Bitcoin embodies Schumpeterian creative destruction. Bitcoin also behaves like a physical natural resource, with unique differences that make it a driving force for effecting fundamental change, much like gold, oil or electricity has done. Bitcoin goes through periodic cycles of varying lengths that inspire a creative rejuvenation of its ecosystem with new ideas and innovations at various timescales and magnitudes. Here we will apply the idea of a Schumpeterian business cycle to Bitcoin and construct a Schumpeterian Bitcoin cycle based on three componential waves: a multi-decade Bitcoin Kondratieff cycle; a Bitcoin Juglar cycle that is shorter than a decade; and a Bitcoin Kitchin cycle that corresponds with the halvings. Associated with these sub-cycles are three ratios that capture their logic: stock-to-flow (S2F), installed capacity-to-capital investment (IC2CI) and inventories-to-sale (I2S). 1. CREATIVE DESTRUCTION Joseph Schumpeter would have loved Bitcoin. He would have seen in Bitcoin a living representation of his theory of capitalism, so often quoted but rarely understood. Creative destruction is the process by which capitalism continually rejuvenates itself. It is what drives markets forward and allows them to be constantly refreshed with new ideas that destroy extant structures and erect better ones in their stead. There are countless elements in Bitcoin that structurally instill the process of Schumpeterian creative destruction in its ecosystem, making it an excellent model for the cycles of capitalistic rejuvenation that formed the basis for Schumpeter’s theory of economic growth. For instance, consider the process of the halving of block rewards. Every 210,000 blocks, Bitcoin forces a creative destruction of itself, urging its participants to either reimagine their competitive edge, seek hidden efficiencies and eradicate waste or risk being left by the wayside. Bitcoin’s worth is rooted in the intrinsic value of capitalism, liberated one cycle of creative destruction at a time. If there is creative destruction inherent in Bitcoin, then where are all those new products that eventuate when extant markets are destroyed by new ideas? Wasn’t that Schumpeter’s point after all? The answer is simple. Bitcoin evolves into a new product — a new version of itself — with each cycle of creative destruction. Since we are so used to thinking of a bitcoin as immutable, we tend to look past this essential characteristic feature it possesses to reinvent itself. Bitcoin started off as electronic cash native to the Internet, but has since become many things besides. It has become the most sound platform for the definitive settlement of contracts; it has become a savings account for individuals and corporations; it has become a useful tool for international remittances; it has inspired an ecosystem of financial instruments, cryptocurrencies and much else. None of these were imagined as core features for Bitcoin in 2008. Yet, with each cycle of creative destruction, Bitcoin was reimagined. 2. A NATURAL RESOURCE WITH A DIFFERENCE Bitcoin can usefully be examined as just another exhaustible natural resource that has held the power to alter the course of human civilization, such as gold or, even more aptly, crude oil. Crude oil underwent several cycles of creative destruction since its discovery in antiquity. In its long history, crude oil has at various times been used predominantly for heating and cooking, asphalt paving, lighting, lubricating and powering machines, transportation, plastics, aviation and so on. Of course, there are key differences between Bitcoin and natural resources, but the similarities are just as interesting. Bitcoin can be imagined as a physical field of exploration where prospectors dig for coins. The field has the following characteristics. First, the total yield from the field is fixed at 21 million coins, and no matter how hard the prospectors may dig, the field simply won’t yield any more coins. All prospectors know this to be true in advance, which puts a very definite terminal point in time to their activities. Second, prospectors know with certainty that it will get increasingly harder to find more coins as they dig. That’s because they also know that this field cannot be gated and thus prospecting cannot be regulated. So prospecting for coins will take the form of a “gold rush”; extraction of the in situ, unmined coins will be an extremely competitive activity. Well, it will almost certainly keep getting harder. The only way in which it will ever get easier for any given prospector is if, for some reason, his rivals decide to reduce their efforts. If that happens, then for a short time the prospector gets just a bit more of the field to himself to mine for coins using his current digging equipment. Before long, though, his rivals observe his obvious fortune and come rushing back in. This squeezes him back to a smaller area on the field. Now he simply must invest in better equipment if he wishes to outcompete his rivals. Third, the fiercer the competition, the less space each prospector will have in the field. To extract coins he will need to try even harder than before. It gets exponentially harder for him to dig deeper, and he has to bring in more and more sophisticated digging equipment to extract coins. He started off with a spoon, upgraded to a spade, then an excavator, then a vertical drill and so forth. We paint this picture merely to underscore the point that Bitcoin is a rare and non-perishable natural resource like platinum, gold, iridium or even rhodium. It is a singular kind of natural resource even among that illustrious group, but it is one all the same. And yet, two things about Bitcoin make it a rather exceptional natural resource. First, since available market supply is known to be fixed and the extraction rate asymptotically approaches zero, future demand is met increasingly with already obtained inventories and decreasingly through new production; until roughly 2140, after which all demand must be sufficed by a globally fixed inventory alone. Thus, hoarding Bitcoin in inventories is rational even before all its possible uses have been discovered. Imagine if the costs of storing in inventory were similar for