The [phase transition](https://medium.com/@100trillionUSD/bitcoin-stock-to-flow-cross-asset-model-50d260feed12) rises in the Bitcoin price are due to phase transition increases in the proof-of-work difficulty level and the effect on [Cost of Production](https://steemit.com/bitcoin/@anonymint/secrets-of-bitcoin-s-dystopian-valuation-model) (COP). In the past that was due to onboarding more efficient mining technologies. In 2020, the surge in difficulty will be due to [massive funding from SegWit booty](https://steemit.com/bitcoin/@anonymint/q1mayq).

The following fits the topological model [McAfee’s Dick Math: illuminating Bitcoin’s ACCELERATING price](https://steemit.com/bitcoin/@anonymint/mcafee-s-dick-math-illuminating-bitcoin-s-accelerating-price).

A comment I’m blocked from publishing on Medium:

> @**Batman** [wrote](https://medium.com/@GreatBatsby/stock-to-flow-is-not-designed-for-non-consumable-commodities-34a8616a6c57):
>>There is no consumption of bitcoin supply, and assuming coins are “lost” and believing that’s a “consumption” is naive at best, and extremely ignorant at worst.
>
>Most of the supply has been (intentionally) tainted and will be "stolen" back as miner donations [ultimately rendering most tokens verboten](https://steemit.com/bitcoin/@anonymint/our-bitcoins-will-be-taken-frozen-by-the-miners-involuntary-income-tax-on-frozen-bitcoin) (at least for the public-at-large).
>
>The posited orders-of-magnitude increase in the quantity of the block reward will result in [a phase transition in the valuation](https://bitcointalk.org/index.php?topic=5147618.200#msg54430603) because of the [effect of those donations on the acceleration](https://steemit.com/bitcoin/@anonymint/precisely-why-bitcoin-is-re-accelerating) of the difficulty level and then the _per unit_ [Cost of Production](https://steemit.com/bitcoin/@anonymint/secrets-of-bitcoin-s-dystopian-valuation-model) (COP) model. First the block reward will suddenly increase by orders-of-magnitude raising the difficulty level by an order-of-magnitude (or more) and subsequently the block reward suddenly decreases back to `6.5 BTC` per block as all of the supply of tainted Core tokens yet to be "donated" to miners is depleted. This instantaneous reduction will have the analogous effect[1] on valuation as a halving but as if on steroids because the decrease in block reward will be orders-of-magnitude not just half —while the difficulty level will not decrease instantaneously thus radically increasing the COP of the marginal miners. Due to this suddenly decrease in profitability for miners, the production of blocks will slow down consequently delaying the readjustment of the difficulty (which will also increase mempool backlog thus mitigating somewhat the decline in COP via rising transaction fees) until the price rises to some equilibrium with the new radically higher COP. Also other non-linear market effects will instigated from the radical contraction of the supply held by _stronger_ hands with no need to sell quickly.[2]
>
> <center>[![](https://i.imgur.com/4ZOeBCc.png)](https://bitcointalk.org/index.php?topic=5147618.200#msg54430603)</center>
>
>[1] The COP _per unit_ sets the opportunity cost for the buying demand for a unit of the asset —why mine if can be obtained for lower cost on the open market. For Bitcoin the COP per unit for the marginal miners adjusts to the value on the open market. **`Buying demand (and thus market price) doesn't decrease when the block reward is halved`** and **`Bitcoin ASICs are a special purpose sunk cost that can’t be repurposed`** so COP per unit increases which instigates non-linear effects of markets, e.g. [marginal miner versus lowest-cost miner COP](https://steemit.com/bitcoin/@anonymint/secrets-of-bitcoin-s-dystopian-valuation-model), flow of new supply to the market, FOMO greed psychology and increased COP opportunity cost raises the market price which raises the COP which raises market price…terminating at possibly some phase transition level higher equilibrium. The plausibility and sustainability of the [phase transitions](https://medium.com/@100trillionUSD/bitcoin-stock-to-flow-cross-asset-model-50d260feed12) (as opposed to Tulip bubbles and altcoin pump & dumps) require that other facets (e.g. the [properties of money](https://en.wikipedia.org/wiki/Money#Properties)) of the asset are amenable and ripened for market acceptance.
>
>[2] They may need to sell before those "stolen" tokens become verboten which would plausibly explain any future correction in the price after the phase transition equilibrium has been firmly established. That is unless they whitelist themselves from the verboten effect in a [two-tiered global monetary reset](https://steemit.com/bitcoin/@anonymint/legacy-bitcoin-rises-surreptitiously-as-the-reserve-in-a-new-two-tier-monetary-system-whilst-impostor-bitcoin-core-dies), because they don't intend to trade with the public-at-large.

