The question of if a nation-state could attack Bitcoin comes up somewhat often in the Bitcoin community. Almost always, that nation is China. The reasons are available at first glance: 1) China houses 65% of Bitcoin mining, and 2)China is the authoritarian global superpower from central casting that Bitcoiners like to say they’re building Bitcoin to frustrate. However, I’ve been arguing, almost exclusively to deaf ears, that the US has much more to lose if Bitcoin undergoes “hyperbitcoinization,” a term that Bitcoiners use to describe the glorious world in which Bitcoin has replaced the Treasury, gold, the US dollar.
So what’s China’s play here? If Bitcoin takes over the world, this comes at the expense of the US hegemony. There’s no question about this. Right now, the global reserve currency is the Treasury, and this is how the US can afford to be $30 Trillion in debt, with more stimulus on the way. The appetite for “sound money” is always there — the “sound money” being not the USD, which does decay because of inflation, but Treasurys, which hold up all right.
As the globe inches towards hyperbitcoinization, more corporations will follow Tesla and dump reserves into Bitcoin. A little at first, then perhaps more. States, municipalities, and other nations will follow. Once the snowball becomes inevitable, the demand for US Treasurys will crash, and we will see a government that can’t continue to refinance. This is a nightmare situation for the US, as I described in February.
Now because the Chinese, more likely than any other nation, do have the most potential to make or break Bitcoin, suddenly they have a huge role in determining the fate of the United States of America. If China goes all into Bitcoin as hyperbitcoinization approaches, the US glory days are over. This will have dire global economic consequences and it will probably be unpleasant for everyone, so China doesn’t necessarily want to see this happen, but they do understand game theory. By giving China the ability to destroy the United States economy, China becomes the ultimate power.
Global dominance is a subtle, delicate, dangerous game for sure. Superpowers have long waged proxy wars to gains tactical and strategic advantages. A positive probability of USD collapse gives the Chinese a distinct advantage. The Cold War is over, but the next decades of global tension could be built around the concept of Mutual Assured Economic Destruction. Thomas Schelling’s Strategy of Conflict could be just as relevant in the next 10 years as it was 50 years ago.