Is Bitcoin just a speculative bubble?
Or is it the foundation of a new financial paradigm?
Is Bitcoin just a speculative bubble, or does it hold true economic substance?
It’s a fair question, one often glossed over in both mainstream commentary and economic debate. The prevailing view among many traditional economists is that cryptocurrencies, including Bitcoin, are largely speculative assets with no intrinsic value. But that view deserves deeper scrutiny.
Let’s explore three perspectives: empirical evidence, socio-economic context, and logical proofs. Together, they paint a more nuanced picture, one in which Bitcoin may be far more than just a bubble.
📊 Empirical evidence: can Bitcoin be valued?
Bitcoin’s design includes two features that are crucial to understanding its economic behaviour:
Fixed supply: Bitcoin issuance is predetermined, halving every four years until it reaches a hard cap of 21 million. No central authority can alter this.
Proof-of-work mining: New Bitcoins are created through computational effort, a process that requires real-world energy expenditure and investment.
These properties create an economic model that differs fundamentally from fiat currency, particularly in three ways:
A) Bitcoin as an anti-inflationary asset
Unlike central banks that can expand the money supply at will, particularly evident during post-COVID stimulus rounds, Bitcoin’s supply is capped. If monetary inflation correlates with Bitcoin demand, the price may reflect its use as a hedge against currency debasement.
B) Bitcoin as money
If Bitcoin serves as a medium of exchange, a store of value, or a unit of account, then we should expect correlations between its price and:
Velocity (the rate at which it's used in transactions)
Stake ratio (the proportion held long-term)
Indeed, studies have found meaningful links between Bitcoin's price and both network velocity and staking behaviour.
C) Bitcoin as a network
As with any networked technology, adoption increases value. Empirical studies show correlations between Bitcoin’s price, the number of users, and the network’s hash rate, suggesting that price reflects underlying utility and usage.
👥 Socio-economic lens: can Bitcoin function without intrinsic value?
Throughout history, money has not always had “intrinsic” value. Many forms of money, especially early ones, emerged through social consensus, not because they were backed by gold or state decree, but because communities accepted them as representations of debt and value.
Bitcoin is no different.
Bitcoin, even without formal consensus on its economic value, has developed through necessity into a functioning medium, driven by a global digital community. This community dynamic gives Bitcoin an edge that even traditional currencies struggle to match. Bitcoin is, in essence, the first truly native Internet money, evolving as a social network with built-in economic rules.
📐 Logical proofs: can Bitcoin price be rationally justified?
Economists have modelled Bitcoin’s behaviour in various ways:
Some argue Bitcoin acts as a rational response to discretionary monetary policy, essentially a hedge against government abuse of money creation.
Others draw on rational expectations theory to show that a unique equilibrium price can exist for a currency like Bitcoin, even if it lacks intrinsic value.
Some models suggest that a central authority is not required to stabilise the currency if the protocol itself creates predictable scarcity and trust.
While these models are not definitive, they offer theoretical support that Bitcoin can be more than just a speculative fad, it can function as money.
🤔 So, is Bitcoin just a bubble?
Each of the perspectives above, empirical, social, and logical, has its own limitations. Models are theoretical. Social value is hard to quantify. Correlation is not causation. But taken together, they form a cohesive argument that Bitcoin is not merely speculative. In fact:
Bitcoin has weathered major shocks (Terra/LUNA, Celsius, FTX) and retained long-term adoption.
It has inspired an ecosystem that goes beyond currency, powering innovation in finance, identity, and ownership via blockchain technology.
It serves as a check on central banks, forcing governments to consider monetary discipline.
Ask the citizens of countries hit by hyperinflation, offering hope.
🧭 Final thoughts
Bitcoin may have speculative episodes, so do all emerging technologies. But that doesn’t make it a bubble by default. What distinguishes Bitcoin is that, despite extreme volatility, it continues to evolve, attract users, and inspire innovation. It’s a social, technical, and economic experiment playing out in real time.
Rather than dismissing it as irrational exuberance, we should understand it for what it is: a new form of value, born out of mistrust in legacy systems, powered by open networks, and anchored in mathematical certainty.
And that is far more than just a bubble.
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