I commented on my subsequent blog [Our Bitcoins Will Be Taken/Frozen By the Miners; Involuntary INCOME Tax on Frozen Bitcoin!](https://steemit.com/bitcoin/@anonymint/q1mayq):

> **EDIT:** the stock-to-flows valuation model of a proof-of-work cryptocurrency [is based on the cost of mining production](https://steemit.com/bitcoin/@anonymint/q1j6n0). The marginal cost of mining rises to match the rise in mining rewards. Yet the weighted-average mining production costs rise slower than marginal cost, as the weighted-average efficiency of the mining hardware declines if price is rising very fast thus making a lot of inefficient mining hardware profitable again.

[…]

> With the mining rewards rising to insane levels at the instant of the start of the posited SegWit “ANYONECANSPEND” donations redeeming because each block will redeems 100s or 1000s of Bitcoin donations as extra mining rewards (which what this blog is about), I suppose it might be plausible that GPUs become profitable for mining Bitcoin again until the most lucrative (e.g. large balances) of the SegWit donations have all been redeemed.
>
> Don’t forget [I recently reiterated that](https://steemit.com/bitcoin/@anonymint/bitcoin-s-whiplash-bear-trap) mining hardware is the tangible mass of a proof-of-work cryptocurrency, so thus it is a monetary component as also is separately the informational value stored in the private keys (i.e. both components have a monetary role to play!):
>
>> […] suddenly no longer think so. It would require that [the Herculean tangible mass of Bitcoin](https://steemit.com/bitcoin/@anonymint/q14mis) […] Bitcoin is just as tangible as gold, yet additionally has [the incredibly important increase in utility because](https://steemit.com/libra/@anonymint/pticzr) the transferable value [is information and detached from](https://steemit.com/bitcoin/@anonymint/q14mis) the tangible mass.
>
> Consequently the security of proof-of-work altcoins is going to become very vulnerable to 50+% attack with ASICs as the most efficient hardware is pulled to the blockchains that have the fastest rising mining rewards, i.e. blockchains with huge SegWit booties for miners. Perhaps this is the basis of Craig Wright’s warning about destroying the altcoins.

Six months ago I blogged in [Secrets of Bitcoin’s Dystopian Valuation Model](https://steemit.com/bitcoin/@anonymint/secrets-of-bitcoin-s-dystopian-valuation-model):

> <center>[![](https://i.imgur.com/OqjL3ET.png)](https://www.danheld.com/blog/2019/1/5/pow-is-efficent)</center>

[…]

> <center>[![](https://i.imgur.com/fdeuCp5.png)](https://www.coindesk.com/bitcoin-mining-can-longer-ignore-moores-law)</center>
>
> Uh oh, some of you may now really be contemplating if I’m Satoshi. &#x1F632;
>
> **So now we know why cryptocurrency scales so much faster to monetary dominance than** the 1000s of years that gold required:

Compare the periods in the charts above to the following chart and note this is the reason the following interpretation is topologically incorrect:

<center>[![](http://i.imgur.com/zpHlAlI.jpg)<br/>(click to zoom to source)](https://bitcointalk.org/index.php?topic=178336.msg53205768#msg53205768)</center>

Note that in 2013 which was the corresponding topological juncture as current fractal pattern, the price peaked at 20 times higher than the stock-to-flows model price. So that projects a ~$2 million peak price in 2020/21:

<center>[![](https://i.imgur.com/T5JE0nZ.png)<br/>(click to zoom to source)](https://twitter.com/100trillionUSD/status/1199744234791804930)</center>