So what happens to the world if millions of millionaires are created all of a sudden?
A million millionaires would require purchase of 1 trillion dollars worth of bitcoin. How is that going to happen?
It would be possible but it would be highly unlikely, at least anytime in the near future (assuming lack of hyperinflation).
Inflation acts a lot like compound interest. M2 is increasing around 7% YoY (official Fed numbers, not SS). Assuming this keeps up for 10 years, ~$2m at that time is the equivalent to $1m now. Basically, everything should double in price each decade at current rates even though that's somehow not considered hyperinflation. CPI is also lagging waaaaay behind M2 right now, but needs to be factored in eventually (over just the past five years, CPI's lagged around 25% [nominal%] behind M2), so I'd guess the consumer-realized inflation over this theoretical decade would be closer to 10%, which'd make ~$2.6m in 10 years the equiv. of $1m today. It starts, I think, if the Fed returns to sanity and starts valuing dollars with an interest rate of significance.
BTC's immune to this and can generate returns on top of it. If you can snag a conservative 10% annual return on it by, say, offering interest rate swaps on BFX, your fiat-value holdings would increase 20% annually. -And we're in the calm right now. Everyone's talking about the fear index being extremely low in the US, similar to the pre-08 crash. We didn't have BTC to buy back then. I wouldn't dare speculate the value increase a stronger crash would bring, but even 20% over 10 years on $1m comes to >$38m. Meanwhile, your family and friends are paying current credit card rates on their $500,000 ARMs while dealing with a declining GDP, house prices dropping like stones, not-hyper-but-may's-well-be-inflation, and austerity measures trying to reign in inflation and runaway national debt/GDP.
There's no doubt in my mind that $25k in BTC today is worth $1m in ten years (though that $1m is only worth ~$385k in today's dollars). .... Well, okay, there's some doubt. It's an arm-chair, very fear-based theory based on current trends continuing and probably some bad math.
I am not following your logic in saying that you would need to add CPI inflation to M2 growth.
In 10 years if M2 doubled but CPI inflation was exactly double then the million dollars that I have can still buy the same amount of goods and services but would be 1/2 the percentage of the total M2 money supply. It would be likely that asset prices would have appreciated in this time so the million dollars would likely buy a smaller house (but the same amount of food, or cars, or haircuts or vacations). M2 doubling in 10 years would mean that in terms of the percentage of money supply a trillion dollars worth of bitcoin would be like 500 billion dollars today.
In regards to your assumption of money supply growth I would question your assumption that the current rate of 7% would remain constant. QE has had many effects on the economy, and one of it's intended effects is to get consumers to spend more. It gets to this goal by making it cheaper to borrow. A large source of this borrowing has been via home equity loans (this would include both lines of credit and loans). At least temporarily the funds from these loans will be part of the M2 money supply. Another issue with the M2 growth rate is the vast amounts of "cash" that large companies have on their balance sheet. Due to a number of reasons companies have been reluctant to invest and have kept a large portion of their profits in "cash" that is part of M2. So the money that consumers do spend eventually ends up in M2, or at least a larger then normal portion of it.
Looking back to the Cyprus bank crisis, the price of bitcoin surged when banks ability to remain a going concern was put into question. I would say that a banking crisis that puts into question the health of banks would be positive for bitcoin, however aversion to overall risk would be bad for bitcoin. It should be noted that bitcoin is still a very speculative asset and people will sell speculative assets when they are trying to reduce risk.
I think that Bitcoin does have a lot of long term value and potential.
In regards to your 25k BTC holdings being worth a million dollars in 10 years. I would not be surprised if this were to happen. I would even go as far to say that I would be surprised if it did not happen anytime in the next 10 years. This would be the result of the value of BTC going up 40x (it would be more when taking into consideration the additional blocks found by miners).