Bitcoin Game Theory

You don’t need to spend long around Bitcoiners before someone uses the term ‘GameTheory’. But why is it important? And why are Bitcoiners so obsessed with it?

While Game Theory might sound like an abstract concept cooked up by ivory-tower academics, it actually serves as a practical tool for understanding the nature of human behaviour.

At its core, Game Theory studies how rational actors make decisions when their optimal strategy is influenced and shaped by the actions of others. It helps us understand how individual incentives interact with one another to drive cooperation, competition and strategy amongst participants each acting in their own best interest.

In Bitcoin’s decentralised network, Game Theory is the invisible hand that keeps everything running smoothly. With no central authority enforcing the rules, Bitcoin still operates flawlessly because carefully designed incentives ensure that everyone’s optimal strategy is to cooperate. Miners, nodes, and users all participate in a delicate balance where honesty isn’t just encouraged, it’s required to profit. If a miner tries to cheat, they risk losing time, electricity, and money, with no reward. If a node broadcasts a fraudulent transaction, it gets ignored. If a user tries to double spend, their duplicate transactions are rejected. Every participant has skin in the game, and the only way to succeed is to play by the rules.

In sharp contrast to the legacy financial system, Bitcoindoesn’t demand trust between participants; it aligns incentives, so thenetwork’s best interest always coincides with each actor's self-interest. It’sa beautiful harmony, a decentralized waltz powered by consensus and mathematics,rather than middlemen.

But when Bitcoiners talk about game theory it’s unlikely that the conversation is limited to just the way the network operates. Game theory doesn’t just keep the network honest; it also helps us make sense of Bitcoin’s adoption and value. Bitcoin’s finite supply means that acquiring some is not dissimilar to a global game of musical chairs. As more people adopt Bitcoin and take a seat, the number of available chairs grows smaller. In this game, the more people that sit down, the more expensive it becomes for others to find a seat. The clear incentive here is to find a seat and adopt Bitcoin early to avoid the steep opportunity cost of waiting.

It's not a perfect analogy, because in Bitcoin you don’t actually run out of seats. Instead, the seats left available just keep getting smaller and smaller. Nonetheless, a larger seat is preferable. If your seat ends up being too small, it might end up being rather uncomfortable to sit on. Or worse, you might find yourself sitting on someone’s lap!

So far, we’ve seen this game theory play out exactly as predicted. Back in 2013, Bitcoin’s price was $130, while today it now trades at over $100,000. Waiting on the sidelines and trying to “time it right” would result in missing the opportunity to increase your purchasing power by a staggering 75,000%!

Yet despite these very clear incentives, many people continue to try and ignore Bitcoin. Doing so is a terrible strategy because Bitcoin isn’t the kind of game you can simply opt out of. By choosing to do nothing, you are still making a decision. You’re a player in the game of global economics whether you like it or not. If Bitcoin continues to succeed, the opportunity cost of ‘not playing’ will only grow.  Bitcoin’s game theory means that tyring to ignore it is one of the worst moves you can make.

It’s important to understand that what we’re witnessing here is much more than just a great investment opportunity. Money is a form of technology and Bitcoin is simply its latest format. You have the option to sit on the sidelines and choose not to adopt a new technology, but why would you want to be the last caveman to discover fire? Like any new technology, the sooner you adopt it, the sooner you begin to benefit.

Bitcoin’s game theory means that being late isn’t just unfashionable, it’s incredibly expensive. If Bitcoin’s game theory continues to play out as expected, then it might make sense to find yourself a seat before the music stops playing.

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The Bitcoin Mega Whales Are Coming

As we head into 2025, Bitcoin's game theory is no longer just a topic for cypherpunks and libertarians. It was inevitable that people with very deep pockets would start playing. In what feels like the end of an era, Bitcoin’s incentives have now started compelling major players like nation-states, financial institutions, and corporate giants to actively start playing the accumulation game.

It seems likely that Bitcoin’s game theory is about to start accelerating.  

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Nation-States Embracing Bitcoin

The first nation to recognise and embrace Bitcoin’s game theory is of course El Salvador. By adopting Bitcoin as early as 2021, Nayib Bukele demonstrated to the world that adopting Bitcoin sooner rather than later is a winning strategy. Since they started accumulating, El Salvador’s national Bitcoin Reserve has increased in value by over 123% vs the dollar and is now worth the staggering sum of over $600m!

So, El Salvador has benefited massively from being the first out of the gates, but Bitcoin’s game theory guarantees that they won’t be the last nation state to start stockpiling the world’s apex monetary asset.

If you hadn’t already noticed, much larger, much richer nations are also starting to make the kinds of noises that suggest it won’t belong before they enter the race as well. President Trump has already openly discussed the US adopting a strategic Bitcoin reserve and Vladamir Putin now openly talks about nobody being able to stop Bitcoin being used as a means of payment and an alternative to the US dollar.

