As a money “monetizes” or moves through the various stages outlined above, its value as compared to other monies increases. Specifically, in the first stage “Store Of Value” which is where Bitcoin is now, the price increases in bursts as adoption of the money happens in cascading waves over time.
These waves of new people usually get on-boarded during crypto bull markets and can result in the price being highly volatile. Maybe there’s a huge influx of new people wanting to buy bitcoins, but due to low liquidity there’s not enough to go around. Supply drops, demand increases and you get a bubble that eventually bursts.
The result of this process is that you have a new money that’s increasing in value, but is highly volatile. Due to most people not understanding money properly, they focus on the volatility side of things claiming that people don’t want to buy their coffee with bitcoins because it goes up and down. While this is partly true, the ongoing increasing value is actually the main reason why no one buys things with it yet. There’s even a fancy “law” for it!
Gresham’s Law
Officially it states that “bad money drives out good” meaning that in an economy with two monies, the good one will be held as savings (bitcoins) while the bad one will be spent day to day (USD).
If everyone in the economy does this, then you end up having everyone holding bitcoin and never actually using it as a medium of exchange! Not spending bitcoins is just the financially sensible thing to do right now. The only way that people will ever start using it to buy and sell goods and services is if the value of it stabilizes for a long period of time.
This price stabilization comes naturally once everyone, everywhere has all the bitcoins they can afford and the waves of on-boarding slows down and then, stops. At this point holding onto your bitcoins for a year or more won’t really make much of a difference and so people won’t mind spending it to buy groceries or other things. This stability will then reduce speculation as there will no longer be the needed volatility to make a quick buck. The money will have finished the Store of Value stage.
People should note three important things here:
We are still horrendously early regarding Bitcoin. It's likely that Bitcoin will continue its monetization process in the Store Of Value state for a good 10 more years. That's YEARS. Could even be more than that. In that time who knows what Lightning will evolve to, maybe something entirely different will debut and over take it
The more trouble people have with transacting on the L1 due to high fees, the more incentive it gives for them and others to invent a solution. While that happens, Bitcoin continues to monetize and the security of the general overall network is kept high
Even if in 10 years time fees are 0 sat/vB for all L1 transactions somehow, people still would be economically stupid to use it as a Medium Of Exchange if it hasn't fully finished its SoV stage. No one will spend the hard money that keeps going up
For the high L1 fee issue to be a REAL problem, Bitcoin must have completed it's SoV stage of monetization and be holding for a long time at a stable exchange rate. Only then will owners be comfortable with using it as a MoE. If by that point there's no L2 alternative AND L1 fees are still high... then we have a problem!
Gresham’s Law