Satoshi’s Law and the irresistible rise of Bitcoin

Dateline 2030: In the decade between 2015 and 2025 a huge one-time historical wealth transfer took place from paper-based fiat currencies to cryptocurrencies like Bitcoin. In retrospect this looks inevitable, but back in the twenty-teens many people saw Bitcoin’s rise as just another speculative bubble. Although it’s hard to believe now, the unique historic investment opportunity presented by the transition was widely regarded with suspicion as late as 2017. Yet, looking back, we can see that in 2017 there was clear evidence of what was about to happen. 

From mid-2014 onwards the growth of Bitcoin became reliably exponential, with the number of wallets – a proxy for the number of users – doubling every year. By 2017 this rate of growth had been holding steady for three years regardless of price fluctuations. The annual doubling of wallet holders became known as Satoshi’s Law, named for Bitcoin’s creator. Like Moore’s Law before it, this was one more aspect of information technology that could be accurately predicted from an exponential growth curve. 

Starting when there were just under 2 million Bitcoin wallets in July 2014, Satoshi’s Law played out as an annual doubling right through to the mid-2020s. By July 2017 there were 15 million wallets, by 2020 there were 120 million, and in 2024 the two-billionth Bitcoin wallet was registered. 

By then it was obvious to everyone that blockchain-based cryptocurrencies were the money of the future. Even governments and central banks had accepted that it was simply too difficult to manage traditional fiat currencies in an information-based economy. Faith in paper currencies had been fatally shaken when years of quantitative easing led to the sudden surge of inflation in the late 2010s. But despite widespread fears of another global financial crisis, the transition to cryptocurrencies turned out to be an “upside crash”. It was disruptive, but all those organizations and individuals who turned to cryptocurrencies were immediately lifted by the updraft of new opportunities. 

Paper currency valuations are now a receding memory, but expressed in terms of early 2017 US dollar values, and ignoring the extreme price peaks during the transition, by 2025 one Bitcoin was worth the equivalent of well over a million dollars. Back in 2017 – when one Bitcoin was only worth a few thousand US dollars – it would have been possible to use Satoshi’s Law to predict this 2025 value. Then again, this kind of calculation is always easier in hindsight.