If we do find ourselves in a situation where nation states the world over are clamouring to get their hands on as much Bitcoin as possible, then things could start getting very dramatic, very quickly. With access to infinite money printers, nation states represent buyers with almost infinite budgets. The catch 22 however is that a nation state can only print money to buy Bitcoin by debasing and hastening the demise of their own national currency.

That scenario is like pouring petrol on a lit fire. Fiat currencies are already collapsing in value vs Bitcoin, if nation states themselves signal that they have lost faith in their national currency and prefer Bitcoin, then the stampede toward the exit will be nothing short of biblical.

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The Wall Street Whales

In what’s looking more and more like the start of a feeding frenzy, we are also beginning to see other species of whale show up to start gulping down as much Bitcoin as possible. Nation states aren’t the only ones hungry to acquire Bitcoin, the Wall Street whales are starting to arrive as well.

At the start of the year, we saw financial behemoths like Blackrock, Fidelity and Vanguard launch and start offering Bitcoin ETF products to their customers. At The Bitcoin Way, we find it easy to ignore these products because it’s far more sensible to buy real Bitcoin rather than paper ‘Bitcoin IOUs’. However, what can’t be ignored is the immense buying power institutions like this bring to the market. Over 35 billion dollars have now flowed into these ETF products as Bitcoin’s game theory proves to be inescapable even for financial institutions that once saw Bitcoin as nothing more than a joke or a novelty.

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Corporations Adopting Bitcoin as a Treasury Asset

Nation states and financial institutions aren’t the only ones getting in on the action. We’re also seeing growing interest from corporations looking to allocate to Bitcoin and adopt it as a treasury asset.

Most famously we’ve seen MicroStrategy become a pioneer in the corporate adoption of Bitcoin. The company now holds more than 400,000 Bitcoin as part of its treasury and has aggressive plans to acquire more. Unsurprisingly, this has been a winning strategy for the organisation. By raising extremely cheap debt and using it to buy Bitcoin, the value of the company has exploded.

And in a perfect example of game theory in action, Michael Saylor’s strategy has inspired other companies to consider similar moves. Watching how Microstrategy plays the game has informed and shaped the strategy of others looking to replicate the same success.

For example, the medical technology company Semler Scientific has also now started raising cheap debt to add Bitcoin to their corporate treasury and owns close to 2,000 Bitcoin. So far, they have spent close to $147million to do this, but the Bitcoin they hold is now worth over $190million, again demonstrating that acquiring the hardest money on earth is a winning strategy.

While companies like Microstrategy and Semler Scientific are aggressively hoovering up significant chunks of Bitcoin, it’s important to remember that neither are particularly large companies. They’re certainly not in the same league as companies like Google, Apple and Amazon who have purchasing power that is many multiples greater. If these enormous companies start adopting similar strategies, then it’s hard to fathom just how large the demand for Bitcoin could get.

Talking about these large companies adopting Bitcoin would have been pure conjecture and speculation just a few years ago, but Bitcoin’s game theory is making this reality more and more likely. Just recently we saw Microsoft shareholders submit a proposal to invest in Bitcoin and Amazon shareholders have done the same. While the Microsoft proposal was ultimately rejected, and the Amazon vote next year will likely have the same result, the fact that these proposals are even on the table demonstrates that shareholders have ani ncreasing desire to see the companies they invest in adopt a long-term Bitcoin strategy.

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Play Your Own Game – The Bitcoin Way

Bitcoin’s game theory means that everyone has to play. This includes nation states, financial institutions, global corporations, and most importantly, YOU.

This might at first feel a little intimidating. How could you possibly win a game where you’re competing against such powerful competitors?

Thankfully, for the time being at least, most people and most organisations are still playing this game exceptionally poorly. In fact, most don’t even realise they’re already playing. Actively participating in the game before your competitors even show up gives you an incredible advantage. Despite having a comparatively tiny amount of purchasing power compared to these monsters, you will be able to get an outsized allocation to Bitcoin relative to your wealth if you get a headstart on them when it comes to accumulating it.

So, the most important thing about this game is that you start playing. The second most important thing is that you play well. If you do want to play this accumulation game, then it’s important that you don’t just know how to acquire Bitcoin, butt hat you also know how to protect it and keep it safe. Buying Bitcoin ‘IOUs’ in the form of ETF shares or buying the stock of the company buying Bitcoin is how amateurs play the game. Learning how to buy and secure Bitcoin yourself and build your own strategic reserve is how you play like an expert.

If you want to learn the skills required to become an expert at this game, there’s no time like the present. Book afree 30-minute consultation with one of our experts and let’s make sure that by the time everyone starts playing, you’re well ahead of the pack.