $22.41 trillion. Stablecoins, representing one-fifth of bitcoin’s market capitalization, are projected to contribute approximately $4.48 trillion. The remaining market capitalization of $17.93 trillion is allocated to other cryptocurrencies apart from bitcoin and stablecoins. These projections are subject to assumptions and estimations and may vary in actual scenarios. It is worth noting that around half of the projected market capitalization for cryptostable coins is likely to be attributed to an inflation-resistant stablecoin like Ampleforth or Spot cash. Given the volatility and uncertainty in the crypto market, the demand for inflation-resistant stablecoins offering price stability and inflation protection is anticipated to increase. However, these projections should be regarded as speculative and subject to market fluctuations.

Lastly, the future projected values of different assets. Based on the above assumptions Gold is expected to rise to $3,391 per ounce, silver to $396 per ounce, bitcoin to $1.16 million per bitcoin, and Ampleforth, represented by wrapped AMPL, to $224,000. These estimates reflect potential increases in value based on factors such as market demand, historical ratios, and the unique characteristics of each asset. However, it is crucial to remember that these projections are speculative and subject to market fluctuations.

In conclusion, the article explores the potential impact of dollar hyperinflation on the global economy and the role of cryptocurrencies in such a scenario. It presents calculations and projections based on assumptions and estimations, highlighting the potential value distribution among different assets. While these projections provide insights into possible outcomes, they should be approached with caution as the actual values may vary due to various factors and market dynamics. The emergence of innovative solutions, such as Ampleforth and Chainlink Oracle, offers new approaches to managing token supply and maintaining stability in the crypto market. As the future unfolds, it will be interesting to see how these projections align with the actual developments in the financial landscape.